Friday, December 14, 2007

'Dead Market' Kills Alliance Title

From the Modesto Bee:

Alliance Title Co. went out of business, laid off all its employees and closed its doors Thursday. At least 30 employees in Stanislaus County, plus hundreds more elsewhere in the state, lost their jobs with less than one day's notice.
Terry Harwell, division president for Alliance in Stanislaus County...said he was shocked to hear his four offices -- three in Modesto and one in Turlock -- were being closed and that he and everyone else was being let go. "We're the market-share leader in Stanislaus County, so it didn't seem viable that they would close us down," Harwell said. "We were on pace to break even this month."
In 2005, at the peak of the real estate buying and refinancing boom, Alliance had more than 200 offices and about 2,500 employees in California, Harwell said. That included 10 branches and about 165 employees in Stanislaus County. "Two years ago, we made a ton of money," said Harwell, noting that Alliance raked in $370 million that year.

Then the housing market began crashing, and Alliance started slashing staff. Harwell closed six Stanislaus County offices and eliminated more than 100 jobs this year. He also closed six branches in Merced and Fresno counties. About 14 employees in a Lathrop title service center were let go Thursday...[E]scrow transactions dropped dramatically the last two years. In August 2006, Alliance processed 715 transactions in Stanislaus County, but that declined to 348 in August 2007.

From the Redding Record Searchlight (hat tip Suzanne):
Fredericka Martin of Real Estate 1 in Redding, who worked in the title insurance industry for 25 years before becoming a real estate agent, speculated that the housing slowdown had little to do with Alliance Title closing. "Normally with a big company, if they are having problems, somebody will buy them," Martin said. "When they just close the doors, something went bad and I have no idea."
But Bob Martin of Summit Mortgage in Red Bluff said the chilled housing market had everything to do with Alliance Title's demise. "More people are losing their homes. ... We are in the worst real estate market in 20 years," Martin said. "A title company has to sell title insurance policies to stay alive. It's the lack of business; it's a dead market."
From the Modesto Bee:
Staggering and bleary-eyed from yet another "inevitable" growth binge hangover, valley residents are still trying to assess the costs of their latest housing boom. One effect is in the form of a new kind of eyesore -- "brownies," abandoned houses where the yards and gardens have died and the lights are either never on or never off. But things might be even worse than they look.

In Modesto, the City Council is struggling to manage yet another budget shortfall. The solutions are likely to include a reduction in the number of police and fire positions -- this in a city routinely ranked among the highest in the nation for such crimes as auto theft.
From the L.A. Land blog:
The relatively new foreclosure auction tracking service ForeclosureRadar reports that banks and lenders are starting to offer discounts on foreclosed homes at the initial auctions, with discounts running as high as 42% of what is owed on the house...Example: A Stockton home with an underlying foreclosed loan of $419,000 was recently auctioned with an opening bid of $240,000 -- a discount of 42.8% from the bank's investment -- and still attracted no bids, [Sean] O'Toole says. has a poll on the mortage rate freeze plan. Vote here.


Sippn said...

Heard they are owned by another title company.

Close em, BK em, take the write offs and stop the lease payments. Send the business back to yourself.

Good time to clean up the mess.

Max said...

Example: A Stockton home with an underlying foreclosed loan of $419,000 was recently auctioned with an opening bid of $240,000 -- a discount of 42.8% from the bank's investment -- and still attracted no bids

Why would anyone bid on these houses when there are hidden reserves and the banks keep the deposit checks for as long as they want?

Until these "auctions" become binding, (not a place for banks to begin negotiating), bids will be few and far between.

Bakersfield Bubble said...

Thanks for the Alliance updates!

Sounds like the Bakersfield office was lying to our local newspaper!

Bakersfield Bubble said...

Sippin -

Stop the lease payments? How if they are owned by someone else? I think you need to get your story straight.

paranoid renter said...

At this point, even though homes are becoming affordable, I would be too scared to buy because of the neighborhoods deteriorating.

Best to wait a couple of years, I think.

SacramentoCrash said...

Is this a Ponzi Scheme?

Title companies take in money paying off any losses out of new title insurance policies?

Who pays off the claims if the title company tanks?

smf said...

"At this point, even though homes are becoming affordable, I would be too scared to buy because of the neighborhoods deteriorating."

