Bipartisan Congressional Real Estate Caucus Urges FHFA to Halt Title Insurance Waiver Pilot
November 19, 2024
The bipartisan Congressional Real Estate Caucus urged the Federal Housing Finance Agency (FHFA) to halt its misguided title insurance waiver pilot until the agency solicits public input and thoroughly vets the program.
Led by U.S. Reps. Lou Correa (D-Calif), Mark Alford (R-Mo.), Tracey Mann (R-Kan.) and Brittany Pettersen (D-Colo.), 17 members of Congress sent a letter on Nov. 18 to FHFA Director Sandra Thompson that said the pilot will inadvertently cause irreparable damage to homeowners and lenders, and potentially leave them without critical protection against financial loss. The four representatives are co-chairs of the caucus.
“Buying a home represents the largest and most important acquisition Americans make in their lifetime and purchasing title insurance secures that investment by protecting against financial loss from threats like unrecorded liens, fraud, and forgery,” the members wrote. “[While] [w]e applaud your ongoing efforts to promote homeownership, especially for low-income Americans, and share your concerns about the difficulty and costs of purchasing a home [...] the Pilot will not achieve your stated goal of finding ways to “responsibly reduce closing costs for homeowners in a safe and sound manner.”
Since FHFA’s announcement of the pilot, there has been significant bipartisan pushback from both state and federal lawmakers, including members of Congress, the National Council of Insurance Legislators (NCOIL) and 14 attorneys general, all persuasively arguing the pilot will not meaningfully address the nation’s housing affordability challenges but instead potentially harm consumers.
“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,” the members added. “Title agents, who are trained experts that comb through these various filings and cure defects to ensure a clear title, will be removed from the process under the Pilot, leaving consumers vulnerable to significant risk.”
Recently, the Consumer Financial Protection Bureau included title insurance in its Request for Information on “junk fees in mortgage closing costs.” This apparent classification of title insurance as a “junk fee,” the members argue, may diminish the value consumers place on this protection or incentivize consumers to forego title insurance altogether, leaving their most valuable asset at risk.
“Title insurance provides critical protections to homebuyers and lenders, and we do not support any efforts that would undermine those protections,” they concluded.
Diane Tomb, CEO of ALTA, added, “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. The FHFA Title Acceptance Pilot is a misguided policy that has received bipartisan pushback from all levels of government. We greatly appreciate the leadership of Representatives Correa, Allford, Petterson and Mann in continuing to voice those concerns.”
In addition to Reps. Correa, Alford, Mann and Petterson, this letter was also co-signed by Rep. Ken Calvert (R-Calif.), Jim Costa (D-Calif.), Angie Craig (D-Minn.), Monica De La Cruz (R-Texas), Andrew Garbarino (R-N.Y.), Vincente Gonzalez (D-Texas), Young Kim (R-Calif.), Joseph Morelle (D-N.Y.), Wiley Nickel (D-N.C.), Guy Reschenthaler (R-Pa.), John Rose (R-Tenn.), Deborah Ross (D-N.C.) and Brad Sherman (D-Calif).
“Identifying the risks to ownership and curing many of them before a transaction closes is why homeowners so rarely are challenged on their ownership right after closing,” said Mark Fleming, chief economist at First American Financial Corp. “Even on the rare occasions when issues arise, the duty of the insurer to defend the insured and indemnify against loss effectively provides continued protection of their interests.”
Contact ALTA at 202-296-3671 or [email protected].