Despite the closed title purchase order volume dropping 36% year over year and the number of closed refinance orders dropping 79% compared to the fourth quarter of 2021, Fidelity National Financial still managed to record a strong Q4 in 2022.
“Our title business has continued to perform well despite the fall off in mortgage originations due to increasing mortgage rates and housing market headwinds,” Mike Nolan, Fidelity’s CEO, told investors during the firm’s fourth-quarter earnings call mid-morning on Thursday. “Volumes in 2022 were considerably less than the record setting 2021 levels, mainly due to the precipitous increase in mortgage rates in recent months. We responded with disciplined cost actions as opened orders began to decrease.”
These cost cutting actions helped Fidelity’s title segment record revenue of $1.9 billion for Q4 (down from $3.1 billion in Q4 2021) and a net income of $198 million. While direct title premiums ($544 million), agency title premiums ($708 million), and commercial revenue ($344 million) were down 47%, 48% and 37% for the quarter, respectively, the total fee per file was up 21% to $3,649.
However, Nolan noted that this was the second-best fourth quarter on record for commercial revenue, just trailing the record-setting fourth quarter of 2021.
For the full year 2022, Fidelity’s title segment recorded revenue of $9.5 billion, down 11% from 2021, and title earnings of $790 million. Overall, the firm as a whole reported revenue of $11.556 billion in 2022, down from $15.643 billion in 2021, and a net income of $1.136 billion, down from $2.422 billion the year prior.
“We have a proven track record of reacting quickly to adjust order volumes,” Nolan said. “For the full year 2022 net and acquisitions, we have reduced title headcount by approximately 26%, and will continue to manage the business based on market conditions.”
Nolan noted that the firm is also continuing to look for opportunities to strengthen its business through acquisitions and recruiting talent already established in the industry.
With mortgage rate volatility continuing into 2023, Fidelity executives expect a challenging year ahead.
“I don’t think we’ve ever seen rates move this fast in such a short period of time. When they are moving that rapidly, it definitely impacts purchase orders very quickly,” Nolan said. “In a more normalized environment with more gradual rate increases, purchase orders hold up way better, but in this environment, those purchasers got choked fast.
“FNF is well positioned to execute through this higher mortgage rate environment due to our disciplined operating strategy and long history of navigating market cycles,” he added.
Unlike other Big Four title firms, Fidelity executives fielded questions on attorney opinion letters, which were approved for use in lieu of title insurance by Fannie Mae in April 2022. So far, executives say they have not seen any impact on title volume caused by AOLs.
“There is some promotion around them that they lower costs for consumers, but I don’t think anyone has actually shown that, and I think it could actually raise costs for people, as there are so many unknowns and so many things they don’t cover,” Nolan said.