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The nation’s largest mortgage lender is once again ruffling feathers in the title insurance industry, by expanding a program that it says saves borrowers time and money by cutting title and settlement services providers out of the process on some loans.
When originally announced in 2022, United Wholesale Mortgage’s Title Review and Closing (TRAC) program was aimed at replacing lenders title insurance policies with attorney title opinion letters issued by in-house lawyers who review title documents. UWM CEO Mat Ishbia said at the time that the company intended to rapidly scale TRAC, even as a title industry trade group denounced the practice as “irresponsible.”
This week, UWM unveiled an expanded version of the program, TRAC+, that provides pricing incentives to mortgage brokers who agree to let UWM handle not only title review but closing and disbursement for clients who are refinancing existing loans.
“As a result, a broker will no longer need to work with a title company or settlement agent for title work, balancing fees, scheduling closing or any related communication when they use TRAC+,” UWM said in a press release.
In a breakdown of pricing on the company’s website, UWM said it will provide TRAC services for a flat fee of $1,600, while TRAC+ will cost $1,850. UWM is also offering brokers pricing incentives of 10 to 60 basis points, depending on loan size.
TRAC is available for both purchase mortgages and refinancings, but only conventional mortgages eligible for backing by Fannie Mae and Freddie Mac qualify. An additional settlement agent fee of up to $500 is assessed.
While TRAC+ is only available for refinancings, conventional, FHA and VA loans can all qualify — and there’s no additional settlement agent fee.
“With TRAC pricing incentives applied based on loan amount, a flat TRAC+ fee of $1,850 with no additional settlement agent fees, brokers will be able to save borrowers thousands of dollars and provide a simplified process that is streamlined through UWM,” the company said.
Expanding the adoption of title insurance alternatives has been a priority for the Biden administration, which sees reducing closing costs as one way to address housing affordability issues.
Fannie Mae in 2022 followed Freddie Mac’s lead in allowing lenders the option of using an attorney title opinion letter instead of traditional title insurance on some loans.
In March, Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), took the concept one step further, saying it would allow lenders to sell low-risk refinance loans to Fannie and Freddie without a lenders title policy or an attorney opinion letter.
The American Land Title Association (ALTA), the title industry’s Washington, D.C.-based advocacy group, has been engaged in extensive public relations and lobbying campaigns opposing “unregulated title insurance alternatives” such as attorney opinion letters, which threaten to cut into the business of the association’s members.
ALTA is also backing legislation in the Senate and House that would require lenders title insurance on all loans purchased by Fannie Mae and Freddie Mac, although both bills have been languishing in committees for months without a hearing.
ALTA provided the following statement to Inman when asked for comment about UWM’s expansion of its TRAC initiative:
“The title industry plays a critical role in helping American households build wealth through homeownership by ensuring the proper transfer of real estate from seller to buyer, securing property rights and facilitating the growth of the secondary mortgage market. With fraud and forgery claims significantly on the rise, prudent lenders should ensure their investment is protected. Title insurance remains the most cost-effective way to limit their risk against these issues. Lower protection alternatives to title insurance are often more costly and increase unnecessary risk, particularly for first time homebuyers and low- and moderate-income consumers who need it most.”
UWM declined to comment on ALTA’s suggestion that TRAC could create “unnecessary risk” for consumers.
Fannie and Freddie both require that lenders using title opinion letters in place of title insurance agree to indemnify mortgage investors against losses attributable to an oversight in declaring that a title is free of liens and other “clouds.”
In its most recent annual report to investors, UWM acknowledged that TRAC and another program, in which it hires appraisers directly instead of through an appraisal management company, could expose the company to risk.
“While we believe that these programs meet all of the regulatory and legal requirements, there is a risk that a regulatory agency could decide that our programs do not meet all of the regulatory and legal requirements, or that these programs will not be accepted by other market participants, could expose us to additional liability, or subject us to repurchase obligations.”
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