Doma Holdings Inc

NYSE:DOMA

Earnings Call Analysis

Doma Navigates Market with Strategic Focus

In 2023, Doma implemented cost reductions, divested non-core operations, and streamlined the business, focusing on affordable and tech-driven title insurance solutions. They made significant progress toward adjusted EBITDA profitability, reducing Q4 losses from $11 million in the previous year to $3 million, though they missed the break-even target. Doma launched the 'Upfront Title' pilot, integrating technology with mortgage platforms, offering value through lower costs and efficient scaling. Despite market headwinds, their underwriting division showed 7% and 22% growth in premiums/fees and adjusted gross profit, respectively. Endorsing President Biden's affordable housing plan, Doma's tech can partake in a Federal Housing Finance Agency pilot, reducing costs and accelerating closings, potentially benefiting low and moderate-income homeowners.

Strategic Transformation and Market Positioning

In the year 2023, Doma undertook a process of strategic transformation, navigating challenging market conditions while implementing significant cost reductions, divesting from non-core operations, and streamlining the business towards technology-driven offerings. They sharpened their focus on affordable tech-centric title insurance, culminating in the launch of an innovative pilot product, Upfront Title.

Financial Progress and Seasonal Market Challenges

Doma achieved a reduction in its adjusted EBITDA loss for continuing operations to $3 million in the fourth quarter, an improvement from the $5 million loss in the third quarter, reflecting progress from a larger loss of $11 million in the fourth quarter of the preceding year. Despite missing their quarterly target, Doma is optimistic, though they recognize the seasonal industry low in the first quarter and macroeconomic uncertainties that may challenge their path to adjusted EBITDA profitability.

Advancements in Upfront Title and Tech Solutions

Doma's commitment to tackling the housing affordability crisis has led to the launch of the Upfront Title pilot program. Their patented instant underwriting technology is expected to considerably reduce costs for homeowners by automating title insurance and integrating seamlessly with lenders' mortgage software systems. Early results from the pilot suggest the potential for expansion and enhanced configurations in the second half of the year.

Underwriting Performance and Cost Reduction Success

In the fourth quarter, Doma’s underwriting division saw a 7% increase in retained premiums and fees, along with a 22% rise in adjusted gross profit compared to the previous quarter. Cost reductions have begun to bear fruit, and further momentum in the underwriting business is anticipated due to these initiatives.

Technical Initiatives and Expansion of Customer Base

Doma implemented significant tech initiatives which are believed to aid their independent agent-focused title production team by saving time and expenses. They also achieved growth in their independent agent customer base, building 130 new relationships in 2023 and notably partnering with Lennar, the nation’s largest homebuilder.

Regulatory Developments and the Opportunity for Innovation

Doma anticipates benefitting from emerging public and political support for innovative title insurance solutions aimed at affordable housing. This comes on the heels of announcements by President Joe Biden and the Federal Housing Finance Agency hinting at an impending administrative pilot to lower housing costs by reducing title insurance expenses. Doma's technology is well-suited for such initiatives, potentially playing a key role in reducing costs for conforming refinances.

Expectations for Sustained Growth and Profitability

Doma executives are determined to execute on their strategic vision for 2024, focusing on growing revenues, expanding margins, and aiming for sustained adjusted EBITDA profitability. With a stronger fourth quarter reflecting an 11% increase in GAAP revenue to $85 million, due primarily to the robust homebuilder market, the company is positioned to leverage their unique offerings for future success.

Confidence in Instant Underwriting Technology

The company expresses confidence in their technology's ability to safely and instantly provide underwriting decisions, securing a potential advantage as Fannie Mae considers implementing pilot programs that align with Doma’s innovative approach. As specifics about such programs are awaited, Doma remains ready to swiftly adapt their unique technology offerings to new market opportunities.

Earnings Call Transcript 2023-Q4

[Operator]

Hello, and welcome to the Doma Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

It is now my pleasure to introduce Chief Strategy Officer and Interim Head of Investor Relations, Dave DeHorn.

[David DeHorn, executive]

Thank you, operator. Good afternoon, everyone, and thank you for joining Doma's Fourth Quarter and Full Year 2023 Earnings Conference Call.

