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Is Fidelity Insolvent?
by Robert Franco | 2009/03/02 |

Fidelity recently acquired LandAmerica out of bankruptcy giving it roughly 46% of the national title insurance market.  Fidelity is now the largest title insurer in the country.  But, it may have "bitten off more than it can chew" if my experience with the company is any indication of its financial stability.  At least one of Fidelity's subsidiaries, Chicago Title, is several months delinquent with us.  According to a representative of the company, they are paying their bills as they get paid.  These are sure signs of financial difficulties and cash flow problems.  These are problems one would not expect from the largest title insurer in the nation!

Source of Title Blog ::

Prior to the LandAmerica acquisition, we did work for both companies.  We rarely ever had any payment issues either of them, but that is changing.  Recently, we were contacted by the LandAmerica office we provided abstracting services to.  They told us that we would have to reduce our full search fee from $125 to $70, or they would have to find another vendor.  Basically, they are seeking to roll-back searching fees to where they were about 15 years ago!  We cannot do the work that cheaply, so we politely declined.

Meanwhile, we have been trying to collect past due invoices from Chicago Title, one of the Fidelity underwriters.  One office has several hundred dollars owed from as far back as August 2008.  Things apparently started to go south when Chicago started running all of their searches through their Vendor Management Company (VMC), CastleSearch.  CastleSearch also has outstanding invoices totalling over $2,000 that are more than 30 days past due.

Perhaps too late, we cut them off.  We have been sending polite past-due notices for months and have not even received a phone call.  This time, we let them know that we would not be returning any further work until the delinquent account was brought current.

After a few emails back and forth trying to get the delinquent invoices to the right person for the "ump-teenth" time, I called the person who appeared to be responsible based on their emails.  I was told that they are paying their bills "as they get paid."  She politely told me that she would have to find another vendor if I was "going to hold their work hostage," because I am costing her money.  I tried to explain to her that I had no choice.  I have to make payroll; I have to pay my examiners and I can't do that if they don't pay us.

There are two common definitions of insolvency.  Balance sheet insolvency is when liabilities exceed assets.  Based on the February 4th Earnings Call, Fidelity seems to have lots of money on the books.

We now have reserves for claim losses of more than $2.6 billion which is approximately twice that of any other title company, reserves plus stockholders equity of approximately $5.4 billion and a cash investment portfolio of more than $4.7 billion.

My first question for Fidelity is why can't you pay my measly $2,500 bill if you have $4,700,000,000 in cash investments?  And that leads to my second question - is Fidelity insolvent?

The second definition of insolvency is Cash Flow Insolvency - the inability to pay debts as they come due.  The Balance Sheet Test for insolvency is all on paper.  We know that fancy accounting is misleading at best... anyone remember Enron?  In my opinion, if you really want to know about a company's financial condition, just look at how well they are able to pay their bills.  My bill with Chicago is peanuts (for them).  But, multiply that by thousands of examiners, and their admission that they are "paying as they get paid," and we start to get a very different picture than was presented on the Fidelity Earnings Call. 

And, if you dig deeper into the transcript from the Earnings Call, it wasn't all rosy.  The company's net loss was $1.7 million on $1 billion in revenue.  The executives also clarified the $4.7 billion in cash investments.

Of the gross $4.7 billion, approximately $1.1 billion was theoretically available for use, with about $900 million held at regulated underwriters and approximately $200 million in non-regulated entities.

I'd like to know a little more about what that really means.  This just bolsters my concern that the balance sheet numbers are merely a result of paper accounting.  What does "theoretically available for use" mean?  What is not theoretical is that my invoices apparently can't be paid until they receive payment from their customers.  In my world, the real world, this indicates a problem.  To me it indicates that Fidelity, or at least one of its large subsidiaries, Chicago Title, is unable to pay its debts as they come due.

Fidelity is taking aggressive cost cutting measures by closing offices and reducing headcount. 

We continue to reduce headcount through much of the fourth quarter eliminating approximately 600 additional positions before the addition of the new underwriters. In the first month since the acquisition of Commonwealth, Lawyers and United Title we have been very aggressive on reducing costs in those underwriters.

Through the end of January we have eliminated approximately 1500 of the 5500 employees that we inherited at the closing on December 22nd; a reduction of approximately 27% of the existing workforce.

We have also closed about 125 offices in the first month of ownership. In total we have eliminated annual run rate expenses of approximately $180 million.

Apparently, part of the "cost cutting" includes not paying for the work they ordered and accepted from their independent abstractors (at least not in a timely manner).  As I mentioned, Chicago has outstanding invoices from 8 months ago! In the past, this type of evasive behavior was commonplace with the VMC clients.  Many of them unilaterally adopted payment terms that exceeded the standard NET30 and they often claimed that they would pay when they got paid.  When the largest underwriter in the country starts to take this position, things are bad... really bad. 

Unlike Fidelity, we don't have a $4.7 billion cash investment portfolio.  If they don't pay us, I can't pay our employees.  When they start to lag behind in payment, it doesn't take long to affect our bottom line.  Independent abstractors will face very difficult times if a company the size of Fidelity can't pay for the work they ordered until they get paid.

