Fannie Mae scraps title waiver pilot program

The American Land Title Association (ALTA) is celebrating a huge win in its ongoing war against title insurance alternatives. Fannie Mae is no longer considering a pilot program that would bypass traditional title insurance by granting certain mortgage lenders a waiver on title insurance requirements for loans sold to Fannie, according to an announcement earlier this month.

This is a major victory for the trade group, which felt that Fannie Mae was “moving beyond its charter” with this pilot program.

News of the rumored pilot program came in March, roughly a year after Fannie Mae first announced that it would be accepting attorney opinion letters (AOLs) in lieu of title insurance in limited circumstances.

The pilot program was said to have been a component of the government sponsored entities’ (GSEs) Equitable Housing Finance Plans, which are required by their regulator Federal Housing Finance Agency (FHFA).

The initial version of the GSE’s Equitable Housing Finance Plans were approved in the summer of 2022 by the FHFA.

“The intent was to promote affordable and sustainable housing opportunities for more households nationwide,” Diane Tomb, the CEO of ALTA, told HousingWire late last year. “One of the goals they outlined in those plans is a push to reduce closing costs, especially for low-income borrowers. Based on those plans, both GSEs are pushing pilot programs promoting the use of attorney opinion letters, reportedly as an alternative to reduce closing costs.”

According to an email Tomb sent to ALTA members earlier this month, obtained by HousingWire, more than 200 trade organization members shared their concerns about the title waiver pilot program with members of Congress.

“This is a significant achievement to protect consumers, lenders and the housing finance system, and showcases the benefits of our products, industry and your business. The success of challenging this pilot underscores the value of advocacy and making your voice heard,” Tomb wrote in the email. “Importantly, we will continue to work with the FHFA and policymakers to thoughtfully address housing affordability and opportunity. We will also continue to collaborate with Fannie Mae and Freddie Mac to deliver innovative and cost-effective title insurance products and solutions that best protect lenders and consumers.”

Despite scrapping this pilot program, Fannie Mae said it will continue to look for ways to improve housing affordability.

“Housing affordability is key to Fannie Mae’s mission, and we remain committed to our ongoing engagement with industry partners and providers to explore ways to make the homebuying process more affordable and accessible in a manner that does not increase risk for borrowers, lenders, and the marketplace,” a Fannie Mae spokesperson wrote in an email.

For its part, ALTA said it is working on lowering closing costs where it can, and it believes the increase in automation and improved technological capabilities within the title industry will lower costs over the next few years.

“Over the last 10 years, rates have gone down 6% across the industry and that is important for homeowners and it’s because of the investment the industry has put into things around automation and using machine learning and AI to search title and come to a faster decision about the title,” Steve Gottheim, ALTA’s general counsel, told HousingWire last November. “These technologies come with a cost at the front end, but over time, they bring that efficiency and bring the price down.”

During the first quarter of 2023, title insurers brought in $3.37 billion in title insurance premiums, while paying out just $162.7 million in claims during that same time period, according to data from ALTA.