Earlier today, Doma issued a press release announcing its fourth quarter and full year results, which is also available at investor.doma.com.

Leading today's discussion will be Doma's Founder and Chief Executive Officer, Max Simkoff.

Before we begin, I would like to remind you that our discussion will contain predictions, expectations, forward-looking statements and other information about our business that is based on management's current expectations as of the date of the presentation. Forward-looking statements include, but are not limited to, Doma's expectations or predictions of financial and business performance, market conditions, competitive position and industry outlook. Forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results and/or from our forecast, including those set forth in Doma's most recently filed annual report on Form 10-K and subsequent filings with the SEC. For more information, please refer to the risks, uncertainties and other factors discussed in Doma's most recently filed annual report on Form 10-K and other SEC filings.

All cautionary statements that we make during this call are applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks and uncertainties and other factors discussed in Doma's SEC filings. Do not place undue reliance on forward-looking statements as Doma is under no obligation and expressly disclaims any responsibility for updating, altering or otherwise revising any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Additionally, during this conference call, we will also refer to non-GAAP financial measures, including retained premium and fees, adjusted gross profit, adjusted EBITDA and the other measures described in our earnings release. Our GAAP results and a description of our non-GAAP measures with a full reconciliation to GAAP can be found in the fourth quarter and full year 2023 earnings release, which has been filed with the SEC and is available on our investor website.

And with that, I'll turn the call over to Max Simkoff, CEO of Doma.

[Maxwell Simkoff, executive]

Thank you, Dave. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2023 earnings call.

2023 was a transformational year for Doma. As we continue to navigate challenging market conditions, we successfully executed significant cost reduction actions, divested our noncore local agency operations and streamlined our business to focus on our core strengths and support our invaluable customers. We narrowed our strategy to better address the ever-growing market demand for more affordable and tech-driven title insurance offerings, including the launch of an innovative new product pilot called Upfront Title.

This transformation was made possible by the incredible team that we have built here at Doma. I want to start by thanking each of you for your hard work and contribution to get us where we are today.

Turning to our fourth quarter results. We will discuss 4 key themes on the call today.

First, I will provide an update on our path to reaching adjusted EBITDA profitability.

Second, I will provide an update on the implementation of our narrowed strategy for the business, including more detail on the launch of our Upfront Title pilot and the early encouraging successes we have enjoyed.

Third, I want to take a few minutes to talk about the continued strength of our core underwriter platform, which demonstrated another quarter of strong performance despite difficult market conditions.

Fourth, I will discuss how the recent groundswell in public and political support for more affordable housing solutions, specifically driven by a need for more innovative title insurance options as exhibited in last week's state of the union address, is something we believe we are uniquely positioned to address in ways that could deliver upside to our long-term success.

Regarding our first theme, we successfully executed significant cost reduction actions in 2023 while still enhancing the customer service levels at our underwriter and our enterprise division. We struck a fine balance between reducing costs while still funding investments to support our future growth opportunities, particularly as it relates to our new strategy.

While we 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 adjusted EBITDA and P&L.

Our adjusted EBITDA loss for continuing operations was $3 million in Q4, an improvement from our adjusted EBITDA loss for continuing operations of $5 million in Q3 of this year. As a more stark reminder, we've come a long way from our fourth quarter '22 EBITDA loss for continuing operations of $11 million, and we are proud of the progress we've made despite narrowly missing our target this quarter.

Looking ahead, and as we have previously discussed, Q1 is typically a seasonal low point for the housing market which, combined with continued macroeconomic uncertainty, presents risks to achieving adjusted EBITDA profitability in the first quarter and first half of the year. But overall, we are encouraged by the significant improvement in our cost structure which enabled us to get within striking distance of our goal.

Now that we have significantly reduced our cost structure, our efforts and our focus going forward are on growing our revenue and expanding our margins through realization of operational improvements. We believe the implementation of our new strategy will be key to achieving these goals, and we are extremely encouraged by the external support we are getting from our customers as we navigate through change.

