While the firm’s title revenue was down 18% year over year to $1.9 billion, firm executives noted that it was in line with historical levels reported in 2018 and 2019. As revenue dropped, so did the title segment’s pre-tax earnings, which fell from $335 million a year ago to $248 million.
Fidelity attributed the drop in title revenue and pre-tax earnings to an overall decrease in title orders opened, which fell from 363,000 orders a year ago to 318,000 orders. When separated by segments, the number of purchase orders opened on a daily basis was down 7% year over year, while refinance dropped 25% and commercial fell 10%. Although the number of orders dropped, the average total fee per file remained in line with Q3 2023 levels at $3,618.
Overall, Fidelity reported a 13.3% year-over-year drop in revenue to $2.778 billion, while pre-tax earnings were up from $503 million in Q3 2022 to $603 million in Q3 2023.
Despite the decrease in title segment revenue, Fidelity executives still expressed their pleasure at the title segment’s performance.
“This is an outstanding result, especially given that U.S. mortgage rates have advanced to multi-decade highs recently peaking at over 8% in October, which is the highest level since November of 2000,” Mike Nolan, Fidelity’s CEO, said on the Wednesday morning call. “In turn, this is keeping a lid on residential purchase applications, which have decreased to their lowest level since 1995, almost three decades ago.”
Nolan noted that the firm has focused on reducing operating expenses over the past year, resulting in Fidelity’s total field operations employee count decreasing 13% over the past year. In addition, Fidelity has also reduced its direct title office locations from roughly 1,400 offices to less than 1,300 offices.
Also reporting Q3 2023 earnings this week was title firm Doma. Over the past year, the Max Simkoff-helmed firm has made its goal of becoming adjusted EBITDA profitable in 2023 widely known, but failed to hit its mark this quarter, reporting an adjusted EBITDA loss of $5 million in Q3 2023. Firm executives did note that this was an improvement over the adjusted EBITDA loss of $12 million reported a year ago.
In addition, Doma’s net loss for the third quarter of $22 million was a slight improvement over the net loss of $24 million reported in Q3 2022. This improvement came even as revenue fell 6% year over year to $76 million.
“We are proud of the continued progress we’ve made towards profitability, and we were pleased to see a $2 million and $7 million sequential improvement in our net loss and adjusted EBITDA loss, respectively, this quarter,” Mike Smith, the chief financial officer of Doma, said in a statement. “While we believe we are within striking distance of achieving our goal and expect to see continued significant improvement in our overall adjusted EBITDA in the fourth quarter, the continued degradation of the housing market means there is still risk to us achieving full quarter adjusted EBITDA profitability in Q4, and this risk will likely persist into the first quarter of 2024.”
Doma’s most recent endeavor is Upfront Title, which Simkoff announced the launch of during his firm’s third-quarter earnings call with investors and analysts Tuesday evening.
According to Simkoff, Upfront Title will “enable Doma to move our instant underwriting decision closer to the loan underwriting decision itself, allowing lenders to significantly reduce key areas of cost and operational activity, all while providing homebuyers with more affordable title solutions.”
Upfront Title will be available to mortgage software platforms and the government sponsored entities before the end of the year. Doma is also launching a pilot program with an undisclosed mortgage software platform for its initial launch of Upfront Title in the mortgage software platform channel.
Simkoff said he expects the launch of Upfront Title to help Doma shift more of its revenue toward higher-margin software licensing revenue, aiding it on its journey to become adjusted EBITDA profitable.