Trump Administration Should Hit The Brakes On Title Insurance Waiver Pilot Program

In the final days of the Biden administration, officials had several policy decisions to make as the president worked to cement his legacy, including whether to move forward with the Federal Housing Finance Agency’s (FHFA) title insurance waiver pilot program. The program would waive title insurance requirements for certain Fannie Mae federally backed mortgage loans. Both Democrats and Republicans on Capitol Hill previously expressed concern that the program would undermine the protection title insurance provides.

Additionally, a coalition of state attorneys general and state lawmakers have spoken out against federal overreach into an area regulated by individual states. And just recently, Sen. Tim Scott (R-S.C.), chair of the Senate Banking Committee, sent a letter to former Director FHFA Director Sandra Thompson sharing his concerns with several agency policies, highlighting that the agency approved the pilot without public input.

These concerns, coupled with a new president, were more than enough reason to pause the pilot program; instead, the Biden administration chose to hit the gas pedal. Now, it’s up to the Trump administration to apply the brakes before state regulators are undercut and taxpayers and homeowners find themselves at greater financial risk.

Threatening this reliable system, the title waiver pilot program transfers the responsibility of protecting property rights from state-regulated title insurance companies to Fannie Mae —enabling it to function as a title insurer without complying with any state title insurance laws and regulations. It’s a blatant intrusion into an area that federal law explicitly placed under the regulatory authority of the states.

Insurance directly impacts Americans’ financial stability, making it critical that insurance companies are financially sound, and consumer protections are in place—both can only be achieved through government oversight and regulation. The McCarran-Ferguson Act, signed by President Franklin D. Roosevelt over 80 years ago, gave states, rather than the federal government, the primary authority to regulate and tax the insurance industry within their borders. 

In that time, states have developed their own statutes and regulatory requirements for title insurance that cover underwriting standards, regulation of conduct and unfair contractual terms, and competition and rate regulation. Title insurance companies are also required to establish and maintain reserves to protect policyholders. 

Title insurance companies are equipped and prepared to assume the risk if any title issues emerge. Now, that risk shifts to Fannie Mae, a Government Sponsored Enterprise (GSE), and by extension—the taxpayers. With zero title insurance experience under its belt, Fannie Mae will be stepping well outside its lane. Taxpayers shelled out $200 billion to bail out the GSE the last time this happened.

Contrary to the view that proponents of the pilot program hold, our industry is dominated by small businesses with expert and dedicated title professionals dedicated to protecting the property rights of Americans—and helping identify and collect $3 billion in back federal income taxes, property taxes, and unpaid child support in 2022 alone.

Small businesses are the ones who will be sidelined by Fannie Mae’s intrusion into an area that states have successfully regulated for eight decades. 

The Biden administration rushed the pilot out of the gate hoping it would show the Biden administration’s efforts to address affordability, with officials announcing they had revived the once-dead program only a few hours before the president was scheduled to mention it in his State of the Union speech in March. There was also no opportunity for the title insurance industry and other stakeholders to submit public comments on the program, which runs afoul of the FHFA’s rule for new products and activities. There has also never been any data or cost-benefit analysis of this pilot—balancing supposed savings with increased risk—despite repeated bipartisan requests for such information

On Jan. 16, President Trump announced he was nominating Bill Pulte as the next director of the FHFA. We look forward to collaborating with him and the Trump administration to help more people achieve and protect the American dream of home ownership, while ensuring homes are protected with title insurance which is the gold standard in protecting property rights and strengthening the housing finance system and broader economy.

After taking office, Trump issued an executive order calling for emergency relief on housing, principally through a reduction of regulatory burdens and efforts to expand supply. ALTA is committed to working with the Trump administration on thoughtful approaches to increase access to homeownership.

But as the Trump administration reviews the unilateral actions of the previous administration and the title pilot, it should carefully consider that for the past 80 years, states and the title industry have worked together to help Americans achieve their dream of homeownership. The pilot program upends that relationship, defies the state’s regulatory authority over title insurance, and most importantly puts homeowners and taxpayers in a precarious position. The one thing it will not do is help solve affordable housing challenges.

Diane Tomb is the CEO of the American Land Title Association.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: zeb@hwmedia.com.