This brings me to the second key theme of our earnings call, an update on our Upfront Title pilot program, which we launched in the first quarter of this year.

As we discussed on our last couple of quarterly earnings calls, our go-forward business strategy is centered around providing solutions to the growing market chorus for more affordable and tech-enabled title insurance and technology solutions.

Housing affordability remains a critical issue for many Americans. By licensing our patented instant underwriting technology upstream, directly to the largest mortgage market participants in the country, and while continuing to serve independent agents through our underwriting channel, we are confident that we can meet market demands and ultimately bring down costs for homeowners who are in critical need of relief.

The unfortunate reality is that most homes for sale in 2023 were not affordable for a typical U.S. household. According to an analysis by Redfin, just 15.5% of homes for sale in 2023 were affordable for the typical U.S. household, the lowest share on record. According to the National Association of REALTORS' data, the national median price for an existing single-family home jumped 3.5% from the year prior. They cite that home prices continued to surge in the fourth quarter of 2023 in the majority of major U.S. metros, and some markets even posted double-digit gains.

While interest rates have begun to cool, they still remain elevated which, combined with low supply, have created affordability challenges for many families. We applaud the industry participants who are exploring new and innovative options to help with closing costs, especially for low-income, first-time homebuyers.

It is clear to us that Americans desperately need relief. We believe that our narrowed strategy positions us well to address this critical issue by offering a much lower cost and more streamlined solution for homeowners. Through the launch of our groundbreaking pilot product, Upfront Title, which we discussed on our Q3 call, we believe we will have a strong competitive advantage to deliver a far better, faster and more affordable suite of title solutions to American homeowners.

As a reminder, our Upfront Title insurance product will enable us to provide an instant title underwriting decision as well as rate and coverage quoting all within, or in communication with, the core platforms used to determine eligibility for loan underwriting itself. Specifically, we have designed the product to integrate seamlessly with, number one, mortgage software systems utilized by large lenders to process borrower demand and issue prequalification decisions for mortgages; and number two, the core automated underwriting systems utilized by the government-sponsored enterprises.

By offering our new Upfront Title product to mortgage software platforms as well as the GSEs directly, we will enable the lender customers of these platforms to obtain instant title certainty at the point of deciding whether or not to underwrite the loan as well as to provide their homeowner customers a price generally far below current industry standard rates for title insurance. Additionally, over time, this configuration of our technology will help us shift more of our revenue towards higher-margin software licensing revenue.

On our Q3 call, we announced an initial partnership with one of the largest mortgage technology platforms in the country to launch our Upfront Title products via a pilot program. We are delighted to announce today that earlier in Q1 '24, an early-stage configuration of this pilot program successfully launched ahead of schedule. We are already seeing encouraging early results, and they are helping to validate that the future could bring a transformational new configuration, which can deliver both meaningful savings and benefits to consumers and lenders alike.

We believe that based on these early results, we are on track, and if we are successful demonstrating pilot program success in the first half of this year, we would be in a position to expand our partnership in the second half of the year both on a geographic basis and also by offering a more enhanced Upfront Title product configuration to additional lenders and mortgage technology platforms. While we are very encouraged by the early results, we do not expect revenue from this pilot program to be material in the first half of the year.

We are thrilled to be partnering both with one of the largest mortgage technology platforms in the country and a major national lender customer to launch this innovative product and believe that the value proposition that we offer to this initial lender will be just as strong with other lender customers. And our technology platform partner has built an impressive customer base, so we are excited about our ability to expand within this partner's platform given their scale and market presence.

For the Upfront Title product, Doma's underwriting division will provide the title insurance policy, while the escrow and closing services may be performed either internally or provided by external partners, which we believe will enable us to scale our product efficiently. Our intent is to accelerate our go-to-market strategy and work over the next few quarters to expand our reach so that we can deliver meaningful cost savings to homeowners.

As part of our go-forward strategy, and in parallel with the distribution of our technology on a license basis, our title insurance underwriting business and our independent agent customers remain of critical importance and will continue to be a core part of our business.

This brings me to the third key theme of our earnings call, which is to provide an update on our core underwriting platform and its strong performance despite continued difficult market conditions.

