State officials push back against FHFA's title waiver pilot program
(HousingWire by Brooklee Han). The effort was spearheaded by Tennessee Attorney General Jonathan Skrmetti. Attorneys general in 14 states have joined together to send a letter to Federal Housing Finance Agency (FHFA) director Sandra Thompson that urges the termination of the agency's title waiver pilot program.

The letter, which was sent on Monday, was spearheaded by Tennessee Attorney General Jonathan Skrmetti and co-signed by attorneys general in Alabama, Arkansas, Georgia, Indiana, Kansas, Louisiana, Mississippi, New Hampshire, Oklahoma, South Carolina, South Dakota, Texas and Virginia.

In the letter, the officials expressed concerns over the revived pilot program that aims to remove the title insurance requirement for certain loans sold to Fannie Mae.

"The pilot program will shift title risk on refinanced loans purchased by Fannie Mae from state-regulated title insurance companies to Fannie Mae itself," the letter stated. "Title insurance is a state-regulated industry, and homeowners will be better served if it stays that way. We call on the Agency to terminate implementation of this misguided pilot program."

The letter highlights the fact that the pilot program was abandoned in the summer of 2023 but revived in March 2024, after the initial pilot program received pushback from Congress and the title insurance industry.

In the letter, the attorneys general claim that the FHFA inappropriately approved the pilot program by not seeking public input. They also note that the program only benefits homeowners who are refinancing loans that the FHFA has deemed "lower risk," which the attorneys general claim ignore the needs of first-time and low-income homebuyers.

Additionally, the letter claims the pilot program exposes homeowners to potential fraud and abuse, removes protections from liens and alternative claims of ownership, and forces them "into a completely experimental claims resolution process with" Fannie Mae, risking property sale or foreclosure.

"While title theft is not common, tens of thousands of people have been victimized by deed scams, and even the most famous private home in America is not immune to attempted fraud," the letter stated.

"More commonly, title insurance protects against title defects such as liens or alternative claims of ownership. Title companies invest significant resources in maintaining databases, training workers and digitizing documents to ensure that homeowners get the most accurate title information possible. Even homeowners who are refinancing need title insurance because latent issues, such as boundary line disputes or discovery of unpaid debt, can arise at anytime."

Direct's Comment:
Whether we are in favor of this "title waiver program", or whether we oppose it - to those of us in the mortgage industry - we are competing against it. And we are competing against those other lenders that FHFA has approved to pilot this program with. Is that fair? Sigh...

Here is a serious but leading question...
1) If an attorney does a title search, and then writes a legal review (for less money than title insurance), does that provide more risk or less risk to a homebuyer?
2) What guarantees the attorney did the work correctly, or that there wasn't some other unexpected claim against the title to the property?
3) If a title agent does the title search, and then provides insurance in case they missed something, does that provide  more risk or less risk risk to the homeowner?
4) A title insurance provider typically must register their insurance fees (with their respective licensed state) well in advance of issuing title insurance. Does an attorney have anything remotely close to this expense, and regulation? If not, then why not?

So if this attorney option is less expensive to the homeowner simply because it takes a shortcut, then this is a bad idea for the homeowner, and is also a bad idea for everyone else in the mortgage industry. But if this will provide the same or more protection for a homeowner, then I am all in favor of it. But I highly doubt that this is the case.

Hopefully, clearer heads will prevail.

And hopefully... the FHFA will stop doing pilot programs with any very large lender that places the rest of the industry at a competitive disadvantage. Arrrghh!

Sacred Work.
(Luke 22:32). But I have prayed for thee, that thy faith fail not: and when thou art converted, strengthen thy brethren.

Comment:
Of course, we are keenly interested in conversions, baptisms, and strengthening members of the Church. But if you have only one convert during your mission, I hope it would be yourself. Teaching the gospel is sacred work. There is not a better way to get the gospel of Jesus Christ into your heart and mind than for you to be a missionary and teach to others the resplendent and glorious gospel of the Lord Jesus Christ.
(Daily Joy, Russell M. Nelson, page 224).