For now at least, the U.S. auto industry's got its big three: GM, Ford and Chrysler. In real estate, you've got your big four title insurance underwriting companies -- soon to be the big three.

In 2007, the top four title insurers controlled 87 percent of the $14 billion U.S. title insurance business. First American Corp. led the pack with 30 percent market share, followed by Fidelity National Financial Inc. (26 percent), LandAmerica Financial Group (19 percent) and Stewart Information Services Corp. (12 percent).

With LandAmerica in Chapter 11 bankruptcy and Fidelity looking to buy its three underwriting subsidiaries -- Lawyers Title Insurance Corp., Commonwealth Land Title Insurance Co. and United Capital Title Insurance Co. -- the picture could soon look something like this: Fidelity (45 percent), First American (30 percent), and Stewart (12 percent).

But now we learn that Stewart also seems to be in the chase for LandAmerica's underwriters (see story).

If Stewart succeeds in outmaneuvering Fidelity, that would leave the three biggest companies still standing with roughly equal market share: Stewart (31 percent), First American (30 percent) and Fidelity (26 percent).

In a Nov. 10 analysis of a proposed Fidelity-LandAmerica merger, analysts at Keefe, Bruyette & Woods said that a combined Stewart and LandAmerica would make for a "healthy industry."

But KBW saw Fidelity as "the logical partner" for LandAmerica, because LandAmerica's $650 million-plus debt load would be too big a hurdle for Stewart, with its "conservative balance sheet philosophy," to overcome (this was before LandAmerica filed for bankruptcy protection and said instead of merging with another company, it would sell off its underwriting companies as part of a plan to pay off the parent company's debt).  

The KBW analysts ruled out First American because the company's management has said they aren't interested in acquisitions right now -- like everybody else, they are downsizing as fast as they can to survive the downturn.

Fidelity's management has indicated that in order to realize "synergies," layoffs would be an inevitable part of an acquisition of  Lawyers, Commonwealth and United. That's probably true regardless of who ends up with LandAmerica's underwriting subsidiaries.

That being said, who are you rooting for, Fidelity or Stewart? If Fidelity beats out Stewart, can Stewart boost its market share and attain parity with Fidelity and First American? Or will the big three eventually become the big two?

There's one other scenario that would preserve a "big four" title industry: What if Old Republic International Corp., which had 5 percent of the underwriting business in 2007, picked up LandAmerica's underwriters? That would create a landscape something like this: First American (30 percent), Fidelity (26 percent), Old Republic (24 percent) and Stewart (12 percent).

If that sounds far fetched, Old Republic did file an application with Nebraska regulators this week to acquire Lawyers and Commonwealth, but withdrew the application yesterday (see story link above).

What about First American? Should the current leader reconsider and jump into the hunt, now that it's LandAmerica's underwriting companies on the block, and not the parent company and all its debt? Or are they wise to stay on the sidelines and let Fidelity and Stewart engage in a bidding war?

Fidelity is hoping to wrap up a $298 million deal with LandAmerica this month, but LandAmerica's creditors are objecting to a quick sale and have asked the bankruptcy court to hold off on approving it, saying a better offer could emerge (for details, and access to filings in the case, see the story).

UPDATE: Fidelity has the go-ahead from bankruptcy court to acquire Lawyers, Commonwealth (see story).

UPDATE TWO: Feds standing aside on antitrust issues (see story).

Flickr photo by floodllama

With LandAmerica no longer able to count on a merger with Fidelity to resolve its issues with creditors, we may be headed for the biggest shakeup in the title insurance industry since Mercury Cos. shut down operations in five states and sold its remaining title and escrow operations in Colorado to Fidelity (see story).

LandAmerica says its underwriting subsidiaries are well funded to pay claims, but the question has now become how the company funds ongoing operations. Some analysts who follow LandAmerica reportedly see bankruptcy as an option. LandAmerica's already closed down its 1031 exchange company (see story).

LandAmerica's got several hundred subsidiaries or companies it holds an interest in. We'd like to hear from Inman News readers if you are with one of those subsidiaries or do business with them on what happens next.

And more broadly, what do readers think the broader implications are for the title insurance industry? A Fidelity-LandAmerica merger would have put about 75 percent of the business in the hands of just two companies: Fidelity/LandAmerica and First American. 

Could we still be looking at that kind of consolidation? Would that be a problem for you, or do you see any silver lining?

UPDATE: Fidelity is now looking to pick up LandAmerica's title insurance underwriting subsidiaires in bankruptcy court. If the deal goes through, Fidelity and First American would control about 75 percent of the title insurance business (see story).

