WASHINGTON, D.C. – Today, Congressman Blaine Luetkemeyer (MO-03), top Republican on the Subcommittee on Consumer Protection and Financial Institutions and Congressman Brad Sherman (CA-30), top Democrat on the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets sent a letter to the Federal Housing Finance Agency (FHFA) regarding the need to protect American consumers from the potentially harmful effects of title insurance alternatives.

The full letter can be found HERE.

Read key excerpts from the letter:

“…The plans aim to lower closing costs and make homeownership more accessible for low- to moderate- income and minority homebuyers. However, these initiatives appear to risk exposing these consumers to harm by not providing the same consumer protections as title insurance. They also raise concerns about the safety and soundness of the Enterprises, increase taxpayer risk which FHFA must consider as the GSEs’ regulator and conservator.”

“First, both plans place low- and moderate-income, and minority borrowers at risk of going uninsured against some of the most common title defects for the average homebuyer. As a result, the attorney opinions imperil the ability of these consumers to be compensated for title issues. Attorney opinions increase the likelihood these precarious homeowners lose their house and lose the ability to build wealth.”

“The differences between attorney title opinions and title insurance can be confusing to policymakers, mortgage lenders, and legal practitioners. It is not hard to imagine how much more challenging these distinctions are for the typical consumer.”

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“Given these issues, it is critical for Congress and other policymakers to understand how attorney opinion letters will be promoted to consumers and what representations will be made to encourage their use of this product. For example, Freddie Mac indicates its pilots will involve 'targeted marketing and outreach' through 'lenders and community organizations.' Many legal practitioners and respected legal scholars have argued that not requiring homeowners to purchase title insurance (absent an extensive written disclaimer explaining the risks to the consumer) should itself be considered legal malpractice. This raises concerns that the 'targeted marketing' of the closing cost pilots may fail to adequately convey these risks to consumers, misleadingly suggest to homebuyers that attorney title opinions have been endorsed by the Enterprises or the federal government, and even potentially cross the line into the unauthorized practice of law.”

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“We expect FHFA to address these concerns in a timely manner, prior to approving the expansion of any Enterprise closing cost pilot, in order to give Congress the opportunity to engage further on this important matter. We appreciate your attention to these significant issues and look forward to your response.”

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