Podcast
Questions and Answers
The title waiver pilot program aims to increase closing costs for homeowners.
The title waiver pilot program aims to increase closing costs for homeowners.
False
The automated title review process is designed to provide more rigorous independent verification for certain transactions.
The automated title review process is designed to provide more rigorous independent verification for certain transactions.
False
CFPB has labeled certain fees in the mortgage process as exploitative junk fees.
CFPB has labeled certain fees in the mortgage process as exploitative junk fees.
True
President Biden announced a plan to eliminate title insurance on federally backed mortgages.
President Biden announced a plan to eliminate title insurance on federally backed mortgages.
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Title insurance typically pays out 70% of premiums in claims.
Title insurance typically pays out 70% of premiums in claims.
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The Federal Housing Finance Agency Title Waiver Pilot Program is one of the two main events affecting the title industry this year.
The Federal Housing Finance Agency Title Waiver Pilot Program is one of the two main events affecting the title industry this year.
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The title policy has no real-world benefits for customers and clients.
The title policy has no real-world benefits for customers and clients.
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Educating oneself and others about the title policy is encouraged in the discussion.
Educating oneself and others about the title policy is encouraged in the discussion.
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FNF agents aim to become title icons by ignoring recent headlines affecting the industry.
FNF agents aim to become title icons by ignoring recent headlines affecting the industry.
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The CFPB request for more information is not mentioned as an important initiative for the title industry.
The CFPB request for more information is not mentioned as an important initiative for the title industry.
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Study Notes
Title Insurance Industry Initiatives
- Title insurance has garnered national attention due to recent initiatives like the FHFA Title Waiver Pilot Program and CFPB's request for more information.
- These initiatives could significantly impact title operations.
FHFA Title Waiver Pilot Program
- Goal: Reduce closing costs for homeowners.
- Method: Automated title review process for certain refinance loans (<80% loan-to-value ratio).
- Lenders pay a fee to Fannie/Freddie to cover title risk, eliminating the need for a lender's title insurance policy in certain transactions.
- Expected outcome: Low cost of curing title defects, offset by lender fee.
- FHFA will oversee the program to ensure effectiveness.
- Title insurance premiums typically pay out 3-5% in claims, compared to 70% for other insurances.
CFPB Request for Information
- Purpose: Assess the impact of mortgage closing costs on borrowers and the mortgage market.
- CFPB views numerous fees as "exploitative junk fees" driving up home costs.
- Focus on:
- Concerning fees causing hardship.
- Unnecessary fees.
- Fee-setting practices.
- Entities profiting from fees.
- Applies to both purchases and refinances.
- Comment period closed August 2nd, awaiting CFPB review.
Political and Industry Perspectives on the Title Waiver Program
-
Proponents:
- President Biden: Eliminating title insurance on federally backed mortgages to save $1,000+ in refinance costs.
- Wall Street Journal: Article asserting title insurance is overpriced and largely unused.
- NPR: Title insurance is a cash cow for lawyers, a scam, lightly regulated.
-
Opponents:
- House Democrats: Program won't genuinely improve affordability and could risk GSEs into property sales or foreclosure
- Tennessee Attorney General et al: Title insurance protects against fraud and exploitation and addresses actual homebuyer barriers like high rates and low stock.
- WSJ Letter to Editor: Title insurance reduces risk, is a useful, albeit sometimes hidden or pricey, expense.
- First Americans' Chief Economist: Title insurance protects from 600−600-600−900 billion in annual risk.
- Title Insurance Industry perspective: Title insurance is crucial for protecting consumers and lenders.
State Regulation and Title Insurance
- State regulation of title insurance is preempted by states.
- States hold the responsibility to better regulate and protect consumers.
- All Florida title insurers must adhere to state, including adequate reserves and claim repayment requirements.
- Important Questions regarding federal program on reserve requirements.
Title Insurance vs. Casualty Insurance
- Title insurance is a contract of indemnity, covering losses due to pre-policy title defects. The risk is minimized through extensive title search and examinations. This is different from casualty insurance, which covers losses occurring after policy issuance.
- Title insurance is not a guarantee of defect-free title and does not have recurring payments.
Value of Title Insurance for Homeowners
- Title insurance is a one-time premium and continues as long as the insured holds an interest in the land.
- Policy coverage extends to heirs, successors in LLCs, and other transfers, such as trusts and divorces.
Title Insurance Claim Handling
- Claims are not frequent, but can lead to sizable, burdensome losses for individual homeowners – often the value of the mortgage and property loss; potentially substantial for individuals.
- Fidelity, as an example, has a 3.2% claims loss-to-operating revenue ratio and is financially secure.
- Claims department in Florida has support staff to assist insureds in the claim process.
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Description
Explore current initiatives in the title insurance industry, focusing on the FHFA Title Waiver Pilot Program and the CFPB's request for information. These initiatives aim to streamline processes and reduce closing costs for homeowners, impacting title operations significantly. Understand how these changes could reshape the mortgage market.
