First American Says Real Estate Slowdown Is Forcing Layoffs

First American Financial Corp., the nation’s largest title insurer, said Friday that a faster-than-expected decline in real estate activity is forcing the company to slash 12% of its work force, or about 2,400 jobs, nationwide.

The Santa Ana-based company also warned that it expects to report a loss during the fourth quarter of 1999 and the first quarter of 2000 as it attempts to cut costs in response to the business slowdown.

“We just haven’t been able to cut fast enough to keep pace,” said Tom Klemens, the company’s chief financial officer.

Ups and downs are nothing new to First American. The title insurance industry is notoriously cyclical, typically rising and falling with home sales and interest rates.

After enjoying a banner year in 1998, the industry started to slow down in March when interest rates began to rise and fewer homeowners refinanced their mortgages.

Refinance business at First American has dropped nearly 70% since March, Klemens said. He attributed most of the decline to a normal seasonal slowdown but said the slump seems to have accelerated in November. He also said business this month will be hurt because some mortgage lenders, concerned about year 2000 computer glitches, have temporarily stopped funding new loans.

First American cut about 1,600 jobs nationwide during the third quarter and expects to eliminate 800 more in the fourth quarter. Klemens could not say how many of the cuts would occur in Orange County.

Though First American has been striving to diversify into other types of information services, Friday’s announcement shows that the company still depends heavily on title insurance.

Klemens stressed that First American will still record a profit for the year and predicted that the company would return to profitability by mid-2000.

Wall Street analysts had expected First American to earn about 17 cents a share during the fourth quarter, according to First Call Corp.

In its statement Friday--released after the stock market had closed--First American did not estimate how much it expected to lose. Klemens characterized the loss as “small, or maybe even break-even.” It’s the company’s first quarterly loss since 1995.

Analyst Charles Gunther of First Security Van Kasper in San Francisco predicted that First American will recover next year. “It falls quickly and it rebounds quickly,” he said.

Gunther said the slowdown will likely affect other title insurers, including Irvine-based Fidelity National Financial Inc.

First American stock closed Friday at $13.50, up 38 cents a share in New York Stock Exchange trading.

To help soften the blow on Wall Street, First American also announced Friday that its board has authorized the repurchase of up to 5% of the company’s common shares. The company hopes the move will help lift its share price, which is down 56% so far this year.

Staff writer James S. Granelli contributed to this report.