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Title Insurance Outlook Is Stable With Improvement Expected in 2009

A recent Fitch Ratings report is stating that the rating outlook for the US Title Insurance industry is Stable, despite a continued lessening of revenues, and more importantly margins, caused by it's ties to mortgage and real estate markets which are projected to see continued deterioration in 2008.

According to Fitch, cost cutting efforts implemented this year by the underwriters is starting to have a positive effect in dampening the lessening of margins. It expects a moderate (3-5%) decrease in margins in 2008 with improvements beginning in 2009.   However, because of strengthened financials provided by the previous prosperous years, Fitch believes that Title Insurance companies are relatively well positioned to get through the down cycle.

The rise in foreclosures, while increasing the possibility of title claims, does not directly result in title claims. Any increase in claims should be within the norms predicted by underwriting and offset by existing coverage premiums.

Family mortgage originations fell by 15% in 2007, with the reduction divided almost equally between purchases and refinancings. "According to Freddie Mac, the average 30-year fixed mortgage rate has moved within a tight band between 6.2% and 6.7% during 2007 and is currently 6.4%. The MBAA forecast a small increase in mortgage rates during 2008 to 6.8% and holding essentially steady through 2009."

The current inventory of new and existing homes is 10 months, compared to the record low of 3.6 months in January 2005. This indicates that it will take some time for the inventory to clear out to healthier norms. The biggest concern is whether the U.S. economy will be pulled into a recession by the real estate sector.

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Posted by Lawrence Yerkes - Broker Associate, Southern New Jersey Real Estate Services on 12/04/2007 01:24 PM

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