Interest Rates and HARP Participation Pressure Title Insurer Revenues

2014 revenue growth for U.S. title insurers is likely to be constrained, said Fitch Ratings in a press release Wednesday. Fitch cites rising interest rates and Home Affordable Refinance Program (HARP) participation as a limiting factor for title insurers, who have experienced steady revenue growth and improving profit margins over the last two years.

Since 2009, 67 percent of all mortgage originations have been related to refinancing activities according to the Mortgage Bankers Association of America (MBA).

Bolstered by the recovery of mortgage and property markets, title insurer’s revenues have increased the past few years in large part to the high volume of refinances brought on by low interest rates.

However, Fitch notes declining participants in HARP and rising interest rates as two key factors in their projected downturn of refinancing that could negatively affect title insurer’s bottom line.

Although still below historic averages, Fannie Mae is forecasting interest rates to increase to 5.1 percent by the end of 2014.

One factor cited by Fitch to possibly help offset lost revenue is the recent increase in new housing construction. Still, Fitch projects a modest decline in 2014 versus the prior year.