Tennessee Attorney General Jonathan Skrmetti led a coalition of 13 other state attorneys general in pushing back against a new pilot program launched by the Federal Housing Finance Agency (FHFA) that would remove title insurance requirements from certain loans sold to Fannie Mae and Freddie Mac.
In March, the FHFA launched the pilot program, which “waives the requirement for lender’s title insurance or a legal opinion on certain low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance.”
The Biden admin's efforts to remove title insurance requirements creates serious risks of fraud and other harms to consumers.
Today, @AGTennessee led 13 states in calling upon the FHFA to reject their consumer-damaging policies.
➡️https://t.co/JK51e7FYkN pic.twitter.com/u7Lj0wzwNi
— TN Attorney General (@AGTennessee) July 22, 2024
Prior to the pilot program’s launch, lenders were permitted to sell mortgage loans to Fannie Mae and Freddie Mac only if lenders warranted that an individual’s mortgage was a valid first lien free of any prior lien or encumbrance.
While the FHFA argued that the pilot program would work to “reduce closing costs for homeowners in a safe and sound manner,” Skrmetti and the coalition of attorneys general warned of multiple issues with the program.
In a letter to FHFA Director Sandra Thompson, the attorneys general highlighted the “essential” role that title insurance plays in safeguarding homeowners from fraudulent activities while also pointing out the unethical implementation of the program.
“Firstly, the FHFA inappropriately approved the program without seeking public input, contradicting its own rule to determine if it serves the public interest. Additionally, the program solely benefits homeowners with “lower risk” refinance loans, neglecting the needs of first-time and low-income homeowners,” Skrmetti’s office explained in a press release.
“Furthermore, it fails to address the underlying barriers faced by these homebuyers, such as high interest rates and limited affordable housing supply,” the release added.
The attorneys general also argued that the pilot program “exposes homeowners to potential fraud and abuse, removes protections from liens and alternative claims of ownership, and forces them into an experimental claims resolution process” with Fannie Mae and Freddie Mac.
This, the attorneys general added, risks property sale or foreclosure and “threatens local economies” by allowing the enterprises to “sideline small businesses in communities.”
The attorneys general further pointed out that the program’s implementation was unethical as it violated the FHFA’s rule of subjecting any new activity to public notice and comment.
Skrmetti called the program a “shortsighted regulatory overreach,” adding, “The affordable housing crisis demands meaningful bipartisan solutions.”
The attorneys general of Alabama, Arkansas, Georgia, Indiana, Kansas, Louisiana, Mississippi, New Hampshire, Oklahoma, South Carolina, South Dakota, Texas, and Virginia so-signed Skrmetti’s letter to Thompson.
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Kaitlin Housler is a reporter at The Tennessee Star and The Star News Network. Follow Kaitlin on X / Twitter.
Photo “Jonathan Skrmetti” by Tennessee Attorney General.
