Thinking About Expanding Your Title Insurance Licensing?

                                    To be more specific, the resolution of Foreclosure-gate, whenever it does come along, is quite likely to represent a significant boom in the foreclosure – REO space for title agents. The title work needed to complete those transactions will have to come from somewhere, and it’s worthwhile to ask yourself whether your business might benefit from preparing for this eventuality by expanding your title insurance licensing.

               The refinancing boom that we have been witnessing recently is the result of previously unimagined interest rates. They are low, low, low, and the residential refinance market has been reactively responding to interest rate fluctuation and pricing.

               In October of 2008, the interest rate on a 30-year fixed mortgage peaked at 6.33%. As that rate has gone down (and down), the volume of transactions has steadily increased. Consumers, particularly in this tight economy, are highly sensitive to rate fluctuations, and voilà the current refinance boom.

                In May 2009, the rate reached an intermediate term bottom at 5%, but bounced rapidly back up to 5.51% in June 2009. During that one-month period, the market was “shocked” by this sudden increase in rate, and refinance volume temporarily “dried up.” Again, this sudden decrease in volume illustrates a market that is highly responsive to changes in rate.

                The rate then consolidated at 5% for about nine months, but in March 2010, the rate started on another rapid descent as seen by the below price point chart. This once again led to high transactional volume until the rate started to bottom out once more around October of 2010. The rate then began consolidating between in mid-October, 2010. All of this bodes well for anyone with the licensing to capitalize on the refinancing boom. But here comes the interesting part.


                The interest rate has very recently dropped even further because of artificial pressures exerted by the Federal Reserve. Its plan is to invest additional funds in the real estate market and thus spur economic growth. Freddie Mac issued a statement that the rate had dropped to a new low of 4.17%, which broke the previous record low of 4.19% that was reached in mid-October of 2010.

                                       Since then, the Fed has repeatedly pledged to keep interest rates low for "an extended period" of time as the economy continues to mend. On Nov. 3, 2010, the Fed outlined plans to invest $600 billion in Treasury bonds to keep rates low, add liquidity to the market and incent investors into riskier assets. This means lots of transactions for the refinance (and purchase) markets, and thus for title insurance companies prepared to capitalize on it.

                Rates are still inching ever lower, and continued concerns of deflation may exert even more downward pressure on mortgage rates. Moreover, home builders have been known to pay down mortgage rates for their buyers, so these days it wouldn’t be unheard of for them to entice people with a 2% or 3% mortgage rate, at least for a period of time. Mortgage rates could certainly drop lower than they are now. You probably realize that two years ago, few people would have thought a 4% mortgage was possible. It’s possible.

                Basically, we are likely to see high volume in the refinance market continue as long as interest rates remain at historic lows. When the Foreclosure-gate mess gets cleaned up, that’s likely to represent a boom as well. New home sales have increased for three straight months. Are we entering a purchase market? It’s important to keep your finger on the pulse of the economy when determining your licensing strategy. Obviously, we can’t promise anything, but if you’ve been considering expanding your title insurance licensing, the current refinancing boom,  and eventual fall-out of Foreclosure-gate might , along with an up tick in purchases, make now a great time to do that.

2010-11-18 | Add a Comment
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