If the title industry continues to suffer, as I predict it will throughout this year, things will get worse.  Fidelity's acquisition of LandAmerica may just drag the company under.  What will happen if Fidelity files bankruptcy?  As an unpaid creditor I am worried about the possibility.

Robert A. Franco


1587 words | 3794 views | 8 comments | log in or register to post a comment

CEO Bill Foley made $180 million.

I think it's interesting to note that CEO Bill Foley was the 4th highest paid executive in America in 2007. He was paid nearly $180 million!

I believe the cash portfolio is for dividend payments through at least the 1st quarter 2009 of .15 cents per share. They can leave you hanging but they can't leave Wall Street hanging!




by Wyatt Bell | 2009/03/02 | log in or register to post a reply

Mechanic's Lien??

Robert, that is terrible and takes some nerve but it seems to be the norm any more.  I know there was some talk of filing Mechanic's leins before.  Is that a possibility or something like it????  At least that way you have some sort of claim. 

So, what happens when the file never closes?  I have had so many cancellations it is a sad state but my examiners got paid for their work as they should have (I am sure on time but I don't do that part). 

It really shouldn't be a surprise I suppose due to how long we have been watching the slow/no pays we see on the discussion page.  It has finally caught up to the bigwigs of the biz.

At this point I think I might start making phone calls to borrowers/buyers/sellers (BBS) to let them know you will be billing them accordingly for work ordered by the lender/title co. while politely explaining the situation to them.  Some will freek out and others will jsut hang up but there will be those that will take it in stride, hang up with you and immediate call their contact and get them reved up. 

Just call me trouble maker (I have been accused of that before!! Imagine that).  I have no problem contacting managers to complain when I can't get instruction or insurance, etc.  Why would this be any different.  In this case you would calling the "true" customer (the BBS) instead of the manager.  I would make sure to tell the BBS the reason I am calling stressing the number of times you have requested payment from the company, that I need their help and any assistance would be so greatly appreciated.  After that I would mail them a copy of the bill with an extremely nice letter instructing them to send payment directly with instructions to give this to the lender/title co. as proof of payment so that you won't be charged twice.

What say you??????



by Clanci Nelson | 2009/03/02 | log in or register to post a reply

"Holding Our Work Hostage"...I Love That One!

My response: "No, I'm not.  You already got the work two months ago.  The company you work for is holding my money hostage."  Then I say something like, "Tell me something...would you still work for them if they didn't pay YOU?"

by Scott Perry | 2009/03/02 | log in or register to post a reply

Where the money goes...

by Ray Glowniak | 2009/03/03 | log in or register to post a reply

Independent Agents Make Fidelity

Keep in mind that independent agents contribute nearly 2/3rds of the total income to Fidelity and its subsidiaries! 

If you were to factor a market share percentage to the total number of agents Fidelity would have around 2,500 to 3,000 agents. That means Foley earned around $65k per independent agent!!


by Wyatt Bell | 2009/03/03 | log in or register to post a reply

Theoretically Available?

Can I use that one on my bills?

Dear mortgage company:

        Please find enclosed a check for the monthly mortgage payment. Please note that the money to cover this check is "theoretically available" at the bank.  If the check is not honored, I will pay the mortgage as I get paid.  Also, I had to take a 20% pay cut in order to keep my job.  Therefore, I am enclosing 80% of the monthly amount due. If you want to keep me as a paying borrower, you must absorb the difference.  As the CEO and head of my household, I am paying myself the first 180 million dollars of my household revenue before any of my bills are paid.  I'm sure you understand.

Yours truly,

Joe American



by J. H. | 2009/03/04 | log in or register to post a reply

Going After the "BBS" is a Bad Idea


Your contract is with the title company or agency that retained your services.  You have no privity of contract with the borrowers/buyers/sellers, and any attempt to collect from them might constitute fraud.

Your problem is with the company that retained your services, and your solution is small claims court.  It is not worth it to them to retain local counsel to represent them, so just bring your documentation and you have a slam dunk (it is March) win.

Do not forget to follow your state's procedure to register your win as a lien.  If your client files for Bankruptcy, you will be a secured creditor.

by Doug Flavin | 2009/03/10 | log in or register to post a reply


We received a payment on this account for some of the delinquent invoices.  We have also been asked to provide all past-due invoices (again) to two different people.  It seems that nobody even knows who is responsible for paying our bills anymore.  I am hopeful that it will get resolved, but with the confusion over who is paying what will make it complicated.  I just hope they look at all of the invoices and all of the payments and realize that they don't add up to the full amount due.

The problem is that they track which individual order they paid, and we credit the payments to the invoices (oldest first)... so there may be an order on an invoice we have marked as paid that they have missed, and others that show as open invoices that they have actually paid.  This is a big problem, since they don't pay full invoices.  We get partial payments and I cannot credit individual orders in our accounting software - payments get credited to invoices, not idividual items on an invoice.  Thus we have sent all of their invoices and a list of all of the checks we have recieved - they can figure out which orders they haven't paid if they need to, but as far as I'm concerned, they have clearly not paid them all and there is a balance due.

by Robert Franco | 2009/03/16 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco



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