Lawmakers introduce bills requiring title insurance on GSE-backed loans

The bills propose changes to the charters of Freddie Mac and Fannie Mae, which back most U.S. mortgages

Federal lawmakers in both the U.S. Senate and the House of Representatives introduced new bills requiring title insurance on mortgages purchased by government-sponsored enterprises (GSEs).

On Thursday, U.S. Reps. Andrew Garbarino, R-N.Y., and Vicente Gonzalez, D-Texas, introduced House Bill 5837. The bill is also known as The Protecting America’s Property Rights Act and is the companion bill to Senate Bill 2687, which was introduced in late July 2023. Neither bill has been voted on yet.

The text of the House bill has not yet been published, however, the contents of the Senate bill are public.

According to the bill, sponsored by U.S. Sens. John Kennedy, R-La., and Katie Britt, R-Ala., amendments would be made to the charters of Fannie Mae and Freddie Mac.

The new language prohibits GSEs from purchasing conventional mortgages for one- to four-unit properties unless the loans have primary-lien title insurance. Title insurance companies must be licensed and authorized to do business in the state where the home is located, the bill reads.

This move comes roughly 18 months after Fannie Mae approved the use of attorney opinion letters (AOLs) in lieu of title insurance in limited circumstances. Freddie Mac has also accepted AOLs in limited circumstances since 2008. In total, Fannie Mae purchased just 45 loans with attorney opinion letters in 2022.

Fannie Mae is rumored to be considering a pilot program that grants certain mortgage lenders a waiver on title insurance requirements for loans sold to Fannie Mae, effectively bypassing traditional title insurance. However, the GSE announced it was scrapping those plans in early August.

Correction: An earlier version of this article misstated when Freddie Mac began accepting AOLs.

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