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The nation’s biggest mortgage lender, United Wholesale Mortgage, has jumped on board a Fannie Mae pilot program that’s roiled the title insurance industry by allowing some homeowners to refinance their mortgage without having to pay for title insurance.
UWM has been an enthusiastic adopter of title insurance alternatives, launching a title review and closing (TRAC) tool in 2022 that allows lenders to employ attorney opinion letters in lieu of traditional title insurance.
In May, UWM rolled out an expanded version of the program, TRAC+, providing pricing incentives to mortgage brokers who agree to let UWM handle not only title review but closing and disbursement for clients who are refinancing existing loans.
Now UWM — which employed an aggressive pricing strategy to overtake Rocket Mortgage as the nation’s biggest lender in 2022 — has unveiled “TRAC Lite.”
TRAC Lite provides title insurance waivers through Doma Title to lenders refinancing mortgages in seven states — Arizona, California, Colorado, New Jersey, Ohio, Texas and Virginia — allowing qualifying borrowers to avoid the expense of title insurance.
The waivers are allowed as part of a Fannie Mae pilot program that’s testing whether automated title reviews can substitute for title insurance or attorney title opinion letters on “low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance.”
Doma, which uses a machine learning platform to automate the title and escrow processes, was acquired by Dallas, Texas-based title insurance underwriter Title Resources Group (TRG) on Sept. 27.
“Doma offers a unique title risk assessment model for refinances that we are proud to offer to our partners, including UWM, to reduce the cost that homeowners pay for lender’s title insurance,” a spokesperson for the company said in a statement.
“Our unique model automates manual work in performing the same key functions as in traditionally underwritten transactions, resulting in the same risk profile as traditional title at a fraction of the cost,” Doma said. “We’ve long supported innovation in this space to make the process more affordable for homeowners and more efficient for lenders, and that continues today.”
FHFA ‘disregarding the views of policymakers’
A trade group for title insurers, the American Land Title Association (ALTA), has led the opposition to the pilot program and other title insurance alternatives endorsed by the Biden administration and consumer groups, who say they can broaden access to homeownership.
In a Nov. 18 letter to Fannie Mae and Freddie Mac’s federal regulators, 17 members of a “bipartisan Congressional Real Estate Caucus” endorsed by ALTA demanded that the pilot program be halted “until proven beneficial for homebuyers.”
UWM announced the launch of TRAC Lite on Facebook two days later.
In a statement to Inman Thursday, ALTA questioned how the pilot program could be allowed to move forward with the Biden administration set to hand over control of Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), next month to President-elect Trump.
“If the FHFA allows this pilot program to move forward during this transition period, it once again raises questions about the agency not only disregarding the views of policymakers but also flaunting any semblance of an open and transparent regulatory process,” ALTA said. “Any program that waives title insurance is simply bad for consumers, bad for lenders, and bad for taxpayers, and should be halted as bipartisan lawmakers have requested.”
FHFA approved a “small-scale, limited duration” title acceptance pilot program on March 7, and Fannie Mae issued a request for proposal to potential industry participants in June.
But it’s unclear how many lenders are participating. Neither Fannie Mae nor FHFA responded to Inman’s request for comment as well as a list of the lenders who are participating in the title acceptance pilot program.
In a statement, UWM said that since launching TRAC Lite last month, feedback has been “overwhelmingly positive.”
“As closing costs remain a significant barrier for borrowers seeking to refinance, this innovative product has allowed independent mortgage brokers to save their clients thousands of dollars on these fees,” UWM said. “We’re excited to see the momentum continue, and help more consumers achieve their refinance goals.”
According to UWM’s website, lenders pay a $1,600 flat fee to participate in TRAC, and a settlement agent fee of up to $500. The TRAC+ program costs $1,850 but there is no additional settlement agent fee. Participating lenders are offered pricing incentives of up to 60 basis points depending on the loan amount.
Lenders participating in TRAC Lite pay no title fee but aren’t offered a pricing incentive and are responsible for settlement agent fees ranging from $375 to $475.
Editor’s note: This story has been updated with a statement from UWM.
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