The AOL debate rages on

Attorney opinion letters were a hot topic at the National Settlement Services Summit this week

Fannie Mae dropped a bomb on the title insurance industry in April 2022, when it adjusted its selling guide to allow the purchase of loans using attorney opinion letters (AOLs). In the ensuing 15 months, discussion over the risks and challenges posed by AOLs consumed the title industry, so naturally, it was a hot topic at the National Settlement Services Summit (NS3) in St. Louis this week.

“The title I have used to frame this discussion for the past few months is ‘storm warning or calm seas?’” Chuck Cain, the senior vice president of the FNF Family of Companies, told NS3 attendees Thursday morning. “Is this a big deal or not a big deal for those of use in the title industry and the real estate industry generally?”

Many in the title industry would argue that Fannie Mae’s acceptance of AOLs is a big deal.

“We strongly believe that title insurance is, and always will be, essential,” the American Land Title Association wrote in an email to HousingWire in April 2022. “For over a century, title insurance has provided reassurance that a title is clear of defects and offers lenders and borrowers the highest level of confidence in ownership. Historically, lenders have overwhelmingly preferred the protection of a title insurance policy, and Fannie Mae itself has acknowledged that there may be additional risk in accepting attorney opinions.”

ALTA’s strong stance, however, does not take away from the fact that Fannie Mae purchased just 45 loans with AOLs in 2022, according to the government sponsored entity’s (GSE) 2022 Equitable Housing Plan Performance report. For context, Fannie Mae purchased a total of 1.151 million loans in 2022.

But Cain warned that title professionals should not allow these numbers to deceive them.

“I am in the Cincinnati metro area, which was and still is the epicenter of attorney opinion letters,” Cain said. “We are seeing them throughout Ohio, Kentucky and Indiana because that is all part of a tri-state region, but we are seeing expansion into Michigan, Pennsylvania, Texas, Florida, Louisiana, Alabama, Massachusetts and West Virginia — these are all states where attorney have generally played a significant role, whether by law or by custom, in the title marketplace.”

Prior to the advent and widespread use of title insurance, the buyer required that the title be free of any rights, interests, liens or encumbrances of others for which the buyer would be responsible for before taking title to a property. A title search would be conducted and then a conveyancer would issue an opinion on the title.

After the creation of title insurance, this practice remained prevalent in the conventional residential mortgages, until the rise of the GSEs and commercial banks setting up mortgage operations. Due to the large national footprint of both the GSEs and large commercial banks, title insurance quickly became de rigueur.

The risk appetite of many mortgage lenders has changed since the rise of residential title insurance over 50 years ago. AOLs are based on just what is shown in public records; they provide the mortgage lender assurance and not insurance, as they have become accustomed to.

Due to this, many in the industry have concerns over what the curative action would be if a claim does show up. With a title policy, the path is clearly defined, but with an AOL, many questions remain.

“A lot of the title premium, which is a one-time premium, is paid for curative action prior to the closing, but some issues do need to be resolved by council and if it is an attorney opinion letter, then the attorney would say here is my hourly rate,” Cain said.

In addition, Cain warned that in many states, the statute of limitations for an attorney’s malpractice or errors and omissions insurance is just one year.

“If I write a title opinion today on June 8, and next year on June 9 something comes up, you can do anything and my insurance company is not going to pay anything to me or you,” Cain said.

Cain also highlighted that direct guidance from the American College of Real Estate Lawyers and the American Bar Association issued two decades ago, warns attorneys against issuing some of the assurances asked for by Fannie Mae and Freddie Mac in its AOL guidelines. This makes it even less likely that an attorney’s malpractice insurance would cover them if a claim was brought against a property they issued an AOL for.

Despite these concerns, in October 2022, United Wholesale Mortgage (UWM) CEO Mat Ishbia announced that his company was hiring attorneys to review title and closing documents, as the firm looked to potentially bypass title insurance.

While Ishbia and UWM may be prepared to take on the risks and uncertainty surrounding AOLs, Brian Levy, counsel at Katten and Temple, said mid-sized lenders are not similarly equipped.

“It makes me very nervous,” Levy told NS3 attendees. “My clients are generally small and mid-sized mortgage lenders, so we have a different comfort level with AOLs. With AOLs, we have to incur the entire risk. In the past, we have always been able to have confidence that a title insurance company was standing behind the risk. Now we have less confidence, but we have lower costs.”

Lower costs have been at the center of this AOL debate, as Fannie Mae first proposed AOLs as part of the Equitable Housing Finance plan presented to the Federal Housing Finance Agency. While the title industry in on board for lowering costs for homebuyers, many in the industry do not want to do so at increased risk to the homebuyer.

“We are all happy to lower costs; we just don’t want to lower value to get there,” Cain said.

With companies like Voxtur, Single Source and iTitleTransfer offering AOLs products and Fannie Mae announcing that it would accept AOLs on VA loans, it is clear that AOLs are not going anywhere any time soon.

Due to this, Cain and Levy told attendees that it is their responsibility to learn more about these products and educate others in the industry on the pros and cons of both AOLs and title insurance.

“Everybody has to understand what they are getting and what they are not getting, as to which product or service is being provided,” Cain said.  


  1. Brooklee, I also attended the excellent NS3 Conference in St. Louis, and enjoyed the presentation by Brian and Chuck.

    Notwithstanding their significant expertise, it was clear that the presenters were fully unfamiliar with “modern and contemporary” AOLs, currently available in the marketplace. And, most surprising, the presenters were fully unaware of the insurance products that are the underpinning of modern and contemporary AOLs.

    Under these circumstances, it seems a stretch to be a critic of the concept.

    Lenders, loan brokers, Realtors and title agents should contact a firm providing AOLs, and take a closer look at the quality, price and competitiveness of this alternative to title insurance. Remember, Fannie Mae and Freddie Mac, as purchasers of $2.7 Trillion of loans, last year, have already voted in favor of AOLs !!

    And, in the case of iTitleTransfer, a modern and contemporary AOL is only one component of a GSE-compliant national, flat fee, Lender outsource, Loan Closing Platform.

    Regards, Ted.

    Theodore Sprink, Founder
    iTitleTransfer, LLC
    [email protected]

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