Our fourth quarter underwriting division retained premiums and fees and adjusted gross profit increased 7% and 22%, respectively compared to the third quarter.

During the fourth quarter, the underwriter performance was aided by the strength in the homebuilder portion of the business and positive improvement in gross profit resulting from favorable reserve development. And we also expect to see continued positive momentum in our underwriting business, benefiting from lower costs driven by our most recent cost reduction actions.

We continue to launch significant tech initiatives in our underwriting division, which have been instrumental to our success. For example, we launched numerous APIs with major title production systems in areas like CPL, policy jackets and title production. We also launched online pay systems, allowing our agents to make their remittances electronically with the click of a button. And lastly, we launched our new revamped agent education portal, Doma Academy, offering CE, CLE credits to our agents to satisfy licensing requirements.

We believe our continued rollout of our innovative technology will benefit our independent agent-focused title production team by saving them time and expense, while also enabling them to improve their efficiency through a partnership with Doma.

Our independent agent community remains of critical importance to Doma, and we are pleased to continue growing our community by onboarding new agents. We saw meaningful growth in the number of independent agent customers we service, having added 130 new customer relationships during 2023.

Lastly, we saw positive results from our partnership with Lennar, which is the nation's largest homebuilder. With the chronic supply shortage of homes and increasing demand for housing, we remain excited to partner with Lennar in order to continue servicing their title needs.

Before wrapping up, I would like to touch on the fourth key theme of our earnings call. The public and political support for more affordable housing outcomes being driven specifically through more innovative title insurance solutions has grown significantly, even in just the last few weeks. And we believe we are extremely well positioned to address one specific opportunity that emerged coming out of last week's state of the union address.

As you may have seen in his address last week, President Joe Biden announced his plan to lower housing costs for the millions of Americans who are struggling to afford the American dream of homeownership, and he specifically mentioned a focus on reducing title insurance costs.

In a separate announcement immediately ahead of the President's address, the Federal Housing Finance Agency announced that they have approved a pilot to waive the requirement for lenders' title insurance on certain refinances. FHFA's Director, Sandra Thompson, further clarified that this "title acceptance pilot" will waive the requirement for lenders' title insurance or a legal opinion on certain low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance. The pilot only impacts the requirement for a lender's title policy or AOL and does not impact a borrower's title risk since it only applies to certain refinanced loans where the borrower has title to the property already.

We believe that Doma is one of the only players in our space who has the proven technology and underwriting capabilities to participate in the pilot program announced by FHFA. Our patented technology, which has been proven out over nearly 85,000 loans, is able to automate the bulk of the title search and exam process for the majority of conforming refinance transactions regardless of geography, borrower profile or other traditional manual underwriting characteristics that have been used.

Our tech has also proven that we consistently reduce time to close by several days and enable significantly lower fulfillment costs for mortgage originators, all while exhibiting similar claims rates as the traditional title process. And because our technology operates using a completely automated front end, we can not only provide it as a licensed offering to the GSEs for the majority of refinances that they purchase from lenders, if they should decide that this configuration would best support the FHFA's announced pilot, but also provide a seamless and instant integration with any lender who might choose to participate in this program.

Further, if the external reporting that we've seen is correct in stating that Fannie Mae will be the first to launch this pilot, we have the added benefit of a relationship with Fannie Mae in helping evaluate and execute initiatives to drive more equitable and affordable homeownership outcomes.

It's important to note that we've been dismayed by some of the commentary following last week's announcements that assume that the reported pilot program will both put the American dream of homeownership at risk as well as not benefit low-income and/or minority homeowners. Specifically, FHFA confirmed in their statement last week that the pilot program will not introduce any new risk to borrowers.

Additionally, we have seen reports by some industry trade organizations that assumed, based on FHFA's language in their announcement last week, that the only transactions that qualify for the announced program will be those of wealthy homeowners and implying that these will be non-low income and/or high credit score borrowers.

