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Members of a “bipartisan Congressional Real Estate Caucus” endorsed by the American Land Title Association are urging federal regulators to halt a Fannie Mae pilot program aimed at letting some homeowners refinance their mortgage without having to pay for title insurance.
The Federal Housing Finance Agency, 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 industry participants in June.
In approving the pilot program, FHFA said it wanted to evaluate whether automated title reviews could substitute for title insurance or attorney 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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But the American Land Title Association (ALTA) has waged a protracted public relations and lobbying campaign in opposition to the pilot program and other title insurance alternatives endorsed by the Biden administration and consumer groups, who say they can broaden access 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 said in a statement Tuesday. “The FHFA Title Acceptance Pilot is a misguided policy that has received bipartisan pushback from all levels of government.”
The pilot program has previously been criticized as reckless by some Democratic lawmakers and Republican attorneys general from 14 states.
With Republicans set to take control of the White House and both chambers of Congress following the November election, the campaign against the title acceptance pilot program has resumed.
In a Nov. 18 letter to FHFA Director Sandra Thompson, nine House Democrats and eight Republicans demanded the pilot program be halted “until proven beneficial for homebuyers,” citing worries that the program “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 said.
A spokesperson for Fannie Mae directed questions to the FHFA. An FHFA spokesperson said the agency “has received the letter and will respond to it directly.”
The pilot program and other title insurance alternatives are supported by consumer groups including the Center for Responsible Lending and the National Consumer Law Center, who say they can help broaden access 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 consumer groups wrote Thompson in July. “Mortgage closing costs have been identified by some researchers as an important piece of the puzzle.”
The bipartisan Congressional Real Estate Caucus weighing in this week against the title acceptance pilot was launched in May by Democrats Lou Correa (California) and Brittany Pettersen (Colorado), and Republicans Mark Alford (Missouri) and Tracey Mann (Kansas).
A number of housing industry groups applauded the launch of the real estate caucus, including ALTA, the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), the National Association of Hispanic Real Estate Professionals (NAHREP), U.S. Mortgage Insurers (USMI), the National Multifamily Housing Council (NMHC) and Asian Real Estate Association of America (AREAA).
But it’s not clear where all of those groups stand on the title acceptance pilot program and other title insurance alternatives.
In May, the nation’s largest mortgage lender, United Wholesale Mortgage, expanded its Title Review and Closing (TRAC) program, which it launched in 2022 to dispense with lender title insurance policies in favor of attorney title opinion letters issued by in-house lawyers who review title documents.
Technology provider Alita Group this summer launched a platform that lets title providers produce a “modernized” attorney opinion letter that’s also “wrapped” with an errors and omissions insurance policy.
The MBA expressed “deep concerns” about the FHFA’s approval of the title acceptance pilot program in April. But last year, the MBA published an analysis of attorney title opinion letters by the law firm Blank 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 told Inman Wednesday that the MBA has not taken a position on alternatives to traditional title insurance, “and our release of [the Blank Rome] paper is not an MBA endorsement of its conclusions.”
A spokesperson for the NMHC also said the group does not have a position on title insurance alternatives.
USMI declined to comment on title insurance alternatives, but pointed to statements it’s made in the past that pilot programs instituted by Fannie Mae and Freddie Mac should include meaninful input and analysis from industry stakeholders.
NAR, NAHREP and AREA declined to provide their positions or did not respond to Inman’s requests for comment.
ALTA has been leading a public charge against both the title acceptance pilot and attorney title opinion letters.
ALTA hired a public relations firm, Marathon Strategies, in 2021 to conduct “a corporate rebranding campaign” around the theme “Our Title Is Protection.”
The campaign was aimed at “educating consumers and policymakers and shaping public perceptions of the industry,” according to an ALTA webinar.
ALTA federal election spending by party
Source: Federal Election Commission data tracked by OpenSecrets.org.
ALTA has contributed $1.01 million to candidates and political action committees (PACs) and parties in the current election cycle, according to Federal Election Commission filings tracked by OpenSecrets. A majority (54 percent) of that spending has gone to Republican candidates and committees.
ALTA lobbying 1998-2024
Source: Senate Office of Public Records via OpenSecrets.org.
ALTA’s lobbying budget, which hadn’t exceeded $600,000 until 2021, soared to $1.34 million last year. The title industry trade group has spent $1.23 million on lobbying through Sept. 30 of this year, according to calculations by OpenSecrets based on data from the Senate Office of Public Records.
ALTA is also backing legislation in the House and Senate which would require title insurance on mortgages purchased by Fannie and Freddie.
Legislation introduced in the House in September by New York Republican Rep. Andrew Garbarino, H.R. 5837, would effectively ban the use of attorney opinion letters for clearing title on conventional mortgages by requiring lenders selling mortgages to Fannie and Freddie to obtain title insurance. The bill has attracted 12 Republican and four Democratic co-sponsors.
A companion bill in the Senate, S. 2687, introduced in July 2023 by Sen. John Kennedy, R-Louisiana, has two Republican co-sponsors.
Editor’s note: This story has been updated to note that the FHFA says it has received the Nov. 18 letter from lawmakers and will respond directly.
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