Alita Group Responds to Advocacy Groups’ Support for FHFA’s Pilot Program
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Recently, the Americans for Financial Reform Education Fund, in collaboration with the National Consumer Law Center, the Consumer Federation of America, and other advocacy groups, submitted a letter to the Federal Housing Finance Agency endorsing the Title Acceptance Pilot Program announced by Fannie Mae and Freddie Mac.
The Advocacy Groups’ Letter to FHFA in Support of the Title Acceptance Pilot Program
The letter submitted to the Federal Housing Finance Agency (FHFA) by several advocacy groups supports the Title Acceptance Pilot Program initiated by Fannie Mae and Freddie Mac. This program explores alternatives to traditional title insurance, such as using an automated title review process in certain refinance transactions to potentially waive the requirement for a lender title policy. The advocacy groups express concerns that these alternatives, including attorney opinion letters (AOLs), may not provide comparable protections to homeowners, particularly in terms of fraud, forgery, and covering legal fees for title issues.
You can read their letter of support here: Coalition Letter
Below is our response to this initiative, in which we highlight our support for innovative solutions that both protect consumers and make homeownership more attainable. Additionally, we address some common misconceptions regarding attorney opinion letters, particularly insured attorney opinion letters, as an alternative to title insurance.
Debunking Misconceptions: The Advantages of Insured Attorney Opinion Letters
August 1, 2024
Alys Cohen
National Consumer Law Center
7 Winthrop Square
Boston, MA 02110-1245
Email: [email protected]
VIA ELECTRONIC MAIL
Re: Clarifications regarding Coalition Letter to FHFA Director Thompson dated July 12, 2024
Dear Ms. Cohen:
Having had the opportunity to review your letter of July 12, 2024, to FHFA Director Sandra Thompson, I, on behalf of myself and Alita Group, commend the efforts of the National Consumer Law Center and the other signatories to the letter for their staunch efforts in support of the interests of homeowners and potential home purchasers.
At Alita, our mission is to reduce the cost of homeownership as we believe that sustainable homeownership, when it is available, is one of the most effective ways to improve financial and social well-being. We do this by offering an insured attorney opinion letter as an alternative to title insurance for a price that is substantially lower than title insurance in many cases, reducing the closing cost barrier. While our product offers protection to lenders that is comparable to the protections offered by title insurance, we designed this alternative with homebuyers in mind, particularly low-income and first-time homebuyers.
To that end, I think it important to clarify some misconceptions about attorney opinion letters, insured attorney opinion letters in particular, as an alternative to title insurance.
Your letter states that “[h]omebuyers get important protections from an owner title insurance policy, and it is not clear at all that the waiver pilot or attorney opinion letters provide equivalent protection, such as protections against fraud and forgery and coverage of legal fees to clear any title issues that arise.” While I cannot speak to the title waiver pilot, I can confirm that Alita’s insured attorney opinion letter does protect both lenders and homebuyers from fraud and forgery and covers legal fees to clear title issues that arise.
Your letter further states, in support of your argument against the use of title alternatives in the context of a home purchase, that “an owner’s policy is often purchased in concert with a lender’s policy” and that “owners get the benefit of a simultaneous reissue credit when the same insurer provides an owner and lender title policy at home purchase.” We certainly do not disagree but would point out that an insured attorney opinion letter is actually more beneficial as it is issued as a single letter to replace both the lender’s and owner’s policy, and is issued for a flat fee, which is more beneficial to the consumer than a discounted second policy. In our work with large multi-national insurance underwriters, all of whom are A.M. Best A rated and of superior financial size, we have determined that a singular document protecting all stakeholders in the transaction is a more streamlined and cost-effective approach for the consumer.
Finally, your letter states that “[i]t will be important for FHFA and the GSEs to carefully examine whether attorney opinion letters and title waivers provide comparable protections to a homeowner.” Again, I cannot speak to the approach of the title waiver pilot, but I can confirm that the approval of attorney opinion letters as an alternative to title insurance was carefully considered by all stakeholders in the industry and that Alita’s insured attorney opinion letter does provide comparable protections to a homeowner. For a full explanation of the coverage, I urge you to read the white paper published by Bradley Arant Boult Cummings, LLP, a prominent and well-respected law firm serving the mortgage finance industry, which can be accessed here: Bradley White Paper
We appreciate the opportunity to share this information with you and are grateful for your efforts in support of consumers. If we can be of further assistance in your efforts, please do not hesitate to contact us.
Best Regards,
Stacy Mestayer
President, Alita Group