Ahead of his State of the Union address tonight, President Joe Biden announced his plan to lower housing costs. It includes a plan to “discuss the title insurance industry and analyze potential reforms.”
“In the coming months, the Department of Treasury’s Federal Insurance Office will convene a roundtable of relevant industry stakeholders, including consumer advocates and academics, in order to discuss the title insurance industry and analyze potential reforms," the announcement stated. "Building on today’s announcements, President Biden is calling on federal agencies to take all available actions to lower costs for consumers at the closing table and help more Americans access homeownership.”
Biden's efforts also include policies and pilots approved by the Federal Housing Finance Agency (FHFA) to waive the requirement for lender’s title insurance on certain refinances.
The announcement states, “This would save thousands of homeowners up to $1,500, and an average of $750, and the lower upfront fees will unlock substantial savings for homeowners as mortgage rates continue to fall and more homeowners are able to refinance. According to independent analysis, across the market title insurance typically pays out only 3 percent to 5 percent of premiums in claims to consumers, compared to more than 70 percent in other types of insurance. Homeowners can still purchase their own title insurance policies if they choose to do so.”
FHFA Director Sandra Thompson noted that for many, “closing costs represent a substantial affordability barrier to purchasing or refinancing a home.” She said one of those costs is a new lender’s title insurance policy.
“The recently approved title acceptance pilot will waive the requirement for lender’s title insurance or a legal opinion on certain low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance,” she stated. “The title acceptance pilot will make it possible to test whether allowing lenders to sell these refinance loans is a responsible approach to reducing the closing costs incurred by existing homeowners. Lenders will also retain the option to provide evidence of clear title through other options, such as title insurance or an attorney opinion letter (AOL). And homeowners are always able to purchase their own title insurance policy or AOL, if they so choose.
“The pilot only impacts the requirement for a lender’s title policy or AOL and does not impact a borrower’s title risk, since it only applies to certain refinance loans where the borrower has title to the property already,” she continued. “As with any pilot undertaken by an Enterprise, this effort will be subject to robust oversight by FHFA to monitor the effectiveness of the pilot in meeting its desired outcomes.”
Biden also announced the Consumer Financial Protection Bureau will “pursue rulemaking and guidance to address anticompetitive closing costs imposed by lenders on homebuyers and homeowners.
“These charges — which benefit the lender but not the borrower — can add thousands to the upfront costs of a mortgage,” the announcement stated. “Those upfront costs cut into the amount of homebuyers’ down payments and reduce homeowners’ available equity.”
Check back with The Title Report and The Legal Description for industry reaction to the president’s announcement.