Safe Without Title Insurance?

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Safe Without Title Insurance?

Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes

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.

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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
2y

I've purchased at least 8 without title insurance (or lender's insurance obviously).   Savings of $3k each.

I also didn't need a lender-required but buyer-bought appraisal.   Saved another $400-$2500. 

But.. these were in the inland northwest where really old land only goes back to late 1800s vs 1600s New England / east.

I also did a through O&E title search with no deaths,  divorces, unconveys or unaccounted for quitclaims resulting.   

What will the charge be from the attorney opinions that are allowed in lieu?  $300 at least.   Probably $500. They won't be free.  

I am glad costs like these and the forcing  of sellers to pay buyer's agents commissions are under the magnifying glass these days.

Soon hopefully the 5-6% commission standard will feel some heat.  The dominoes of bloat are starting to fall! 

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    2y
    Quote from @Tom Gimer:

    @Peter Walther A couple of things...

    We just follow guidance provided by our underwriters... and my deals rarely involve FNMA backed or similar loans. If the lender approves our commitment and the parties understand and agree the issue, if it still exists at the time of the next proposed transfer, will be insured over yet again by one of the insurers involved, that's all I care about.

    The MIA is actually a last resort "solution"... when all other efforts to clear the issue have failed. We're primarily talking about prior owner unreleased trusts. If there is a real title issue such as an open DoT or unpaid judgment lien, the insurers want to hear from us so they can resolve it or at least have it on their radar.


    My experience is that many agents see the MIAs as a panacea, there to cure all title ills.  So much so that some claimed to have relied on an MIA to ignore matters clearly outside the MIAs scope, such as ignoring HELOCs.  My story was not a one off, it was illustrative of what I experienced almost every day.

    I'm not aware of any underwriter mandating an agent consult with underwriting before relying on an MIA, in fact just the opposite.  MIAs were developed to decrease the amount of time spent curing known defects.  Here's a quote from one underwriter's bulletin to its agents regarding the use of an MIA.

    "Only time will tell how effective the Agreement will be in simplifying the clearance and indemnification process. Undoubtedly there will be issues to be resolved at the outset. Properly implemented and administered, it should eliminate a portion of the burdensome and time consuming process of clearance of title issues among participants."

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    2y

    @Peter Walther HELOCs are expressly excluded from every MIA I've ever seen. Example of covered defects in FATICO - Old Republic MIA:

    "Deeds of Trust that have not been effectively released, except for mortgages and deeds of trust securing Home Equity Lines of Credit and Home Equity Conversion Mortgages (aka Reverse Mortgages) that have not been effectively released, or mortgages and deeds of trust in which  foreclosure proceedings have been instituted." [emphasis in original]

    When the MIA is used to write over a lien that appears to be not only unreleased but unsatisfied,  my experience is the insurers generally want to know about it. Do they require notice? No.

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  • Peter Walther
    Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    2y
    Quote from @Tom Gimer:

    @Peter Walther HELOCs are expressly excluded from every MIA I've ever seen. Example of covered defects in FATICO - Old Republic MIA:

    "Deeds of Trust that have not been effectively released, except for mortgages and deeds of trust securing Home Equity Lines of Credit and Home Equity Conversion Mortgages (aka Reverse Mortgages) that have not been effectively released, or mortgages and deeds of trust in which  foreclosure proceedings have been instituted." [emphasis in original]

    When the MIA is used to write over a lien that appears to be not only unreleased but unsatisfied,  my experience is the insurers generally want to know about it. Do they require notice? No.


    That was my point Tom, the agent ignored the HELOC based on an MIA even though HELOCs are always excluded from inclusion in an MIA. The agent either knowingly or negligently, and improperly, ignored a known excluded defect. It was done without consulting with an underwriter.

    MIAs whole purpose is to free up underwriters' time.  They don't want to be contacted every time an agent relies on one.

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  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    2y

    Last year, I had a situation where my buyer decided to not buy title insurance, title company buy mistake bought it, 6 months later they called and said high you got scammed but we made a life saving mistake and bought the title insurance policy.

    Turns out, this guy creates llc's with the same owner name on different states and claims the properties, and sells them.

    FBI is looking into this but I would never buy one without it after what I witnessed.

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