Uwm, Better Join Fannie Mae’s Controversial Title Insurance Waiver Pilot

Leading U.S. mortgage lenders United Wholesale Mortgage (UWM) and Better have joined Fannie Mae’s pilot program that waives lender title insurance requirements for certain refinance transactions, HousingWire has learned.

The initiative, announced by President Joe Biden during his March 2024 State of the Union address, seeks to reduce closing costs as part of his broader “war on junk fees.” The Federal Housing Finance Agency (FHFA) approved the pilot, framing it as a step toward more affordable homeownership.

But the program has encountered significant opposition. The title industry, dismissive of the “junk fees” label, argues that it introduces unnecessary risk to the market. Many hope the Trump administration will not advocate to advance it. And bipartisan members of Congress have urged a pause until it undergoes thorough public review. 

In the meantime, Fannie Mae has begun to implement the pilot. UWM joined the program in November, Better started offering it to borrowers on Wednesday, and sources indicate that additional lenders are in discussions about participating. 

A representative at Fannie Mae did not immediately reply to a request for comment.

How does it work?

In the case of the UWM program, introduced to its broker partners on Nov. 20 as TRAC Lite, there is no lender title insurance on some rate-term and cash-out refinances. The move may appeal to borrowers as refi volumes could rise in 2025 due to anticipated lower rates.

TRAC Lite was initially available exclusively for eligible conventional desktop underwriter refinance transactions in four states: Arizona, California, New Jersey and Texas. This week, it was also rolled out in Colorado, Ohio and Virginia. It targets 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 because they do not have to pay for a lender title insurance, and additionally, the closing fee, like the settlement fee, is very low as well,” said Melinda Wilner, UWM’s chief operating officer. “Switching to TRAC Lite has saved multiple thousands of dollars [for borrowers] in the state of Texas, where it is very expensive when it comes to title insurance.”

The Fannie Mae pilot program is executed by Better and UWM in partnership with Doma Title, which serves as the settlement agent and is the main vendor behind the title insurance vendor pilot. UWM said its program does include a settlement agent fee that varies by state, ranging from $375 to $475.

A spokesperson for Doma did not respond to requests for comments.

In a statement, a spokesperson for Better said, “We are excited about the savings this program could provide consumers. Closing-related fees can often be cost prohibitive for borrowers, and waiving title insurance can help offer necessary relief to families seeking to refinance.” 

The program can save borrowers $1,500 related to lender title insurance, but it requires lenders to pay Fannie Mae a fee of $75 per transaction, according to a source familiar with the agreements between lenders and the government-sponsored enterprise.

“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’s no need to charge another fee.”

Challenges to the pilot

The American Land Title Association (ALTA) has voiced strong opposition to the program, arguing that it introduces significant risk into the market and positions Fannie Mae as a primary market insurer — an authority that ALTA contends exceeds its mission.

ALTA emphasizes that title insurance plays a critical role in protecting against risks that arise between the origination of an old loan and a new one, such as fraud or unresolved liens from 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 undergoes a thorough vetting process with public input.

“If the FHFA allows this pilot program to move forward during this transition period, it once again raises questions about the agency not only disregarding 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 halted as bipartisan lawmakers have requested.”

But mortgage lenders have refuted these arguments, saying that the risk of a title insurance claim on a refinance loan is extraordinarily low. In addition, this type of title insurance aims to exclusively protect the lender but not the borrower, they noted.

“I’ve never run a title company. I do know what we’ve had here at UWM as far as title claims on refinances, and they don’t exist,” Wilner said.