First American Faces Mortgage Rate Pressure

Zacks Investment Research··US·Read original
2▲1 ▼2Impact / 5
Summary · why it matters

First American Financial Corporation continues to face pressure from elevated mortgage rates, which are weighing on its residential title business. The 30-year fixed mortgage rate averaged 6.66% as of August 27, up from 6.56% a year earlier. In the second quarter of 2026, purchase revenues rose only 2%, as a 6% increase in average revenues per order was partly offset by a 3% decline in closed orders. Refinance revenues jumped 18% after a temporary rate decline, but volumes moderated as rates moved higher. However, commercial title activity is helping offset the weakness, with commercial revenues up 34% to $314 million in the quarter, and adjusted net investment income rose 11.4% to a record $1.88 billion. A decline in mortgage rates remains a key potential catalyst for the company. Among peers, Stewart Information Services expects existing-home sales growth of only about 2% in 2026, down from its earlier 6-8% expectation, while Fidelity National Financial saw adjusted pretax title earnings rise 33% to $448 million. First American's shares have gained 14.3% in the past year, outperforming the industry's 1.4% growth, and the stock trades at a price-to-book multiple of 1.33, below the industry average of 1.42. The Zacks Consensus Estimate for 2026 revenues is $8.2 billion, up 9.5% year over year, and earnings per share are expected to rise 17.5%.

Impact on assets 3

Financials± Mixed · 3 stocks
First American Corporation
FAF
▼ NegativeMonetaryrelevance

Elevated mortgage rates weigh on residential title business, with purchase revenues up only 2% and refinance volumes moderating.

Stewart Information Services Corp
STC
▼ NegativeDemandrelevance

Stewart Information Services expects existing-home sales growth of only about 2% in 2026, down from earlier 6-8% expectation, reflecting weak housing demand.

Fidelity National Financial Inc
FNF
▲ PositiveCapitalrelevance

Fidelity National Financial saw adjusted pretax title earnings rise 33% to $448 million, indicating strong performance.

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