As the debate continues over what should constitute a qualified mortgage in the lending process, the American Land Title Association
is urging the Federal Reserve Board
to require the inclusion of title insurance in the final draft of the qualified mortgage standard.
The qualified mortgage requirement, which is part of the Dodd-Frank Act signed last year, is the subject of much debate in Washington since the final definition of QM will have a great impact on what type of loans can be originated.
ALTA sent a letter to the Federal Reserve
this week saying the history of legal title to the collateral should also be analyzed as part of the qualified mortgage requirement.
"Prudent underwriting of a borrower’s ability to repay would require that a creditor evaluate the title to the collateral to determine what outstanding debts will need to be satisfied before the creditor can obtain the first lien mortgage," said Anne Anastasi, president of ALTA.
"A title search and examination backed by a title insurance policy is a crucial underwriting feature that ensures that the borrower will have the ability to repay the mortgage by verifying their ownership of collateral and identifying any liens superior to the creditor’s mortgage," Anastasi said.
Anastasi explained that not all debts tied to a title can be viewed in credit reports, especially since some of those debts are secured by liens on the property that only show up through title searches and examinations.
Other trade groups and real estate firms voiced opposition
to the QM rule's current construction, saying the QM standard and the qualified residential mortgage rule are somewhat redundant and need to be efficiently coordinated and streamlined.
Write to Kerri Panchuk