UWM, you better join Fannie Mae’s title insurance waiver pilot
Leading US mortgage lenders United Wholesale Mortgage (UWM) and Better have joined Fannie Mae‘s pilot program that waives lender insurance requirements for certain refinancing transactions, HousingWire has learned.
The initiative, announced by President Joe Biden during his March 2024 State of the Union address, aims to reduce closing costs as part of his broader “war on junk fees.” The Federal Agency for Housing Financing (FHFA) approved the pilot, calling it a step toward more affordable homeownership.
But the program faced significant opposition. The title industry rejects the “junk fee” label, saying it poses unnecessary risks to the market. Many hope the Trump administration will not advocate for this to happen. And bipartisan members of Congress have urged a pause until it undergoes a thorough public review.
Fannie Mae has now started implementing the pilot. UWM joined the program in November. Better began offering it to borrowers on Wednesday, and sources indicate more lenders are in discussions about participating.
A Fannie Mae representative did not immediately respond to a request for comment.
How does it work?
In the case of the UWM program, which was introduced to its broker partners on Nov. 20 as TRAC Lite, there is no lender insurance on some interest rate term and cash-out refinances. This move could appeal to borrowers as refi volumes could rise in 2025 due to expected lower interest rates.
TRAC Lite was initially available exclusively for qualifying refinance transactions to conventional desktop underwriters in four states: Arizona, California, New Jersey and Texas. This week it was also rolled out in Colorado, Ohio and Virginia. It focuses on loans with a maximum Loan-to-Value (LTV) ratio of 80% and there are no title fees. By comparison, UWM’s other programs, TRAC and TRAC+, include title fees of $1,600 and $1,850, respectively.
“This is a program that saves consumers money by not having to pay for lender insurance, and in addition, the closing costs, like the settlement fee, are also very low,” said Melinda Wilner, UWM Chief Operating Officer. “Switching to TRAC Lite has saved thousands of dollars [for borrowers] in the state of Texas, where it is very expensive when it comes to property insurance.”
The Fannie Mae pilot program is being conducted by Better and UWM in partnership with Doma titlewho serves as a settlement agent and is the primary salesperson behind the title insurance seller pilot. UWM said the program includes a settlement agent fee that varies by state, ranging from $375 to $475.
A spokesperson for Doma did not respond to requests for comment.
In a statement, a Better spokesperson said: “We are excited about the savings this program can bring to consumers. Closing-related costs can often be unaffordable for borrowers, and forgoing title insurance can provide needed relief for families looking to refinance.”
The program could save borrowers $1,500 on lenders’ insurance, but it requires lenders to pay Fannie Mae a $75 fee per transaction, according to a source familiar with the agreements between lenders and the government-sponsored company.
“The average title fee on a refinance is about 50 basis points, so on a $300,000 mortgage that’s about $1,500 in savings for borrowers,” the source said. “Fannie Mae already has that risk because it already has the existing loan – there is no need to charge another fee.”
Challenges for the pilot
The American Land Title Association (ALTA) has strongly opposed the program, arguing that it introduces significant risks to the marketplace and positions Fannie Mae as an insurer in the primary market – an authority that ALTA believes exceeds its mission.
ALTA emphasizes that title insurance plays a critical role in protecting against risks that arise between taking out an old loan and a new one, such as fraud or unresolved liens on unpaid debts.
Reflecting ALTA’s concerns, the Bipartisan Congressional Real Estate Caucus sent a letter to FHFA Director Sandra Thompson in November, urging the agency to halt the pilot program until it has undergone a thorough vetting process with public input.
“If FHFA allows this pilot program to move forward during this transition period, it once again raises questions about the agency not only ignoring the views of policymakers but also flaunting any semblance of an open and transparent regulatory process,” an ALTA spokesperson said. .
“Any program that waives title insurance is simply bad for consumers, bad for lenders and bad for taxpayers, and should be ended as bipartisan lawmakers have demanded.”
But mortgage lenders have refuted these arguments, saying the risk of a claim on a refinance loan is extremely low. Furthermore, this type of title insurance is intended to protect solely the lender, but not the borrower, they noted.
“I’ve never run a title company before. I know what we’ve had here at UWM in terms of ownership claims on refinances, and they don’t exist,” Wilner said.
