The volume of L.A.-area properties being sold is inching upward, and so is activity at L.A.'s top title companies, according to this week's List.
But while increased sales activity means better business for the title companies, it doesn't necessarily translate to better market conditions for local real estate.
That's because a substantial portion of the properties being sold in the county perhaps as many as one in four, according to title company executives are by financial institutions that sell properties after completing foreclosures.
When properties are sold, title companies insure owners and lenders against losses resulting from any existing legal problems related to the property, such as fraud or "liens" or other claims, that might hinder the transfer of ownership.
Title companies also get involved in refinancings.
When owners refinance their mortgages, title companies insure lenders against any such claims against the property since the date the owner acquired the property.
Refinancings typically generate only about half as much in fees for title companies as do property purchases.
Title companies' rankings on the List are determined by the combined values of L.A. County mortgages on which they wrote title insurance policies in 1996.
Fortunately for title companies, the gains most of the top firms posted last year are clearly being driven by sales activity, rather than mortgage refinances.
Twelve of the top 15 firms insured a higher overall dollar value of mortgages in 1996 than they had in 1995, including all of the top seven. And 11 of the top 15 insured a higher dollar value of sales-related mortgages than they had in 1995.
The increase in title companies' business in 1996 comes on the heels of a tough 1995 for the industry. The combined values of L.A. County mortgages dropped from 1994 to 1995 for every firm on The List last year with many seeing values falling by one-third or more.
But the higher activity is not reflective of strengthening property values, given the distressing level of bank foreclosures involved.
"Overall, the sales market was much better last year than in 1995, but it's still to a large extent influenced by the 'REO' (foreclosure) market," said Tom Kelley, president of No. 1-ranked First American Title Co. of Los Angeles.
As L.A. County still has an inordinate share of the state's foreclosure activity, REOs foreclosed properties, also known as "real estate owned" constituted perhaps as much as 25 percent of local properties sold last year, Kelley said.
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