Fannie Now Permits Lenders to Obtain Attorney Title Opinion Letters
Written By: Joel Palmer, Op-Ed Writer
Fannie Mae has announced several recent updates to its Selling Guide, including one that provides title insurance flexibility.
One Selling Guide update, effective immediately, permits lenders to obtain either a lender’s title insurance policy or an attorney title opinion letter, “in limited circumstances.”
Lenders who opt for the attorney letter must ensure that the attorney is licensed to practice law in the jurisdiction of the subject property. The attorney must also be insured against malpractice in rendering opinions of title in an amount commonly prevailing in the jurisdiction.
The title opinion letter itself must:
be addressed to the lender and all successors in interest of the lender
be commonly accepted in the area where the subject property is located
provide gap coverage for the duration between the loan closing and recordation of the mortgage
list all other liens and state they are subordinate
state the title condition of the property is acceptable and the mortgage constitutes a lien of the required priority on a fee simple estate in the property
The lender must report Special Feature Code 155 when delivering a loan that uses an attorney title opinion letter in lieu of a title insurance policy.
According to the Selling Guide, the following transactions are ineligible to use an attorney title opinion letter:
Loans secured by a unit in a condo project
Co-op share loans
Loans secured by a dwelling on a leasehold estate, including leasehold estates on property owned by a community land trust
Loans secured by a manufactured home
HomeStyle Energy and HomeStyle Renovation loans
Texas Section 50(a)(6) loans
Loans secured by property subject to restrictive agreements or restrictive covenants
Loans executed using a power of attorney
In response to the Selling Guide update, Voxtur Analytics Corp., a real estate technology company, launched an Attorney Opinion Letter (AOL) program.
Voxtur said its AOL program provides an attorney’s opinion of title backed by transactional liability insurance that follows the loan into the secondary market and is issued by AM Best A Rated carriers.
“Provided in partnership with established real estate law firms in the industry, this product allows lenders to offer a low-risk alternative to title insurance that supports Fannie Mae’s housing goals,” Voxtur said in its launch statement.
Fannie Mae also updated the requirement pertaining to transfers of ownership of a property to clarify that:
For exempt transferees in connection with a delinquent mortgage loan, servicers must only obtain a signed assumption agreement upon completion of a mortgage loan modification and not a payment deferral; and
Recordation of an executed assumption, or assumption and release agreement, is necessary only where required by applicable law.
In other mortgage industry news, the Federal Housing Finance Agency (FHFA) issued the final version of its five-year Strategic Plan, which outlines the agency’s priorities for the coming years. FHFA had released a draft of the plan in February and invited industry feedback.
The Strategic Plan continues existing priorities and formalizes areas of focus for FHFA and its regulated entities by establishing three goals:
Secure the regulated entities ’safety and soundness
Foster housing finance markets that promote equitable access to affordable and sustainable housing
Responsibly steward FHFA’s infrastructure
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
