Fannie Mae’s Report on Acceptance of Attoney Opinion Letters and its Title Cost Reduction Pilot

Fannie Mae has release the performance report on Fannie Mae’s three-year Equitable Housing Finance Plan. It accepted 45 Attorney Opnion Letters in lieu of title insurance. The goal of the Plan according to Fannie Mae is to advance greater equity in America’s housing finance system, its practices, and its outcomes. To do this, Fannie Mae is systematically identifying barriers to sustainable mortgage finance and affordable rental housing confronted by people who – by design, neglect, or indifference – have historically been excluded or ignored by the housing finance system. Fannie Mae’s report offers its first-year assessment of the progress made against this goal. The Plan’s success is measured by how many barriers were knocked down, who benefits when they are removed, and whether Fannie Mae does both in a safe and sound manner for the housing finance system and the renters and borrowers served by Fannie Mae. Fannie Mae reports that Black consumers were the focus of year one of its Plan.

​Fannie Mae reported that it implemented the Selling Guide update in April 2022 to allow lenders and borrowers in limited circumstances the option to use an attorney opinion letter in lieu of traditional title insurance. The potential cost savings of attorney opinion letters as an alternative to traditional title insurance is heavily influenced, if not dictated, by state laws and regulations. In some states title insurance practices are highly regulated, including its pricing, while others are not. Thus, whether an attorney opinion letter will be lower cost for a borrower depends on where the property being purchased is located. In 2022, 45 borrowers benefited from the attorney opinion letter option according to Fannie Mae, with an average savings of $1,034 based on a comparison against 2020 state averages for like purpose (purchase, cash-out, rate-term). The first loan deliveries with attorney opinion letters were in the fourth quarter of 2022 and Fannie Mae expects deliveries to increase in the future.

Fannie Mae is currently engaged in a Title Cost Reduction Pilot with multiple providers and lenders on potential test-and-learn concepts aimed at reducing the cost of title for borrowers, and plan to finalize pilot opportunity parameters by end of the third quarter 2023.