HUD's Ivy Jackson, Director of the Office of RESPA, is grilled by Rep. Henry Cuellar, D-Texas, at a hearing today on HUD's RESPA reform proposal.

Cuellar had concerns about costs and paperwork, and Jackson conceded small businesses would have $5,000 to $6,000 in up-front costs to comply with HUD's proposed changes to the Real Estate Settlement Procedures Act, adding about $98 to the cost of the average loan.

But Jackson said consumers would end up saving about $600 per loan because simplified disclosures will help them comparison shop and avoid costly features like prepayment penalties. More videos from the House Small Business Committee hearing, “RESPA and its Impact on Small Business.” Also prepared testimony from the Natonal Association of Realtors, American Land Title Association, Mortgage Bankers Association, National Association of Mortgage Brokers, and the Center for Responsible Lending,

California Insurance Commissioner Steve Poizner has a busy day ahead of him today. He's holding a press conference down in San Diego to publicize a ruling that homeowners insurance companies can't reduce claims payments to policyholders who lose their homes in a disaster and decide they want to rebuild somewhere else. Wildfires destroyed more than 1,700 homes in San Diego County last year (see San Diego Union-Tribune for details on the ruling).

After the press conference, Poizner will address members of the California Land Title Association (CLTA) at their 101st annual convention. At last year's event, Poizner lauded a new Web site CLTA was planning to roll out to help consumers shop for title insurance. Poizner liked the site so much, in fact, that he ended up postponing his predecessor's plan to roll back title insurance rates by $1 billion, and put a link to the CLTA's TitleWizard Web site right on the California Department of Insurance's home page (he's pictured above with CLTA officials at an Oct. 9 press conference announcing the launch of the site).

Since TitleWizard went on line, CDI has stopped supporting its own title insurance rate survey. The department helps consumers shop for other lines of insurance by publishing rate surveys for auto, homeowners and long term care insurance. The CDI's own title insurance rate survey, however -- which in some ways looked more thorough than TitleWizard when I compared them last fall -- hasn't been updated since 2006, and is pretty much impossible to find. The Department has addressed one concern I had at the time: that consumers weren't being told that they were being taken away from the state's Web site and to the industry-sponsored TitleWizard when they clicked on "New! Compare title insurance rates!"

A disclaimer now informs consumers: "You are now leaving this site to link to another website location that is not maintained by the California Department of Insurance. The CDI takes no responsibility for and has no control over non-CDI sites."

With HUD proposing RESPA rule changes that could serve as incentives for consumers to shop for settlement services like title insurance, we will soon be seeing more sites like TitleWizard (see story) -- whether they are able to convince regulators to link to them or not. In its April newsletter, CLTA says TitleWizard has handled more than 9,000 visitors, "including individuals from both Canada and Mexico."

Representatives Ruben Hinojosa, D-Texas, and Judy Biggert, R-Ill., want HUD to double the length of the public comment period on its proposed changes to the Real Estate Settlement Procedures Act (RESPA). The 60-day window that closes May 13, they say, provides "an inadequate amount of time for the public to review and comment on such an extensive rule that will have significant implications on the housing industry."

In a "dear colleague" letter asking other members of Congress to support their request to HUD, Hinojosa and Biggert say they want to ensure "that any HUD updates to RESPA regulations do not negatively impact the home buying process and exacerbate the current economic slowdown."

A 60-day delay would increase the likelihood that any changes to RESPA would be left up to the next administration to decide (on the current schedule a final rule could be published this fall for implementation next year).

Hinojosa and Biggert, who teamed up in a similar effort in 2004, say the request to lengthen the public comment period to 120 days is backed by a long list of industry groups, including the Mortgage Bankers Association, the National Association of Realtors, the American Bankers Association , the Real Estate Services Providers Council, Inc., the National Association of Home Builders (NAHB), and the American Land Title Association (ALTA).

ALTA issued an alert urging association members to write their Congressional reps and ask them to sign the letter, saying the more who sign, "the better the chance of getting the comment period extended!!" ALTA also issued a draft statement detailing its problems with HUD's RESPA reform proposal, including the increased time and cost of reading of "closing scripts" and the lack of an itemized list of title fees on the proposed good faith estimate.

Four years ago, Biggert and Hinojosa (pictured here reading to kids at an elementary school in his district) got the ball rolling on a similar procedural issue involving public comments on HUD's last attempt at RESPA reform. Some 226 members of Congress ended up signing a letter asking the Office of Management and Budget to reject HUD's proposed changes, saying HUD had issued a final rule without soliciting additional public comment. HUD eventually shelved the proposal, which involved a controversial plan to allow settlement services to be packaged with mortgage loans.

