As the mortgage landscape in the United States undergoes significant shifts, federal authorities are actively laying the groundwork to ensure the interests of mortgage stakeholders.
Notably, both chambers of the U.S. Congress are showcasing their commitment through the introduction of bills emphasizing title insurance on loans overseen by government-sponsored enterprises (GSEs).
GSE-Backed Loans: Decoding the New Bills
Taking the spotlight, U.S. Representatives Andrew Garbarino and Vicente Gonzalez have put forward House Bill 5837, also known as “The Protecting America’s Property Rights Act.” This legislative move mirrors the objectives of Senate Bill 2687, introduced in July 2023. An essential detail here is that these GSE-backed loans related bills are awaiting their turn in the voting process.
Though the finer points of the House Bill remain under wraps, insights from the Senate Bill, championed by U.S. Senators John Kennedy and Katie Britt, unveil proposals for restructuring the charters of esteemed entities, Fannie Mae and Freddie Mac.
Senate Bill and its Implications for GSE-Backed Loans
Central to the Senate Bill’s mandate is the restriction on GSEs from acquiring conventional mortgages on one to four-unit residential properties without the protective shield of primary-lien title insurance.
Furthermore, the bill enforces a criterion for title insurance companies. To be in the fray, they must be licensed and green-lighted to function in the state housing the property in question.
GSE-Backed Loans and the Historical Shift from Title Insurance to AOLs
This proposed bill gains significance when contextualized against past practices around title insurance. A notable shift occurred roughly 18 months prior when Fannie Mae endorsed attorney opinion letters (AOLs) as viable stand-ins for the age-old title insurance, albeit within certain confines.
Building on this, Freddie Mac wasn’t far behind, having accepted AOLs in specific scenarios since 2008. Signifying the conservative use of AOLs, Fannie Mae’s acquisition numbers stood at 45 loans bundled with attorney opinion letters in 2022.
GSE-Backed Loans: Fannie Mae’s Recent Oscillation on Title Insurance
The murmurs within industry corridors had Fannie Mae contemplating a pioneering program. This program would potentially allow a select group of mortgage lenders to bypass the title insurance mandates for loans queued for Fannie Mae.
This hinted at a shift from the traditional title insurance trajectory. Yet, in a revelation, Fannie Mae discarded such propositions come early August.
Clarifying Freddie Mac’s Historical Dance with AOLs
In the pursuit of clarity and dispelling misinformation, it’s crucial to correct the narrative on Freddie Mac’s journey with AOLs.
Earlier assumptions about Freddie Mac’s timeline with AOLs require adjustment, as their engagement dates back further than previously documented.
Wrapping Up: GSE-Backed Loans and the Impending Title Insurance Mandate
The looming mandate of title insurance on GSE-backed loans reflects the dynamic pulse of the U.S. mortgage ecosystem. By diving deep into these legislative undertones, stakeholders are better poised to sail smoothly through the impending tides of industry transformation.
To learn more about GSE-backed loans, contact the title & escrow specialists at Plymouth Title Guaranty Corporation.