CHLA Advocates Attorney Opinion Letters As Alternatives To Title Insurance
CHLA asks FHFA to explore use of the letters.
The Community Home Lenders of America (CHLA) told Federal Housing Finance Director Sandra Thompson in a letter Wednesday that attorney opinion letters (AOLs) are viable alternatives to title insurance.
The organization cited the ongoing challenges related to rising mortgage rates and homeownership affordability as the basis for urging Thompson and FHFA to explore AOLs further.
CHLA Executive Director Scott Olson emphasized the tough environment for homebuyers and suggested that affordability improvement should be the focal point. CHLA has long criticized the perceived high costs of title insurance relative to the claims it covers.
“CHLA is sending this letter with the goal of jump-charging public policy discussions about how to help consumers achieve cost savings on their mortgage through alternatives to title insurance - in a responsible manner,” said Olson.
The letter highlighted that Fannie Mae and Freddie Mac selling guides have allowed the use of AOLs in limited circumstances since April 2022. CHLA also recognized that both government-sponsored enterprises (GSEs) have established requirements for when and how AOLs can be utilized, a measure the organization supports.
Olson expressed CHLA's desire for an expanded conversation on AOLs and their utility, particularly in cases where they can replace title insurance, such as in refinancing.
The FHFA did not immediately respond to requests for comment on the letter.
While CHLA strongly encourages FHFA to prioritize the potential use of AOLs, Olson noted that the decision to explore AOLs in title policies would be left to individual lenders. He stressed that lenders would bear the responsibility of ensuring clear titles for loans, requiring them to conduct due diligence and feel confident in the process.
CHLA's support for AOLs contrasts with the opposition voiced by the American Land Title Association since Fannie Mae's announcement in April 2022. Despite concerns, Fannie Mae purchased 45 loans with AOLs in 2022 with an average savings of $1,034.
The debate continued into 2023, with rumors of a Fannie Mae pilot program that would have exempted certain mortgage lenders from traditional title insurance for loans sold to Fannie. However, in August the GSE announced that it had abandoned the pilot program.
In recent months, federal lawmakers in both the Senate and the House of Representatives have introduced new bills mandating title insurance on mortgages acquired by government-sponsored enterprises.