The outlook for title insurance has been updated to lower rates

Lower mortgage rates will benefit title insurers over the next two years, but the real opportunity will come not from the obvious increase in refinancings, but from the improvement in the buyout business, Keefe, Bruyette & Woods said.

Estimates and target prices were raised during the period Three title insurers KBW analyst Bose George covers: Fidelity National Financial, First American Financial and Stewart Information Services. Lower mortgage rates will lead to increased activity in both 2025 and 2026, which will benefit the title insurance business.

“While lower rates will likely stimulate an increase in refinancing activity, We believe the real opportunity for title insurers will be if purchase volumes improve year-over-year, as the fee per file for residential purchase transactions is approximately three times that of refinance transactions,” a said George. rates could also lead to an increase in commercial real estate activity, which would be further amplified if buyers and sellers converge on prices.”

KBW’s forecast for closed purchase orders has been updated to 12% annual growth in 2025 from this year and 10% for 2026 on average for the group, compared to 8% and 10% respectively previously. Estimates of closed refi orders were raised to an annual gain of 18% from 12% for 2025 and 15% from 12% the following year.

However, even with mortgage rates falling in recent weeks, refi levels to date have created a low base for growth through 2025. Furthermore, because of this higher filer fee, most of the benefits from the change KBW’s earnings per share estimates are due to higher acquisition volume expectations.

Aaron Davis, CEO of Florida Agency Network and Closing Suite, is also confident that mortgage rates will be lower next year. No matter what the result of the upcoming electionsboth presidential candidates and their political parties are suggesting policies that would impact housing on several fronts, Davis said.

“We were able to see new housing affordability programs and loans for first-time home buyers,” Davis said. “We may or may not have tax cuts. All of these things will have an impact on the title insurance industry and the volume of transactions.”

Jim Paolino, CEO and co-founder of Lodestar Software Solutions, earlier this year started a title agency, Settlewise. While tariffs were apparently a factor in the “meh” housing market this spring and summer“the biggest issue with the volume of purchases is inventory; that’s the biggest question mark I would have with the volume of purchases,” Paolino said.

Low rates will help more potential buyers in terms of accessibilitybut it will be a slow growth in terms of acquisitions.

If there were to be an increase in the volume of securities, it would be supported by refinancings rather than purchases.

“In the short term, he’s going to be very motivated,” Paolino said. “You basically have a two-year yield that can be refinanced now, so in my view, that’s going to drive most of the demand for short-term mortgages up.”

Purchase volume won’t drop, he continued, it just won’t increase as dramatically.

He noted the difference in title fees between refinances and purchases. In the short term, increased refi volume may make the difference.

In the long run, the buyout business is more important, adding that when it comes to the title, it’s almost like they’re “two different industries.”

Another factor that some fear could reduce the title insurer’s business is the use of alternativesincluding attorney opinion letters and secondary market title waiver pilot.

Title insurance is easily maligned because people don’t understand how it works, Paolino said.

But as for those alternatives, he continued, “I don’t think it’s going to have the backbone and the teeth that it needs once the claims start happening.”

What might be more interesting from a competitive perspective are the changes being implemented now that result from settlement of the National Association of Realtors on real estate brokers’ commissions, Paolino said. These changes are likely to change the dynamics of the homebuyer relationship.

“I think it’s a very open question at this point because realtors, especially buyer’s realtors, are in such a good position with the reference title insurance,” Paolino said. “That could change, I don’t know what it will look like, but I think there are a lot of open questions.”

Even with rates down 38 basis points in August, according to Freddie Mac, it’s not enough to get most current borrowers back into the mortgage market for refinancing.

“In my view, this cut in interest rates is more likely to soften the edges around the buying market than to cause a massive financial tsunami like we’ve seen in 2020 and 21, the main reason being that too many people are still under 3.5%,” said David Sober, senior vice president of business development at Voxtur Analytics.

Title agency Voxtur Analytics recommends whether the transaction requires a title insurance policy or whether an AOL is sufficient based on what is the best execution in terms of protecting the interests of both the borrower and the lender.

AOL is also accepted for both purchase and refi transactions, as opposed to title relinquishment, Sober noted. That’s because the risk involved in selling a property is different.

So how much an alternative can earn over a traditional title insurance policy is unknown because when it comes to fees, the market is “fragmented and non-standardized” based on characteristics such as loan type, geography and more, Sober said.

Voxtur uses its Rate Advisor Platform “to make sure we direct the borrower, or whoever is the interested party in that loan, to the product that best suits them, given the parameters of their transaction,” he explained.

There are certainly some moderate to mild threats to the title industry’s market share from alternatives like AOL, waivers, or even something that doesn’t even exist yet because there’s a shift in the way regulators think at title insurance and closing. costs.

“I think now, the consumer has another option to choose from that may make sense for them in a particular transaction,” Sober said. “I think it will happen for a good number of transactions, but I don’t expect to see a transformation in the market just because of AOL’s product overnight.”

In any case, almost all transactions receive a standard securities policy, so nothing is sufficient at this time to adjust a broader macroeconomic forecast about the securities business, he said.

The bond business is going along with the mortgage industry, and while rates haven’t fallen low enough to bring them back into 2021 anytime soon, “after the last couple of years, any relief for us in the industry is good,” Sober said.