State officials oppose FHFA’s title exemption pilot program

Attorneys general in 14 states have joined forces to direct a letter Unpleasant Federal Agency for Housing Financing (FHFA) Director Sandra Thompson pushing for an end to the agency’s title waiver pilot program.

The letter, sent Monday, was led by Tennessee Attorney General Jonathan Skrmetti and co-signed by attorneys general in Alabama, Arkansas, Georgia, Indiana, Kansas, Louisiana, Mississippi, New Hampshire, Oklahoma, South Carolina , South Dakota, Texas and Virginia.

In the letter, officials expressed their concerns the revived pilot program that aims to eliminate the requirement for title insurance on certain loans sold Fannie Mae.

“The pilot program will shift the ownership risk on refinanced loans purchased by Fannie Mae from state-regulated insurance companies to Fannie Mae itself,” the letter said. “Title insurance is a state-regulated industry, and homeowners will be better served if it remains that way. We call on the Agency to end implementation of this misleading pilot program.”

The letter highlights the fact that the pilot program was halted in the summer of 2023 but was revived in March 2024 after the initial pilot program faced resistance from Congress and the title insurance industry.

In the letter, the attorneys general allege that FHFA improperly approved the pilot program by failing to solicit public input. They also note that the program only benefits homeowners who refinance loans that the FHFA has deemed “lower risk,” while the attorneys general claim they are ignoring the needs of first-time and low-income homebuyers.

Additionally, the letter alleges that the pilot program exposes homeowners to potential fraud and abuse, removes protections against liens and alternative ownership claims, and forces them “into a completely experimental claims resolution process with” Fannie Mae, putting them at risk of losing property sell or exclude.

“While property theft is not common, tens of thousands of people have fallen victim to scams, and even the most famous private home in America is not immune to fraud attempts,” the letter said.

“More often, title insurance protects against title defects such as liens or alternative title claims. Title companies invest significant resources in maintaining databases, training employees and digitizing documents to ensure homeowners receive the most accurate title information possible. Even homeowners who refinance need title insurance because latent problems, such as boundary disputes or the discovery of unpaid debts, can arise at any time.”