Back then, a Hinojosa aide said the letter-writing campaign was intended to convince OMB to send the proposal back to HUD so it could be put out for public comment. Those who signed the letter supported efforts to simplify the mortgage application process, the aide said (see Inman News story).

HUD's latest RESPA reform proposal includes incentives designed to encourage packaging of settlement services, but its main focus is on simplifying the good-faith estimate loan originators provide to borrowers. HUD estimates its proposed rule changes would help save consumers $8.35 billion a year, in part by helping consumers make better decisions in comparison shopping for loans and settlement services.

For the complete text of the "dear colleague" letter, and more information on RESPA reform, check out the discussion on the Inman community page.

I've been talking to some folks in the real estate industry for an upcoming special report about HUD's new RESPA reform proposal, and what I'm hearing are concerns that while this may be "RESPA light" with a focus on improved disclosures, there are some incentives for packaging that, the more people look at them, the more they remind them of the rule change HUD tried and failed to push through nearly six years ago.

(This post is continued in the comments section).

HUD's long-awaited proposal to simplify disclosures is out, which they claim will help consumers shop around for the best deal and save an average of $668 at the closing table. If you figure (as HUD does) that there are about 12.5 million mortgages originated a year (both purchase and refis) that's $8.35 billion that stays in consumers' pockets.

See Inman News story for more details.

So who loses? Companies that were overcharging, HUD says. Loan originators will take about 70 percent of the hit (up to $5.88 billion a year in lost revenue) and the rest will come out of the bottom lines of third-party settlement services providers (up to $2.47 billion). Most of that ($1.79 billion) would come at the expense of title and settlement agents.

HUD also anticipates those folks will have about $570 million in one-time compliance costs and recurring costs of $1.2 billion a year.

The Mortgage Bankers Association worries that the proposed rules will ad "significant paperwork to the loan origination process" and the American Land Title Association warns that HUD's proposal "may fall short" of its goal of simplifying the process.

“Simplification is an elusive commodity in an inherently complex transaction and HUD has wrestled for years with how to proceed in revising these rules," ALTA CEO Kurt Pfotenhaur said in a statement. "However, it is essential that on the other side of this 94-page proposal with its 590 pages of economic analysis, borrowers leave the closing table understanding their loan."

It looks like there's something for settlement services providers too, though: They would be allowed to seek volume-based discounts for settlement services (HUD thinks that will benefit consumers by lowering prices).

HUD's taking comments until May 13 at the Federal eRulemaking Portal.

If you're making comments, we'd love it if you'd CC us. Or leave them here for the world to see.

One of the most widely used sports car performance benchmarks is zero to 60 mph time. Less than 5 seconds is impressive. Cars that can do it in less than 4 seconds are considered to be in a class of their own, and are probably most at home on a race track.

Equally important is a car's cornering and braking ability. When that hairpin curve comes up, you want to be able to get down to a manageable speed so you can negotiate it without leaving the road. You need great big brake discs front and rear, and a taught suspension.

While the muscle cars produced in Detroit in the '60s and '70s could spin their tires and pin you back in your seat, most weren't much good for traveling in anything but a straight line. Need to slow down or change directions? Best plan ahead. A '68 AMC Javelin might smoke a Lotus from that era in a drag race, but the Lotus will catch up on the curves.

A title agency based in California's Silicon Valley that went from five branches to almost 200 in nine short years seems to have been more of an AMC Javelin than a Lotus. According to a Google cache snapshot of the Alliance Title Web site, the company grew from 25 employees to more than 2,000 during that time. How did Alliance Title -- which closed its doors this week (see Inman News story) -- grow so fast?

Judging by lawsuits filed by other title companies against Alliance, its sister company Financial Title Co., and the parent of both, Mercury Companies Inc., they did it the old fashioned way: they went out and recruited their rivals' best title agents.

Mercury settled one case in July for $12.5 million, and an $8.3 million jury award in another case is pending, according to a recent regulatory filing by one of the plaintiffs, LandAmerica. Those lawsuits were filed in southern California, but it seems Alliance pursued a similar strategy up north, too.

Brokers at a big Central Valley real estate brokerage that did about a third of its business with Alliance said the company grew fast during the boom, hiring some of the best, most experienced agents in the area. But when it came to a curve in the road, Alliance Title was apparently unable to slow down and ended up on its roof in a ditch.

So, what does it say about the title insurance industry that a company can grow so quickly by (allegedly) poaching their rivals' agents? According to a report commissioned by the California Department of Insurance, it's more proof that title insurance is marketed to real estate professionals, not consumers. 

