In this uncertain economic landscape, we are all feeling a strain on our wallets. It is understandable, then, that the government is looking for ways to lower costs and ease financial stress for Americans. However, short-term cost-saving measures should never come at the expense of our long-term financial security, especially when it may place the protection of one of life’s most important investments — our homes — at risk.
In a misguided attempt to lower costs for some homebuyers, Fannie Mae is reportedly considering a new program that could prove to be harmful to homeowners in North Carolina and across the country. The program would waive Fannie’s title insurance requirements on some loans it purchases, and the company would assume title risk and oversee future claims, becoming a de facto primary market insurer. But private companies, not government-sponsored enterprises (GSEs) like Fannie Mae, should be the ones providing insurance for homeowners in a market-based system.
The title insurance industry is comprehensively regulated and actuarially reserved in North Carolina, ensuring that homeowners and lenders alike are protected from risk. There are over 1,901 title professionals in North Carolina, like myself, that work tirelessly to protect their clients from any and all threats to their property rights. That is why when I learned about this new program from Fannie Mae, one of the leading mortgage financing institutions in the country, I knew I could not remain silent.
Last month, I joined other title professionals from across the country to attend the American Land Title Association’s (ALTA’s) Advocacy Summit in Washington, DC to discuss my concerns with members of Congress. I had the opportunity to meet with U.S. Congressman Wiley Nickel to discuss the risks and threats North Carolina homebuyers, lenders, and the overall housing finance system could face from this program.I intend to continue to engage with members of both parties in the delegation on this important issue going forward.
During my meetings with members of Congress, I also shared concerns about other attempts by Fannie Mae and Freddie Mac to replace title insurance with their riskier offerings. Fannie Mae and Freddie Mac both have begun to allow certain attorney opinion letters (AOLs) in lieu of title insurance in some circumstances on loans they purchase.
However, these alternatives only cover issues that can arise in a simple public records search, failing to protect against other defects not revealed in a simple search, unlike title insurance. Title policies also cover any legal costs associated with protecting property rights and from risks of fraud or forgery, which AOLs do not. Simply put, AOLs fail to provide the same ongoing protections as title insurance, potentially leaving both homeowners and lenders exposed to risk and large unforeseen costs.
My colleagues in the title industry and I will continue to advocate for North Carolina homeowners, protecting them from risk and unforeseen financial costs. Title insurance provides essential protection, and we must remain vigilant to prevent any proposed shortcuts or preferential options for government-sponsored companies that introduce greater risk.