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Members of a “bipartisan Congressional Real Estate Caucus” endorsed by the American Land Title Affiliation are urging federal regulators to halt a Fannie Mae pilot program geared toward letting some owners refinance their mortgage with out having to pay for title insurance coverage.
The Federal Housing Finance Company, which regulates mortgage giants Fannie Mae and Freddie Mac, greenlighted the “small-scale, limited duration” pilot program on March 7, and Fannie Mae issued a request for proposal to potential trade individuals in June.
In approving the pilot program, FHFA stated it wished to judge whether or not automated title evaluations may substitute for title insurance coverage or lawyer title opinion letters on “low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance.”
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However the American Land Title Affiliation (ALTA) has waged a protracted public relations and lobbying marketing campaign in opposition to the pilot program and different title insurance coverage alternate options endorsed by the Biden administration and client teams, who say they will broaden entry to homeownership.
Diane Tomb
“Title insurance is the most effective way to protect homeowners and lenders against future financial loss and any effort to remove those protections puts them squarely in harm’s way,” ALTA CEO Diane Tomb stated in a press release Tuesday. “The FHFA Title Acceptance Pilot is a misguided policy that has received bipartisan pushback from all levels of government.”
The pilot program has beforehand been criticized as reckless by some Democratic lawmakers and Republican attorneys normal from 14 states.
With Republicans set to take management of the White Home and each chambers of Congress following the November election, the marketing campaign towards the title acceptance pilot program has resumed.
In a Nov. 18 letter to FHFA Director Sandra Thompson, 9 Home Democrats and eight Republicans demanded the pilot program be halted “until proven beneficial for homebuyers,” citing worries that this system “will not protect consumers as effectively as title insurance.”
“Relying simply on an automated title search using public records alone will leave consumers susceptible to hidden threats not found in other records like unfiled liens, fraud, and forgery,” lawmakers stated.
A spokesperson for Fannie Mae directed inquiries to the FHFA. The FHFA didn’t reply to Inman’s request for remark.
The pilot program and different title insurance coverage alternate options are supported by client teams together with the Heart for Accountable Lending and the Nationwide Client Regulation Heart, who say they will help broaden entry to homeownership.
“As housing costs have remained high in recent years and continue to drive inflation, finding ways to broaden access to homeownership and preserve stable existing homeownership is extremely important,” a coalition of client teams wrote Thompson in July. “Mortgage closing costs have been identified by some researchers as an important piece of the puzzle.”
The bipartisan Congressional Actual Property Caucus weighing on this week towards the title acceptance pilot was launched in Might by Democrats Lou Correa (California) and Brittany Pettersen (Colorado), and Republicans Mark Alford (Missouri) and Tracey Mann (Kansas).
Various housing trade teams applauded the launch of the true property caucus, together with ALTA, the Nationwide Affiliation of Realtors (NAR), the Mortgage Bankers Affiliation (MBA), the Nationwide Affiliation of Hispanic Actual Property Professionals (NAHREP), U.S. Mortgage Insurers (USMI), the Nationwide Multifamily Housing Council (NMHC) and Asian Actual Property Affiliation of America (AREAA).
Nevertheless it’s not clear the place all of these teams stand on the title acceptance pilot program and different title insurance coverage alternate options.
In Might, the nation’s largest mortgage lender, United Wholesale Mortgage, expanded its Title Overview and Closing (TRAC) program, which it launched in 2022 to dispense with lender title insurance coverage insurance policies in favor of lawyer title opinion letters issued by in-house legal professionals who evaluate title paperwork.
Know-how supplier Alita Group this summer season launched a platform that lets title suppliers produce a “modernized” lawyer opinion letter that’s additionally “wrapped” with an errors and omissions insurance coverage coverage.
The MBA expressed “deep concerns” in regards to the FHFA’s approval of the title acceptance pilot program in April. However final 12 months, the MBA printed an evaluation of lawyer title opinion letters by the legislation agency Clean Rome that concluded, “There is room for both types of products [title insurance and attorney opinion letters] to exist in today’s market.”
A spokesperson for the group informed Inman Wednesday that the MBA has not taken a place on alternate options to conventional title insurance coverage, “and our release of [the Blank Rome] paper is not an MBA endorsement of its conclusions.”
A spokesperson for the NMHC additionally stated the group doesn’t have a place on title insurance coverage alternate options.
USMI declined to touch upon title insurance coverage alternate options, however pointed to statements it’s made previously that pilot packages instituted by Fannie Mae and Freddie Mac ought to embrace meaninful enter and evaluation from trade stakeholders.
NAR, NAHREP and AREA declined to offer their positions or didn’t reply to Inman’s requests for remark.
ALTA has been main a public cost towards each the title acceptance pilot and lawyer title opinion letters.
ALTA employed a public relations agency, Marathon Methods, in 2021 to conduct “a corporate rebranding campaign” across the theme “Our Title Is Protection.”
The marketing campaign was geared toward “educating consumers and policymakers and shaping public perceptions of the industry,” based on an ALTA webinar.
ALTA federal election spending by social gathering
Supply: Federal Election Fee knowledge tracked by OpenSecrets.org.
ALTA has contributed $1.01 million to candidates and political motion committees (PACs) and events within the present election cycle, based on Federal Election Fee filings tracked by OpenSecrets. A majority (54 p.c) of that spending has gone to Republican candidates and committees.
ALTA lobbying 1998-2024
Supply: Senate Workplace of Public Data by way of OpenSecrets.org.
ALTA’s lobbying finances, which hadn’t exceeded $600,000 till 2021, soared to $1.34 million final 12 months. The title trade commerce group has spent $1.23 million on lobbying via Sept. 30 of this 12 months, based on calculations by OpenSecrets primarily based on knowledge from the Senate Workplace of Public Data.
ALTA can also be backing laws within the Home and Senate which might require title insurance coverage on mortgages bought by Fannie and Freddie.
Laws launched within the Home in September by New York Republican Rep. Andrew Garbarino, H.R. 5837, would successfully ban using lawyer opinion letters for clearing title on standard mortgages by requiring lenders promoting mortgages to Fannie and Freddie to acquire title insurance coverage. The invoice has attracted 12 Republican and 4 Democratic co-sponsors.
A companion invoice within the Senate, S. 2687, launched in July 2023 by Sen. John Kennedy, R-Louisiana, has two Republican co-sponsors.
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