Last year may have been the worst since 2002 for title insurers, who will need to reduce costs and contain losses to firm up their bottom lines as premium volumes fall.

That’s according to a new report from Demotech Inc. analyzing the title industry’s third-quarter results. The quarterly update showed net income for the year down 25 percent at the end of the third quarter, and Demotech projects direct premiums written will total $14.5 billion for the year, the lowest level in five years.

Tighter lending standards are limiting the availability of low-rate mortgages to only the most qualified buyers, and larger down payments and higher credit scores are needed to purchase a new home, Demotech analysts said. Affordability remains an issue in many areas, and homeowners with little equity may not be able to refinance or sell if they are upside down on their current loan because of recent home-value declines.

“Until existing homeowners build enough equity to refinance and potential home buyers gain the financial strength to afford a new home, the demand for title insurance will be reduced,” Demotech said in announcing the release of the quarterly update. “A recession would exacerbate the situation. For the next year or so, title companies will need to focus on reducing costs and containing losses in order to achieve healthier bottom lines as premium volumes decline.”

The Mortgage Bankers Association recently projected that total mortgage originations will fall to $1.96 trillion in 2008, down from an estimated $2.34 trillion in 2007. Purchase-mortgage originations are expected fall 18 percent from 2007 levels, to $955 billion (see Inman News story).

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