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First American Financial's Unit Partners With Encompass

 First American Financial Corporation’s FAF unit First American Docutech announced a rationalized consolidation with Encompass, a loan origination software by Ellie Mae. Shares of First American Financial gained 0.3% on Friday's trading reflecting optimism over the consolidation.

Encompass is the industry’s most-recognized Loan Origination Software. With Encompass by Ellie Mae, one will experience immediate savings and operational improvements. Lenders of every size trust the Encompass Loan Origination System (LOS) to originate more loans, lower costs, reduce time to close, and make smarter business decisions.

The Ellie Mae Digital Lending Platform, part of Intercontinental Exchange ICE, empowers lenders and investors to engage homebuyers and efficiently originate, close, sell and purchase loans that maximize return on investment (ROI) across their business. The platform delivers a true digital mortgage experience across entire workflow for every channel, every loan transaction and every customer type. It integrated Encompass into their business, and then started adding services.

The mortgage industry’s average loan origination cost is $8,957, primarily attributed to many lenders not using a tightly integrated, all-in-one solution. Ellie Mae customers substantially reduce these costs by leveraging a single system of record. As a result, they save an average of $813 per loan, and close those loans seven days faster. This equates to an average annual ROI of 698%.

In March 2019, Docutech was acquired by First American for around $350 million to boost the home-buying experience for consumers, aid digital transformation of the real estate settlement process and to invest and enhance its core business. First American Docutech’s combined expertise in title, settlement and document services technology delivers a complete suite of digital mortgage solutions to make it easier for lenders and settlement providers to close loans faster.

The majority of First American business is dependent on activity in the real estate and mortgage markets, which are cyclical and seasonal. Increased mortgage financing availability has a positive effect on residential real estate activity, which typically increases the company’s revenues. Growth in real estate transactions and mortgage origination activity leads to higher demand for the company’s title information products, which in turn increases information and other revenues.

Therefore, this strategic combination will boost First American Docutech’s digital solution suite integration within Encompass. Lenders will get the opportunity to implement the suite of solutions with limited effort, aiding them to digitize their process from point-of-sale origination through closing, and on to secondary market delivery. Also, lenders are bestowed with higher efficiencies, enabling an end-to-end digital mortgage experience.

In order to enhance the mortgage market and aid lenders and borrowers, First American has undertaken various initiatives. It partnered with LendingQB to enable complete end-to-end digital mortgage closing solution for lenders, borrowers and settlement agents. It aided lenders, borrowers and settlement agents with a complete digital solution to streamline the closing process with safety and security.

First American entered into a strategic alliance with Clarifire for seamless and easy accessibility to its loss mitigation products and services.

Also, First American teamed up with Home Point Financial to provide borrowers an efficient and beneficial mortgage process.

Shares of this Zacks Rank #2 (Buy) company have lost 24.6% in the past year, compared with the industry’s decline of 3.6%. Nevertheless, growing direct premiums, escrow fees and agent premiums as well as effective capital deployment should help shares bounce back.

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