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The Biden administration’s push to reduce closing costs for borrowers is an opportunity for title technology provider Doma as it strives to return to profitability this year after closing down its retail title operations nationwide to focus on offering its services to more lenders and mortgage platforms.

That was the message from Doma founder and CEO Max Simkoff Tuesday, as the San Francisco-based title tech innovator reported a $124.4 million 2023 net loss.

That’s an improvement from last year’s $302 million net loss, as Doma saw revenue decline by 22 percent, to $302 million but was able to slash operating expenses by an even more drastic 35 percent, to $486 million.

Max Simkoff

Last year was “a transformational year for Doma,” Simkoff said in an earnings announcement. “As we continued to navigate challenging market conditions, we successfully executed significant cost reduction actions, divested our non-core local agency operations, and streamlined our business to focus on our core strengths and to support our invaluable customers.”

Founded in 2016, Doma has developed a machine learning platform, Doma Intelligence, and other technology to automate the title and escrow processes. After raising less than anticipated when it went public in a 2021 merger with a special purpose acquisition company (SPAC), rising mortgage rates curtailed mortgage refinancing by Doma’s clients, forcing the company to downsize.

Last year, Doma announced the sale of 22 retail title locations and operations centers in California to title insurer Williston Financial Group (WFG) and is out of that business altogether.

During the first quarter, Doma launched a new pilot program, Upfront Title, which it says provides lenders with “near-instant title certainty” and the ability to provide borrowers with “a price meaningfully below current industry standard rates for title insurance.”

Simkoff said Doma has launched Upfront Title with one of the largest mortgage technology platforms in the country and a major national lender but does not expect to generate significant revenue from the pilot program in the first half of the year.

Based on early results, he said Doma would be in a position to expand its partnership in the second half of the year and to offer “a more enhanced Upfront Title product configuration to additional lenders and mortgage technology platforms.”

Doma is “well positioned” to help lenders take advantage of a pilot program announced last week by the Biden administration, which would allow lenders to sell low-risk mortgages they refinance to Fannie Mae and Freddie Mac without having to provide a lender’s title insurance policy or attorney opinion letter.

“We believe that Doma is one of the only companies in our space who has the proven technology and underwriting capabilities to participate in the pilot program,” Simkoff said.

While the program has drawn the ire of an industry group, the American Land Title Association, Simkoff said Doma is “excited by the actions taken by the administration, and we share a desire and a sense of urgency to reduce closing costs for borrowers by a wide margin compared to traditional non-technology-based solutions.”

Simkoff said that, based on information that’s been made available so far, “it’s likely over time that the majority of the refinance universe should qualify for our more innovative approach to quantifying and helping (Fannie Mae and Freddie Mac) assess and underwrite title risk, and we look forward to further exploring this opportunity.”

Doma sees path to profitability

Source: Doma earnings reports. 

As it adapts its technology to handle purchase mortgages, Doma continues to rack up losses, with an accumulated deficit of $615.8 million through Dec. 31.

But Doma has been chipping away at its net loss for four consecutive quarters, paring it down from $109.4 million in the fourth quarter of 2022 to $20.8 million in Q4 2023.

Revenue was up 11 percent quarter over quarter to $85 million in the final three months of 2023, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved to a $3 million loss, down from $11 million a year ago.

“While our results fell just shy of our ambitious goal of reaching adjusted EBITDA profitability in Q4, primarily due to the continued degradation of the interest rate environment, we are encouraged by the significant improvement we made in our cost structure which allowed us to get within our striking distance of our goal,” Simkoff said.

Doma, which executed a 1-for-25 reverse stock split last summer to head off delisting from the New York Stock Exchange, must still convince investors that it’s on the right path.

Shares in Doma, which in the past 12 months have traded between a low of $3.86 and a high of $11.50, fell 15 percent Wednesday to close at $4.64 following the release of earnings after markets closed Tuesday.

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