Fannie Mae and Freddie Mac are searching for methods to open homeownership to low income borrowers. (This is not for investors) There is a trend to use attorney opinion letters rather than title insurance. The title insurance industry was built on the concept of reducing risk for lenders and homeowners. The title company searches history, pulls recordings, looks for clouds, clears up messy problems, then offers insurance to homeowners and lenders. Attorney Opinion Letters are being floated as an alternative to title insurance as title insurance is one of the largest costs to transferring title. Let's talk about this... Some investors on here talk about how they decided not to use title insurance. Some investors actually pull a preliminary title report, review it and decide not to pay for the policy and fly on their own. How has this worked for you when #selling? How do #wholesalers wiggle around #probate #liens and funky deed transfers? #Voxtur Analytics Corp. (TSXV: VXTR; OTCQB: VXTRF) announced, in response to changes to the Fannie Mae Single Family Selling Guide released today (SEL-2022-03, April 6, 2022), that it offers a fully compliant alternative to title insurance through its Attorney Opinion Letter (AOL) program. “The promise of technology has largely been lost in the mortgage industry and little has been done to reduce costs for consumers,” said Jim Albertelli, CEO of Voxtur. “Fannie Mae has identified closing costs as a barrier to homeownership. Our Voxtur AOL program immediately and directly reduces those costs, maybe opening the door to homeownership a little wider for more Americans.” Storm on the horizon or an opportunity? Caroline Gerardo NMLS 324982 This is not a endorsement of Attorney Opinion Letters but have you used them? What was the difference in the cost? Title insurance is regulated and disclosed. Eventually this will be regulated by the #CFBP - states and Federal Government. State by states laws vary.

Agreed, and you also have to hope the attorney is alive when the problem arises and (s)he's solvent and able to pay a damage award.

Title insurers are just that...insurers. I just had my first title claim in 23 years of investing and even with the insurer admitting in writing the claim was valid and their responsibility, I still had to hire my own counsel to get the attorney for the underwriter to get off dead center and clear my title. Yes, I get title insurance. Yes, I understand all insurers will take a premium and do all they can to not pay out.

Exactly Peter forgery COMES TO LIGHT way after the fact.

@Peter Walther Recently lenders are approving files with the defect disclosed as described above and noted as "Covered by mutual indemnity agreement".

Tom, to me, disclosure to the insured is taking exception in the policy and providing affirmation coverage. I believe the policy states that is a contract containing all the terms and conditions. Outside agreements do not apply. In addition, in my opinion, if you are in fact getting a separate disclosure signed, you're in a minority. Also, I suspect you're not getting such a disclosure from a lender providing funds for closing. Every set of closing instructions I can recall, contained a prohibition against disbursing funds if the lender will not be in a first lien position. If an LOI is being issued or an MIA is being relied on, the lender is not in a first lien position. I've been told by management, well we have the prior insurers indem, and we (the current insurer) have policy liability, and were not even sure the defect is valid, so therefore we don't have to disclose. I never bought the argument. When the industry started using LOIs in the 1990s I started requiring an exception and affirmative coverage. Lenders refused to accept the policy because they couldn't resell the loan with a defect. I was informed my procedure was not the company's or the industry's underwriting policy and to stop. I had a claim in NY where an older couple had purchased a property for their retirement home. Several months later they were served with a foreclosure complaint for a mortgage made by an owner two deed back. Their policy did not have a reference to the mortgage and in my conversation with them they advised they knew nothing about it. I contacted the policy issuing agent who advised they found the mortgage in the search but disregarded it based on a policy issued by national title insurer 1 (NTI1) and the NY MIA. I tendered the claim under the MIA to them and they retained counsel for MY insured. Several weeks later the claims person for NTI1 advised she had found their agent had found the mortgage but relied on a policy issued by NTI2 and the MIA and had tendered the claim to them. NTI2 retained counsel for MY insured and began defending. Several months later when it became clear the mortgage was valid and enforceable NTI2 began negotiating with the lender's counsel to pay off the mortgage. About two years later, the matter was finally settled. During the years it took to resolve the matter, the older couple insureds, had to live with the threat of foreclosure hanging over their heads. Do you really believe they would have closed on the purchase had they known there was the remotest possibility of this happening?

@David Dey @Peter Walther is referring to the Mutual Indemnity Agreements entered into by most of the major title insurers which eliminate the need to obtain an LOI between participating insurers when the title defect meets certain criteria. And I disagree about whether there is discretion to disclose to the insured. It must be done according to insurer guidelines (at least around here) including the following: -Disclose the title defect to all parties involved in the transaction and state that you are not excepting the matter from coverage because of the existence of an indemnity or prior [insurer] policy. -Obtain a signed acknowledgment and acceptance of the disclosure from all notified parties. -Obtain the full prior OTP (or LTP if foreclosure or DIL), complete the required checklist, save to file and send to insurer.

Sometimes, when doing certain types of subto deals, we cannot obtain title insurance. We often close anyway, if a comprehensive review of title history comes back clean. The buyers have to sign a "waiver of title insurance" to acknowledge the risk. I LITERALLY just closed 2 in Oklahoma this week without title insurance of any kind (FHA mortgages that title companies wouldn't close and insure). That said, you may also be able to buy on seller finance with a Contract for Deed or Land Contract and so long as title doesn't legally transfer from the seller to the buyer, that seller's title insurance remains valid on the property... There are plenty of other considerations to factor before simply opting for that route though. It's a whole contextual discussion that needs to factor the seller and buyers' separate needs and desired outcomes, state law, etc.

If you ever have a title issue you will kick yourself for not getting title insurance. IMHO.

Safe Without Title Insurance?

Randy Rodenhouse

Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes

2y

I would suggest if you are buying your personal home (owner occupied) that it would be a good idea to get title insurance. However, many of my investment properties I get a title search done (I know how to read Title) and I may not get title insurance depending on the history (prior transfers, mortgages types, etc. on the property. I have never used an attorney opinion letter, in fact it's the first time I heard of it. Fannie and Freddie can probably take the risk since they have a large volume and the number of issues are low but I don't see the banks not requiring title insurance any time soon. Thanks for the info.

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Jarred Ross

Port Huron, MI · Member since 2017 · 28 posts · 8 votes

2y

Taking AOL's instead of title insurance is an interesting move from Fannie and Freddie. I wonder if they're hoping to reduce closings costs and allow more buyers into the market? There must be some underlying cause. I've always wondered why it's become customary for the borrower to pay the cost of a lender's policy anyway. Couldn't the policies be combined, to protect the interest of all entitled parties to defects? The double dipping seems like bloat to me, with consumer's shouldering the cost.

AOL's offering's I've seen all have some type of liability policy in place from the provider. I don't see it as an issue on certain deals, especially in the case of new or newer properties. I'll still be taking owners policies on whatever I buy for now

Safe Without Title Insurance?

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