The government-run company is considering eliminating this requirement for some mortgage lenders.
Fannie Mae is considering a program that would bypass the need for title insurance and attorney opinion letters, according to a number of recent media reports.
The program would allow certain mortgage lenders to be able to waive the requirements for the coverage.
The program Fannie Mae is considering would waive required title insurance coverage for some lenders on loans sold to the government-run company, according to a recent The Real Deal report.
Fannie Mae backs trillions of dollars in residential mortgages across the United States. According to the report, the company would roll out the new program that would bypass the need for the coverage for some lenders starting in the spring.
While the company has yet to make the official announcement, a growing number of media reports are indicating that the program is being seriously considered for an upcoming rollout.
Losing the title insurance requirement would help to reduce the costs faced by homebuyers.
“We know that closing costs continue to be a barrier for homebuyers — especially among underserved populations and first-time homebuyers,” said a spokesperson from Fannie Mae as quoted in the report. “We continue to research options that would lead to cost reductions in a safe and sound manner and help borrowers save money as part of our Equitable Housing Finance Plan. As we’re still in the research phase, we don’t currently have any additional details to share at this time.”
The American Land Title Association has been vocally opposed to the plan to remove title insurance from Fannie Mae’s requirements.
“We are extremely concerned about the reported Fannie Mae pilot program to waive title insurance requirements for certain transactions. It appears Fannie Mae is moving beyond its charter and mission directly into the title insurance business. It should raise significant alarm bells,” said the American land Title Association in an emailed statement. “If the 2008 financial crisis taught us anything, it is that shortcuts to well-established processes pose great risks to our sound, dependable, and trustworthy real estate system, homeowners, and taxpayers. FHFA should halt this activity.”
Fannie Mae has been working on reducing the requirement for the coverage for a while now. In 2022, it announced that it would accept attorney opinion letters as an alternative in a certain number of limited cases.