The Consumer Financial Protection Bureau is considering whether to prohibit banks from charging homeowners for title insurance.
Charging home buyers for title insurance is a long-standing industry practice intended to protect lenders. A Bloomberg report initially broke that the CFPB will soon issue a broad request for information on closing costs – including title insurance. The article says that the CFPB’s plan is still in its initial stages.
The crackdown could include preventing lenders from charging borrowers for the cost of lender’s title insurance. Per the Bloomberg report, the plan would only impact lenders’ insurance – buyers could still purchase optional title insurance to cover their equity.
The CFPB declined to comment on a specific proposal and/or plan, but a spokesperson said, "The CFPB is looking carefully at closing costs and fees consumers may encounter throughout the mortgage process. We are working with agencies across the government to foster greater competition in the mortgage market and help Americans save money when purchasing or refinancing a home."
ALTA CEO Diane Tomb shared with NMP that “Title insurance is one of the most essential, but least expensive, parts of the home buying process. We have real concerns about how this proposed framework would undermine the critical protections provided by title insurance. We will continue our efforts to educate the CFPB as to how the title insurance market works and collaborate with policymakers on thoughtful approaches to housing affordability.”
The report comes just a month after the Biden administration announced that it was moving forward with a previously rejected Fannie Mae pilot program that would waive the requirement for lender's title insurance on certain refinances. The program, which was put forward in 2023, intended to eliminate title insurance on low-risk refinance transactions. ALTA reported the program as being abandoned in August 2023.
However, the Title Acceptance Pilot, announced by the Federal Housing Finance Agency (FHFA) on March 7 during President Biden's State of the Union Address, would allow mortgage lenders to sell certain low-risk refinance loans to Fannie Mae and Freddie Mac without a corresponding lenders title policy or attorney opinion letter (AOL). The Title Acceptance Pilot is akin to last year's pilot.
The American Land Title Association called pilot program announcement " a purely political gesture offering a false promise of savings for homeowners while exposing consumers, lenders, and taxpayers to greater financial risk."