Our own data from the past several years has shown that the majority of conforming refinances were completed by individuals who are below 120% of their area median income, the definition of lower moderate income utilized by the GSEs. And again, our technology was used to safely underwrite over 75% of these transactions. So we have confidence that there are multiple paths for FHFA and the GSEs to ensure that whatever configuration they decide to implement of the announced pilot, it will likely have a significant impact on low and moderate-income homeowners who desperately need relief.

Overall, we're 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. We think that based on what we've heard about the announcements made last week that it's likely over time that the majority of the refinance universe should qualify for our more innovative approach to quantifying and helping the GSEs assess and underwrite title risk, and we look forward to further exploring this opportunity. This is a great example of the kinds of innovation that could make a lasting impact on helping to alleviate housing affordability challenges in this country in a safe and appropriate manner.

In closing, I'd like to take a moment to celebrate the incredible work that has been done by the entire Doma team. Our success is a direct result of your efforts and ability to navigate a continually challenging environment. We believe we have a reasonable amount of runway ahead of us, thanks to all the cost savings initiatives of 2023 and our targeted go-to-market plan for 2024.

I would also like to thank our investors and analysts for your continued support. It's obvious to us that consumers need better options to help relieve the housing affordability challenges they face. We are passionate about not only removing the friction and frustration from an antiquated process but also for providing lower-cost title solutions for all, especially to those who need it most.

I'll now turn over the time to Mike Smith, our CFO. Mike?

[Michael Smith, executive]

Thank you, Max, and good afternoon, everyone.

Today, I'll be providing an overview of Doma's fourth quarter financial results. Please refer to our earnings release issued earlier today for full details of the quarter and full year 2023. Unless otherwise specified, all the comparisons cited in my remarks are sequential comparisons to the third quarter of 2023.

The latest MBA Mortgage Finance Forecast is projecting that the 30-year fixed mortgage rate will remain above 6% for the duration of 2024. As we stated in the past, these elevated rates will likely continue to put pressure on refinance and purchase order volumes industry-wide for the foreseeable future.

As we discussed on our prior couple of earnings calls, we exited all of our local retail operations nationwide in 2023. We have completed all of the related transition periods which have resulted in substantial savings and reductions of legacy local costs. As a result of these sales, the local branches and their associated operations are classified and reported as discontinued operations in our financial results. My remaining comments are focused on our continuing operations.

Overall, our primary measure of unit economics is adjusted gross profit, which was $8 million in the fourth quarter of 2023 and which compares to $6 million in the third quarter of 2023. Adjusted gross profit as a percentage of RP&F increased to 47% in the fourth quarter compared to 39% in the third quarter of 2023, an overall increase of 8 percentage points due to increased RP&F and lower provision for claims as a result of lower claim emergence and favorable changes in reserving assumptions.

Adjusted EBITDA, our main profitability measure, was negative $3 million compared to negative $5 million in 3Q of 2023, an improvement of more than $2 million. This improvement was primarily the result of our previously discussed increase in RP&F, lower provision for claims and our workforce reduction actions and company-wide efforts to reduce overall spend.

Moving on to our top line performance in the fourth quarter. We reported revenue on a GAAP basis of $85 million, which compares to $76 million in Q3 of 2023, an increase of 11%, primarily due to the continued strength seen in the homebuilder market.

As a reminder, GAAP revenue includes a portion of agent premiums that Doma does not retain. So we focus on Doma's retained premiums and fees, or RP&F, as an important metric, which excludes the premium retained by third-party agents. We believe this is a much better representation of Doma's underlying top line performance.

With this in mind, RP&F was $17 million in the fourth quarter, up 7% compared to the third quarter of 2023, driven by strong homebuilder orders and stable independent agent results. Underwriting RP&F within our third-party agent channel increased 12% in the fourth quarter compared to the third quarter, primarily from the continued strength in the homebuilder market I just mentioned.

As we noted on our prior earnings call, we are focusing on the performance of the underwriter. During the fourth quarter, the underwriter performance was aided by the strength in the homebuilder portion of the business and positive improvement in gross profit resulting from favorable reserve development. And we also expect to see continued positive momentum in our underwriting business, benefiting from lower costs driven by our most recent cost reduction actions.

