November 19, 2024

CORREA, REAL ESTATE CAUCUS CALL ON BIDEN ADMINISTRATION TO HALT TITLE INSURANCE PILOT PROGRAM, PROTECT HOMEOWNERS AND BUYERS

WASHINGTON — Today, Representative Lou Correa (CA-46), alongside Representatives Mark Alford (MO-04), Tracey Mann (KS-01), and Brittany Pettersen (CO-07), co-chairs of the bipartisan Congressional Real Estate Caucus, led a bipartisan group of their colleagues in a letter to Sandra Thompson, Director of the Federal Housing Finance Agency (FHFA), calling for the halt of the Agency’s Title Acceptance Pilot (Pilot) program until it seeks public input and is thoroughly vetted.

The Members argue that the Pilot, which insinuates title insurance is a ‘junk fee,” will inadvertently cause irreparable damage to homeowners and lenders, and potentially leave them without critical protection against financial loss.

“Buying a home represents the largest and most important acquisition Americans make in their lifetime and purchasing title insurance secures that investment by protecting against financial loss from threats like unrecorded liens, fraud, and forgery,” the members wrote. “[While] [w]e applaud your ongoing efforts to promote homeownership, especially for low-income Americans, and share your concerns about the difficulty and costs of purchasing a home [...] the Pilot will not achieve your stated goal of finding ways to “responsibly reduce closing costs for homeowners in a safe and sound manner.” 

In fact, the members argue, “it may expose homeowners and lenders to a heightened risk of future financial loss, or even the loss of their home.”

Since FHFA’s announcement of the Pilot, there has been significant bipartisan pushback from both state and federal lawmakers, including Members of Congress, the National Council of Insurance Legislators, and fourteen Attorneys General, all persuasively arguing that this Pilot will not meaningfully address the nation’s housing affordability challenges but instead potentially harm consumers.

“Relying simply on an automated title search using public records alone will leave consumers susceptible to hidden threats not found in other records like unfiled liens, fraud, and forgery,” the members added. “Title agents, who are trained experts that comb through these various filings and cure defects to ensure a clear title, will be removed from the process under the Pilot, leaving consumers vulnerable to significant risk.”

Recently, the Consumer Financial Protection Bureau included title insurance in its Request for Information on “junk fees in mortgage closing costs.” This apparent classification of title insurance as a “junk fee,” the members argue, may diminish the value consumers place on this protection or incentivize consumers to forego title insurance altogether, leaving their most valuable asset at risk.

“Title insurance provides critical protections to homebuyers and lenders, and we do not support any efforts that would undermine those protections,” they concluded.

In addition to Reps. Correa, Alford, Mann, and Petterson, this letter was also co-signed by Representatives Ken Calvert (R-CA), Jim Costa (D-CA), Angie Craig (D-MN), Monica De La Cruz (R-TX), Andrew Garbarino (R-NY), Vincente Gonzalez (D-TX), Young Kim (R-CA), Joseph Morelle (D-NY), Wiley Nickel (D-NC), Guy Reschenthaler (R-PA), John Rose (R-TN), Deborah Ross (D-NC), and Brad Sherman (D-CA). 

You can read the full text of the letter HERE.

Diane Tomb, CEO of the American Land Title Association said: “Title insurance is the most effective way to protect homeowners and lenders against future financial loss and any effort to remove those protections puts them squarely in harm’s way. The FHFA Title Acceptance Pilot is a misguided policy that has received bipartisan pushback from all levels of government. We greatly appreciate the leadership of Representatives Correa, Allford, Petterson and Mann in continuing to voice those concerns.”

Dr. Mark Fleming, Ph.D., Chief Economist at First American Financial Corporation said: “Identifying the risks to ownership and curing many of them before a transaction closes is why homeowners so rarely are challenged on their ownership right after closing. Even on the rare occasions when issues arise, the duty of the insurer to defend the insured and indemnify against loss effectively provides continued protection of their interests.”