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Outlook for Title Industry Revised to ‘Steady’

crystal-ballRating agency A.M. Best is revising its outlook for the U.S. title industry, bringing it down from "positive" to "stable" as concerns build about uncertainty in the housing recovery.

The change reflects the company's outlook shifting from a possible ratings upgrade due to favorable trends to a "low likelihood of a rating change." A.M. Best announced the revision Monday, adding its view "that the majority of ratings will be affirmed in the near to medium term."

In its announcement, A.M. Best said its outlook takes into account the title industry's strong financial condition, as reflected in improved balance sheet strength at the biggest insurers—though the firm noted that growth has slowed in the last year, due in large part to a decline in refinancing.

"In 2013, title insurers continued to report growth in premiums and surplus, but to a lesser extent than in 2012," the company said. "Home refinancing transactions had been greatly curtailed in the second half of 2013 as a result of higher mortgage interest rates. However, home purchases increased, as did real estate prices, which resulted in premium growth."

Also factoring in to A.M. Best's outlook is the state of the housing recovery, particularly in national property values, new construction, and foreclosure rates, all of which were improved in July and August compared to last year.

At the same time, the company cited "mixed signals in recent months" in backing off from its positive outlook. Those indicators include homeownership—currently at its lowest level in nearly two decades—and pending home sales, which fell 7.3 percent annually in June, the month considered to be the peak of the selling season.

Based on those trends, A.M. Best said it has reason to believe "the recovery may not be as sustainable as anticipated."

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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