Citing yet another lawsuit alleging agent poaching by Mercury Companies, this one by Fidelity National Financial, the report asserts that competition in the title and escrow business is not for the consumer who purchases products and services, "but for the 'customers' who can provide the business by steering consumers to a particular underwritten title company or title insurer"  (see page 38).

Here's how FNF put it in their lawsuit against Mercury:

"Success in the title and escrow industry depends upon generating transactions from customers by developing a reputation for, and providing, superior service, responsiveness, and expertise ... The customers for these products include residential and commercial real estate agents and brokers, lenders and developers ... Because customers are attracted and kept by personnel who have demonstrated that they can respond to and meet the customer’s needs, the competition in the title and escrow industry for the services of capable title and escrow personnel is intense."

Another Mercury Companies title firm, Investors Title Company, agreed to pay a $1 million fine in August 2005 to settle allegations by the California Department of Insurance that the company's sales and marketing force racked up $253,213 in expenses in an apparent attempt to generate referrals from real estate agents, lenders, and developers.

Investors Title allegedly spent $144,449 on business support services and promotional materials for companies that were in a position to refer business to it in Southern California. Investors was accused of picking up the tab for refi letters, buyers letters, Just Sold letters, post cards merging, personal return labels, flyers, promotional calendars, and newsletters.

In addition, the company's sales and marketing staff allegedly submitted $108,764 in fabricated or fraudulent receipts, invoices and expense reports for a laundry list of items including limousine rides, spa treatments, rounds of golf, baseball games, basketball games, concert tickets, boxing events, hockey games, bowling parties, mixers, banquets, Feng Shui workshops, and Las Vegas conventions.               

Can a Web site solve the problems California regulators have with an alleged lack of competition in the title insurance industry?

That's a question posed on this blog back in May, when California Insurance Commissioner Steve Poizner, addressing the state's title insurance industry at their annual convention in San Francisco, mentioned TitleWizard, a Web site that promised to allow consumers to shop for title insurance, as the kind of step he'd like to see the industry taking to increase consumer choice.

Poizner's predecessor, you may recall, claimed there was a lack of competition in the state's title insurance business, and proposed rolling title insurance rates back by $1 billion a year. Poizner is a pro business Silicon Valley entrepreneur who has nevertheless been outspoken about his views that title insurers have, in fact, marketed their product to the people who can refer business to them -- realtors, lenders and builders -- instead of consumers.

But Poizner, saying he wants to give the title insurance industry time to reform itself, has rolled back plans to implement the rate cuts proposed by his predecessor until 2011. So what will the industry do to reform itself?

A few minutes ago, Poizner's office sent out a press release alerting the news media of a "major announcement on title insurance rates." Tuesday in Sacramento, the press release said:

"California Insurance Commissioner Steve Poizner and the California Land Title Association will announce TitleWizard, a first-in-the-nation searchable website that will enable consumers to review title insurance rates from nearly 100 companies when buying, selling or refinancing their homes. TitleWizard also offers a consumer education section to help guide users through the real estate closing process."

Wow -- guess Poizner was impressed. The video above is an an overview of the TitleWizard site ClosingCorp CEO Anthony Farwell gave Inman News in May.

If TitleWizard is to be the first searchable title insurance search site in the nation (anybody know otherwise?), sites like Get Title Insurance and EasyTitleQuote.com already provide rate quotes, and there's also Colorado-based myTitleIns.com.

Guess we'll have to wait until Tuesday to see if there's more to this "major announcement"  on title insurance rates than TitleWizard.

Inman News columnist Bernice Ross writes today about the importance of getting good comparable sales to an appraiser so that a low valuation doesn't derail a sale. Appraisers who aren't familiar with your area may choose properties that are nearby but in different markets, she says, or they may not know about properties that are still under contract. As Ross notes, the best time to deal with these issues is before the appraisal is done.

At the NAR convention in New Orleans last fall, a Rels Valuation executive shared this statistic: only about 20 percent of disputed appraisals result in increased valuations, and the average increase is just 5.2 percent. If you'd like to read more on the subject from the point of view of appraisers, see the Inman News story on the NAR panel discussion, "The Low Appraisal: Recourses and Remedies."

The appraisers on the panel offered tips on finding comps that won't be laughed at. Don't, for example, expect an appraiser to accept at face value a house that's been remodeled as a comp for a house that has not, or a new home as a comp for a house that's 20 years old.

Of course, all such tips are offered with the goal of achieving an accurate appraisal -- not pressuring appraisers to hit a predetermined price.