Title insurers big and small can’t seem to escape rapidly deflating refinance volume, but Fidelity National Financial still pulled out the second-best quarter ever for title revenue in Q1 2022.
Fidelity‘s title sector saw the number of refinance orders opened per day during the first quarter of 2022 drop by 57% compared to Q1 2021. The number of purchase orders opened per day dropped 1% year over year, while the number of commercial orders opened per day rose 6% compared to a year prior.
The increase in commercial volume led to a 46% year-over-year increase in commercial revenue to $347 million. A total of 522,000 direct title orders were opened during Q1 2022 compared to 770,000 direct title orders a year prior.
Despite the drop in the number of title orders, Fidelity’s title segment recorded $2.4 billion in revenue and $437 million in adjusted pre-tax earnings. This is only slightly lower than the $2.5 billion in revenue and $513 million in earnings recorded in Q1 last year.
The firm attributed the title sector’s solid showing in the midst of a drastic decrease in refinance volume to strong residential purchase and commercial revenue, which have significantly higher fees per file than refinance orders. Fidelity recorded an average fee per file of $2,891 during the first quarter of 2022, a 49% year-over-year increase.
Overall, Fidelity (not just the title sector) generated a total revenue of $3.165 billion during the first quarter of the year, slightly up from the $3.1 billion recorded a year ago. On the firm’s first-quarter earning’s call with investors, executives stated that this was Fidelity’s best first quarter on record for revenue. Net earnings, however, were another story, dropping from $605 million in Q1 2021 to $397 million in Q1 2022.
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“We have seen steady levels of residential purchase origination demand, although given the current environment, we’re not seeing the typical increase heading into the spring selling season,” Mike Nolan, Fidelity CEO, said. “While current residential purchase demand is trailing last year, 2021 was a record year for the US residential purchase market and current forecast indicate 2022 will still be one of the strongest purchase origination markets in the last decade.”
Nolan told investors that in April 2022 the number of purchase orders was down 6% year over year, while refinance orders were down 63% and commercial volume was down 2%. Despite this drop in commercial order volume, the first quarter of 2022 marked the fourth month in a row with over 1,000 commercial orders opened per day.
Looking further into 2022, Nolan said he expects to see purchase order volume remain relatively flat before slightly dropping in the later half of the year, as rising interest rates impact homebuyers’ purchase power. However, the firm expects commercial volume to remain strong.
“The second quarter we still expect to see a very healthy commercial environment,” Nolan said. “Purchase maybe not as good as the original forecast thought, but still actually a very good purchase market in a historical context standpoint.”
To combat changing market conditions, Nolan said that Fidelity, like Doma, would be investing in expanding and improving its purchase order service. In the past 12 months the firms has made 10 acquisitions in the title space coming in at approximately $92 million. Nolan said the firm is considering future M&A activity.
In 2021, Fidelity was the largest title insurance underwriter by market share according to the American Land Title Association.