As Max mentioned, we look forward to executing on our new strategy, growing our revenues, expanding our margins, and we remain highly focused on becoming adjusted EBITDA profitable on a sustainable basis.

I'll now pass the call back to Max for closing remarks before we open the call to questions. Max?

[Maxwell Simkoff, executive]

Thanks, Mike. Thanks, everyone, for joining us on our call today. We remain focused on our critical mission of making the home buying process better, faster and more affordable.

Overall, 2023 was a transformational year for Doma. Throughout the year, we made progress in positioning the business for the long term. We significantly reduced our expenses, narrowed our strategy and launched an innovative new product pilot. While our efforts have largely been on narrowing our strategy and adjusting our cost structure to align with the current macroeconomic environment, we believe that these efforts are largely complete and will provide us with a sustainable cost base as we push forward and work towards resuming growth in our business.

Operator, we're ready for questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Matt Carletti with Citizens JMP.

[Matthew Carletti, analyst]

You talked a bit about the Upfront Title and the pilot programs, and I know you can't be too specific on each one. But just as a 30,000-foot view, can you provide us any sort of color on how those might be structured from like a commercial aspect as we think about kind of longer term how the economics might inure to Doma?

[Maxwell Simkoff, executive]

Sure. Happy to. So the best way to think about it, Matt, is that what we've really developed over the last 6 or 7 years at this point is a considerable technology platform benefit whereby we can immediately decision using our algorithm's title risk on any qualifying title transaction. And when you think about the way that, that works at a high level in terms of unit economics, we've already paid the R&D cost to develop that technology, and it's very high-margin transactional revenue to us each time it's used at this point because it's really just effectively run time costs for processing the algorithm on each transaction.

And what that enables us to do, in the case of Upfront Title and what it might enable us to do in any applicable configuration, if we were to participate in a pilot program with the GSEs, it basically means that we can afford to either charge a significantly lower price for a title insurance policy which, to be clear, that's what's already been rolled out in our Upfront Title partnership that we mentioned, our pilot that we launched. We filed rates in several states. They're publicly available. You can go find them and you'd see that our rates for that product are significantly below the lowest rates that have historically been charged.

And then in the case of broader efforts, what we'd really like to do is move more towards licensing our decisioning itself, for which, again, we've already made the fixed investment cost in, so that on a transactional basis, we can recognize more and more revenue as high-margin software revenue and do so while we're enabling the cost of this product to come way down to the end consumer while still providing the same safe and secure benefits of guaranteeing the title risk for lenders and again, in fact, applicable to GSEs. Does that make sense?

[Matthew Carletti, analyst]

Yes, absolutely. That's very helpful. And then I guess, like on that software point, which makes a lot of sense from like a SaaS model, do you view that as being ultimately kind of just a subscription basis kind of a license to just use the product? Or do you vision it being still like a per transaction or a per property sort of charge, obviously, you'll be negotiating with each customer?

[Maxwell Simkoff, executive]

I think we're open-minded at this point because it's still early days. And frankly, we think that, with the technology advantage we have, and if not being the only provider, one of the only providers who can deliver this much of a cost savings benefit to American homeowners who desperately need relief, I think there's something to be said. We want to make sure we have the right high-margin software approach that can accomplish the goals for our end customers and consumers but still enable flexibility where it's needed for, whether it's lender partners or mortgage technology system partners or even the GSEs, to be able to see this as more of a variable offering that they can offer to confer benefit when people actually close loans.

Frankly, I think that's the way a lot of the kind of industry mentality is set up. People don't love paying for stuff in the mortgage world if a loan doesn't close. And again, that's where I think we're uniquely positioned because our cost of goods sold effectively on the tech itself is very, very small. And so if variable pricing structures make sense that better align our success with the end customer and the lender and the GSEs, we're open to those models as well.

[Matthew Carletti, analyst]

Okay. That makes sense. And then just one other one, if I could, just kind of a higher-level question, your view of kind of where we are in the industry. Like, we've been living in a kind of elevated mortgage interest rate world for a while now. Kind of what's your assessment of kind of the level that we should be looking at, whether it's 30-year or however you look at it, that you feel there's going to be some reasonably sized opportunity unlocked, whether it be kind of people that have locked into a mortgage with a 7% handle on it and would look to refi or whether it be people that are sitting in 3.5% mortgages and can't swallow a 7% but might move at something in between?

