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The CEO of the nation’s biggest wholesale mortgage lender says it can rapidly scale up its latest offering — a mortgage that doesn’t require lender’s title insurance — even as a title industry trade group rails against the practice as “irresponsible.”
United Wholesale Mortgage (UWM) announced its new title review and closing (TRAC) tool at an industry conference over the weekend, to capitalize on rule changes by mortgage giants Fannie Mae and Freddie Mac aimed at helping borrowers save on their closing costs.
The rule changes give lenders the option to use an attorney opinion letter in lieu of traditional title insurance on many types of loans, and UWM CEO Mat Ishbia says he sees an opportunity to take business from competitors by saving consumers an average of $1,000 a loan.
UWM is hiring and training attorneys to generate attorney opinion letters in-house to meet what the company expects to be strong demand for TRAC, Ishbia told Inman Wednesday.
Mat Ishbia
“I’m the largest lender in America, we can handle the scale on every single loan if it came down to it,” Ishbia said of UWM’s capacity to offer TRAC as an alternative to lender’s title insurance. “We can handle the volume. We’ll continue to hire attorneys. We’ll have multiple attorneys … licensed in every state. We have all the rules, all the processes, but we’ve got it all under control, and we’re really excited about it because it’s going to make an impact for consumers.”
On average, UWM says it expects TRAC to save consumers about $1,000 savings compared to the cost of obtaining lender’s title insurance, and that savings could be as high as $2,000 to $3,000 in some states where title insurance costs are higher.
In August, proptech companies SingleSource Property Solutions and Voxtur launched an “Attorney Conclusion of Title” (ACT) product that’s also designed with Fannie and Freddie’s new guidelines in mind. SingleSource claims that depending on the borrower’s location, the new product can save consumers 20 percent to 70 percent compared to the cost of traditional title insurance.
Ishbia said that UWM has decided it could offer its attorney opinion letters “significantly cheaper” by hiring its own attorneys.
“We’re not like some little guy that doesn’t know what we’re doing,” Ishbia said of UWM’s ability to take on such initiatives. “It’s not like I don’t have you know, 50 attorneys here and all these different risk people and everything. Like, we’re in the weeds on this. We’re doing what’s right for consumers.”
UWM, which went public in a 2020 SPAC merger, is engaged in a fierce battle for market share with rivals including Rocket Mortgage.
Last year UWM launched Appraisal Direct, a new in-house appraisal capability that gives mortgage brokers the option of bypassing appraisal management companies. UWM also equipped brokers with BOLT, an automated document recognition and processing system the company developed in-house to provide initial approvals for qualified borrowers in 15 minutes.
Then in June, UWM announced an “aggressive pricing strategy,” Game On, which UWM hopes will be “the last nudge that we believe retail loan officers need to convert to being a loan officer broker shop or start their own broker shop,” Ishbia said at the time.
The same month, UWM announced a new service for mortgage brokers, Boost, that serves as a marketplace for them to purchase leads, stay in touch with past clients, connect with real estate agents and opt in to receive live call transfers.
Title insurance trade group raises warnings
But UWM’s latest innovation, TRAC, has sparked the ire of the title insurance industry trade group, the American Land Title Association (ALTA).
ALTA raised objections to Fannie and Freddie’s policy shift with its federal regulator, the Federal Housing Finance Agency (FHFA), in a Sept. 6 letter to FHFA Director Sandra Thompson.
The letter warns that “there are many areas” in which the protection provided by attorney opinion letters “is well below what a standard title policy provides and will expose the homebuyer to additional risks.”
In a statement provided to Inman, ALTA’s Diane Tomb said title insurance policies can insure against lien impairment caused by diversion of funds and similar risks and that without title insurance coverage, lenders assume these financial risks.
Diane Tomb
“It is irresponsible for lenders to adopt title insurance alternatives that heighten risk,” Tomb said. “The market moved away from attorney opinion letters decades ago because they don’t provide the protection that matters most to both lenders and homeowners.”
Tomb said attorney opinion letters and other alternatives to traditional title insurance don’t defend against ownership disputes challenged in court, and that title insurers are backed by statutorily required financial reserves to cover future claims risks.
“During the last financial crisis, we unfortunately witnessed several systemic financial problems caused by shortcuts to well-established processes,” Tomb said. “If that crisis taught us anything, it is that underwriting standards and risk-protection should be strong and well-tested. Strong underwriting protects lenders and consumers alike — and title insurance provides a key part of this due diligence.”
SingleSource, which did not respond to a request for comment for this story, says on its website that its Attorney Conclusion of Title product is also backed “by specialty transactional insurance, issued by A.M. Best A rated carriers, that covers the full value of the loan for the life of the loan.”
Ishbia was largely dismissive of concerns that attorney opinion letters carry heightened risk compared to lender’s title insurance.
“That’s a complete joke, so I don’t even know how to respond to it,” Ishbia said. “If my business was gonna be disrupted by someone doing a better job and offering a cheaper, better, faster, easier product, I would probably come up with a lot of stuff too, right? The reality is, it’s better for consumers.”
The Consumer Financial Protection Bureau notes that lender’s title insurance policies only cover claims that affect the lender’s loan. If homebuyers want to protect their equity in the event of a title problem, the bureau advises them that “you may want to purchase an owner’s title insurance policy.”
While Fannie and Freddie have opened the door for lenders to rely on an attorney’s opinion of title instead of title insurance, the mortgage giants won’t accept an attorney’s opinion of title for condos, co-ops, or manufactured homes.
Ishbia envisions a day when borrowers can take out any mortgage without having to pay for lender’s title insurance. UWM says its new TRAC process helps mortgage brokers get title documents ready in an average of three to five days.
“I don’t know anyone that says hey, give me the more expensive clunkier version,” Ishbia said. “There is no additional risk, in our view [in substituting an attorney’s opinion of title for a lender’s title policy], and you can still get an owner’s title policy. I don’t see any real need for it. But if people want to do that, they can do that as well. But this is a significantly better product. And I’m hoping that title insurance companies kind of innovate themselves, so that they make things better as well.”
Ishbia advised borrowers and real estate agents who are interested in exploring the savings they might realize from foregoing lender’s title insurance to talk to a mortgage broker. The UWM-backed website FindAMortgageBroker.com connects borrowers and agents with independent mortgage brokers in their area.
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