Title Insurer Fidelity National’s Stocks Plummet
November 3, 2008
According to recent reports, the shares of some the United States’ major title insurers are falling in the wake of the country’s housing crisis. The drastic turn could mean higher claims as well as lower demand for homeowners’ insurance.
The broader decline in the markets came subsequent to the losses of Fidelity National Financial Inc, one of the largest title insurers reported serious third-quarter losses ($198.3 million or 95 cents a share). Not only were the Jacksonville, Florida-based company’s dividends halved but also it is reported that Fidelity management would be forced to cut a thousand jobs and lower pay scale for all workers by 10%.
The seriousness of this situation is better understood when you know the role that title insurance plays.
Essentially, this form of insurance serves as a guarantee that property owners do have a valid title and can transfer that title legally. Lenders require the buyers to have title insurance before providing loan services. The revenues of title insurers are dropping due to the lower demand for homes created by the credit crisis and weakened economy.
It is suggested by some financial experts that the title losses will rise swiftly, inundating the system because of the strains on the real estate market. Falling prices and increased interest rates are creating difficult situations for many homeowners. In some cases, the owners are consulting their title insurers to make sure that their titles are valid and clear of any complications.
Spokesmen from Fidelity National stated that the company plans to increase their prices to 10% to match the 20% national average in order to deal with lower business and rising reserves.
Claims at Fidelity National are rising because of increased criminal activities such as fraud and forgery; this amounts to about 20% of the total claims.
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