[Maxwell Simkoff, executive]

Yes, good question. Look, every time I try and predict where the mortgage market is headed, and as a general industry prediction, I've been dead wrong. So with that being the disclaimer, I would say that what I do know, and again, I was really encouraged that FHFA and the White House focused on this last week, people scratch their heads these days and they ask, "Well, who in their right mind would be doing a refinance at a 7-ish percent interest rate?" And the reality is, even in a 7-ish percent interest rate environment, there's plenty of people doing refis. And the short answer is they're mostly people who are being forced to refi.

Unfortunately, you have a constant in life, which is death and divorce. Both of those events effectively force a refinance transaction. But more importantly, what we've seen from our data, as we've mentioned, is overwhelmingly, the people that are doing these rate and term refis at these rates, conforming refis, are people at or below 120% of area median income, which is kind of a long winded way of saying that these people can't afford certain other things in their life, and they're being forced to refi. And so for those people, every dollar helps in cost savings.

And to bring it full circle to your original question around like what does that mean for where we're at in terms of volumes, what we really love about our new strategy is it kind of doesn't matter, right? Do I think that things are going to get better from here? Yes. I don't think they're going to get worse from an industry perspective. That is overall volume. But regardless of when they get better, we feel like our new strategy has us really, really well positioned to be capturing large amounts of share from the people that are participating in the market right now and who really, really need cost relief and who an extra couple of hundred dollars to potentially hundreds to even thousands of dollars of cost savings makes a big difference in the money in their pocket that they can use for other important life decisions.

[Matthew Carletti, analyst]

Perfect. That makes a lot of sense. Appreciate the color, and congrats on all the progress you guys have made this year.

[Maxwell Simkoff, executive]

Thanks, Matt.

[Operator]

[Operator Instructions] Our next question comes from the line of Mike Ward with Citi.

[Michael Ward, analyst]

One thing I was curious about, and I know you've spoken about this, but just wondering if there's any kind of time line in terms of the Biden Administration's targeted sort of aid for home buying and refinancing. Is there any kind of time line on that? Or is there any other sort of views you can share? I guess, not totally sure at what stage the proposals are into.

[Maxwell Simkoff, executive]

Sure. Yes. I mean, Mike, I think we can really only comment on the announcement that was made last week, which is public. And I would say that, that announcement certainly implies that, that time line is more immediate than far away, right? I think in the grander scheme of things that the President of the United States can put his full weight in force behind in an election year.

Without getting in too much political commentary on the state of the world, legislative change is a hard thing to do in an election year, even this one. But administrative change is something that the White House and certainly FHFA have full control over. And they made it quite clear last week that this is an administrative change, not a legislative one.

Typically speaking, when administrative changes get announced with that much specificity, they tend to show up relatively soon thereafter, and they show up in a significant way, not in a window dressing kind of way. But that's all just based on kind of general principle about something going so far as to be announced in the actual state of the union address specifically and then having kind of a specific administrative action behind it. Beyond that, I think we're going to wait to see what gets publicly announced by the parties involved when they're ready to share more.

[Michael Ward, analyst]

Got it. Super helpful. And then maybe on the pilot program with the software company, just curious how consumer interest has trended in that regard?

[Maxwell Simkoff, executive]

Yes. I mean, look, what's interesting is most -- I mean, here's the thing, most consumers will not do, call it, a home transaction of any kind, purchase or refinance enough times in their life to either need or want to get sophisticated about title insurance costs. That's just kind of like a generally accepted fact. And so generally, they're going to rely on the decision effectively by the referral channel, either the lender or a real estate agent, for a refinance or a purchase, respectively, to drive their decision.