Same here. With all the troubles, it is hard to figure out what is going to be a nice neighborhood in the future.

Till further notice, we will ride the wave down with our house (instead of selling and renting) until this thing settles down.

There are even 'nice' areas that are starting to have pockets of trouble in EDH and GR.

DFC said...


Where are the 'nice' areas in EDH and what is the trouble?

sacramentia said...

"Brownies" lol .. so many that there is even a nickname now. I can't wait for the an episode of "Flip that Brownie"

Hey SMF - which areas of EDH are seeing trouble in? I want to go check them out.

Cmyst said...

Well, someone DID leave dog poop on our front door mat a week ago....

Patient Renter said...

This is brilliant - Ron Paul was on Cramer (who I don't normally watch) today for a discussion about the Federal Reserve, and the damage the Fed causes

I'm so happy to see this sort of discussion on a mainstream show. Hopefully more people will wake up to this issue.

Patrick Hake said...

In Auburn the majority of the escrow officers and management from Alliance Title immediately moved over to Financial Title.

Their client base of local home owners, home buyers, lenders and Realtors had nothing to do with the Alliance Title name, so they will do fine with the new name.

Outside of the obvious downturn in transactions from resale and refinance transactions, the local title and escrow companies are getting hurt by lenders REO practices.

Most of the REO homes I have sold this year have sent their title and escrow business to Southern California.

The last two REO deals I closed the title and escrow were in Riverside and Temecula.

The annoying part is that they basically provided no local signing assistance and they cost nearly twice as much for escrow costs.

So long as the banks keep sending their business down south, I predict we will see continued attrition in local title and escrow companies.

smf said...

The 'cheaper' areas around Serrano are going back to 2003/2004 prices, as noted by a check of listed prices in MLS, and prior sales.

There is a terrible glut of high end mansions around the area as well, especially around Greenview and Gresham streets.

My in-laws have already lost about $200K in equity, etc.

Professor Shays said...

First of all, I suspect that I'm qualified as a previous industry insider (worked in the title business fro 1972 to 1995 in a variety of non-sale capacities) to comment. Despite the fact that most of what Sippn writes demonstrates either ignorance or is simply designed to encourage dialog, his comment here has some merit of truth. Alliance was owned by a company who owned other underwritten title companies. That is not uncommon. The fact that they took the step in quickly closing down an operation the size of Alliance is uncommon. I've seen small (one to five county underwritten) companies closed in this manner, but one this size is a first for me.

There is no question that this market will cause a retreat in the number of underwritten title companies that service a particular county. You cannot survive very long where your business is half of what it was and you've cut staffing to the bone and still have to meet fixed costs.

I guess my point in all of this is if I were in any transactional aspect of the real estate business, I'd feel more comfortable dealing with a title company that had the word "insurance" in its name. The reserves true "title insurance companies" have to maintain are far greater than underwritten title companies. And yes there are really only a few major insurance companies out there that you are left dealing with. FATCO, Land America, Fidelity, and Mercury.

Oh and more info can be found at:


Tyrone said...

Bargain houses largely unsold
Courthouse-step auctions offer 1,336 properties in foreclosure -- 17 are sold
December 15, 2007

Another foreclosure record was set in November as 1,336 properties were offered to the highest bidder on the courthouse steps in Modesto, Merced and Stockton.

Now here's the real surprise: Only 17 of them sold, despite lenders offering deeply discounted prices.


Diggin Deeper said...


Sentiment, debt, and affordability are powerful players in down markets.

Imho, this whole debt issue is really starting to catch up to Main Street. The entire real estate industry has basically shut down for good reason. The consumer is tapped out as we watch auto loan and CC payment lates rise to alarming levels. This indicates that debt was used to service debt and now there's nothing left on the collateral side to fund anymore of that debt.

Follow the trail. First we get a huge uptick in foreclosures, next the auto repos start rising, and then credit card defaults follow in succession to set up another round of the same. It's like a vortex that just keeps drawing more and more debt ladened consumers to the center.

I keep going back to what Ralphk posted about the possibility that BK's are becoming the rule rather than the exception. Maybe we have to accept that a large chunk of consumer base is basically bankrupt. No matter how low home prices go, it's getting hard to find that "golden" buyer who is flush enough service anymore debt, let alone a mortgage.