14 Attorneys General Urge FHFA to Terminate Title Waiver Pilot
July 23, 2024
A coalition of 14 attorneys general sent a letter to the Federal Housing Finance Agency (FHFA) expressing concerns over their revived pilot program aimed at removing title insurance requirements from certain loans sold to Fannie Mae.
The effort was led by Tennessee Attorney General Jonathan Skrmetti, who said, “the affordable housing crisis demands meaningful bipartisan solutions, not shortsighted regulatory overreach.”
The letter points out that the FHFA abandoned the pilot last year, but was reintroduced in March.
The original pilot program, initially proposed by the Biden Administration, faced significant backlash from Congress and industry experts. Although abandoned last year, the FHFA recently reintroduced a similar program that continues to raise major concerns about potential fraud and harm to consumers nationwide.
The letter emphasizes the critical role of title insurance in safeguarding homeowners from fraudulent activities and exploitation. In the letter, the Attorneys General state that contrary to the FHFA's claims, the cost of title insurance is comparable to a monthly subscription to Amazon Prime and provides essential protection against catastrophic financial harm.
“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 said. “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 attorneys general outlined several reasons why the revised pilot program should be terminated. First, the FHFA inappropriately approved the program without seeking public input, contradicting its own rule to determine if it serves the public interest. Additionally, the program solely benefits homeowners with "lower risk" refinance loans, neglecting the needs of first-time and low-income homebuyers. Furthermore, it fails to address the underlying barriers faced by these homebuyers, such as high interest rates and limited affordable housing supply.
Moreover, the pilot program exposes homeowners to potential fraud and abuse, removes protections from liens and alternative claims of ownership, and forces them into an experimental claims resolution process with Fannie Mae, risking property sale or foreclosure. The program also threatens local economies by allowing Fannie Mae to sideline small businesses in communities.
Joining Tennessee in the letter are Alabama, Arkansas, Georgia, Indiana, Kansas, Louisiana, Mississippi, New Hampshire, Oklahoma, South Carolina, South Dakota, Texas and Virginia.
Contact ALTA at 202-296-3671 or [email protected].