The unit with the title and specialty insurance operations will be spun off to shareholders, while the existing holding company, which will undergo a name change, will consist primarily of businesses that provide data on mortgages, properties and credit.
First American stock declined 27 percent in 2007 as demand for title insurance, which protects homebuyers from claims against their ownership of a property, declined along with home sales. Also feeding the decline – rising costs, as defaults and foreclosures lead to title searches that discover ownership disputes.
Hard times are likely to continue, according to the Mortgage Bankers Association, which says sales of previously owned homes probably will drop to an 11- year low of 4.94 million this year from 5.68 million last year. First American was forced to cut 1,100 jobs in the fourth quarter, bringing the 2007 total to 4,700, said Chief Operating Officer Dennis Gilmore.
First American says it will report a fourth-quarter loss not expected to exceed $50 million for severance expenses, legal reserves and insurance claims of as much as $20 million from the California wildfires alone.