And so in that regard, it's the lenders that are -- in one big case, so one very large lender that's participating in the Upfront Title pilot, and then certainly, other lenders who we've talked to about utilizing the Upfront Title product, they all have had a pretty unanimous reaction, especially given the backdrop we just talked about around housing affordability, which is they are quite excited to be able to select and pass on to their end consumer customers something that will save them hundreds to potentially even thousands of dollars while not introducing any new meaningful title risk beyond kind of traditional alternatives.

It's kind of a no-brainer sell, right? Like, they get something that's better, faster, cheaper. They pass the benefit on to the consumer, and both the consumer and the lender wins. So I would just say that like even though it's early days, it's the lenders, and again, in the case of our pilot, our very large mortgage tech platform partner, who is quite excited because they themselves are in the business of signing up lender customers and being able to offer them more valuable features to help them keep their end customers stickier.

[Michael Ward, analyst]

Got it. And then maybe one more, and maybe this is sort of a silly question, but are there opportunities internationally for you to sort of apply a similar business model to, I guess, to the extent that title insurance exists similarly outside the United States? I know in regions like Europe, I think there's less federal backstopping of residential mortgages. And I think that means that maybe there's more volume or more turnover. But maybe that's a silly question if it's not sort of a similarly structured market.

[Maxwell Simkoff, executive]

No, no. It's not a silly question. Look, I think there might be interesting opportunities abroad, particularly the further we get into just licensing our technology for the decisioning itself where it could be utilized in lieu of a title insurance policy.

That said, honestly, the market opportunity is so big here in the U.S. that we're going to focus on that for the foreseeable future. I mentioned in the call, we just can't emphasize enough how, based on our unique knowledge, having run our own technology with our own lender customers over the years, which we've now shared earlier in the call, we know that the majority of conforming refinances can utilize our technology for an instant underwrite decision. And so when you kind of take that as your 50,000-foot view, like our tech works for the majority of conforming refinances, we think there's plenty big of a universe here in the United States to go after before we start considering an expansion internationally.

[Operator]

And our next question comes from the line of Bose George with KBW.

[Bose George, analyst]

Actually, just wanted to clarify, what kind of loans or refinances would this apply to initially? What is the low-risk refinance? And then your commentary was that eventually this is applied to most refinance, and so just trying to figure out what's low risk now, sort of the trajectory to covering most of the market eventually.

[Maxwell Simkoff, executive]

Yes, sure. Thanks for the question, Bose. And let me just be careful and delineate between two things. I really can't speculate as to what FHFA meant in their statement when they said low risk. You'd have to ask them directly. What I do know is that we've seen using our technology with conforming refinance transactions, I mean, think of this as the bread-and-butter refinance that makes up most of the refinance market and we've used it in pretty much every geography across most lender types, big lenders, small lenders, centralized lenders, distributed retail lenders, across the board, we can safely say that most conforming refinance transactions in the universe of overall mortgage transactions get an instant underwrite decision from our technology.

So it is our perspective, ours, Doma's, that most conforming refinance transactions, if you have the technology like we have, you can delineate as low risk and you can move them down a quick path that's instant and safe, and that equally as important, your technology is able to delineate the minority of transactions that are not low risk, that may have some kind of issue that it needs to have a further, kind of more detailed and more traditional manual title work put against it. So that's how I just make sure that we reconcile the kind of two characterizations of "low risk".

[Bose George, analyst]

Okay. Great. That's helpful. And then actually, in terms of the potential pilot with Fannie Mae, would it be just the technology underwriting? I mean, would you be taking the title risk? Or do you provide the technology and then Fannie, if there is residual risk, they retain it?

[Maxwell Simkoff, executive]

Again, I don't know that we can get into the specifics of potential commercial arrangements that may or may not be in play. What I would say is that we're confident that our technology works to deliver a safe and instant -- and instant means truly instant. Like, basically, almost in the blink of an eye, a decision that can safely provide an assurance that the title for that property can be underwritten. Where that risk sits is a whole other battle axe, and I think there's a lot of different configurations that might make sense. And I assume that if and when Fannie Mae provides more daylight on to how this program works, if, in fact, they are the provider as has been reported, I'm sure when they publicly announce that, then more will come to light.

[Operator]

Thank you, and thank you for participating. This does conclude today's program, and you may now disconnect.