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Fannie Mae News: Will Written Lawyer Opinion Letters Replace Traditional Title Insurance?

Fannie Mae news reported that instead of obtaining a title search on a property, borrowers could submit written legal opinion letters or attorney opinion letters (AOL) from a qualified lawyer. The written opinions are obtainable under certain conditions and "in limited circumstances."

AOL's must be commonly accepted in the property's jurisdiction, and the lender must provide gap coverage. An AOL must include "all other liens and the states in which they are subordinate."

Lenders must show that an approved title insurance policy covers their loans. That policy must be issued by an established industry insurer and include all supporting documentation. 

An AOL letter must clearly state that the title condition of the property in question "is acceptable and the mortgage constitutes a lien of the required priority on a fee simple estate in the property."

What Qualifies an AOL for Fannie Mae Approval?

The attorney must be appropriately licensed and carry sufficient malpractice insurance to cover the title opinions. Should a lender receive an AOL instead of a title insurance policy, that lender must report it as Special Feature Code 155 upon disbursing the loan.

The American Land Title Association issued an email reassuring lender partners and government-sponsored enterprises (GSEs) that it is currently reviewing this recent Fannie Mae news and working to develop a meaningful response. He asked partners to remember the "vital role our industry's products and services play in a well-functioning housing finance market."

The Fannie Mae news prompted no response from the company.

Now, Voxtur Analytics has created a product designed to take the sting out of title insurance. The full-coverage title alternative is available for a fraction of the cost of a title insurance policy. 

A Voxtur attorney opinion letter (AOL) combines the wisdom and credibility of a legal opinion with data-driven property review technology. According to the company, their product is a "fully compliant alternative" to traditional title insurance policies.

The new product includes an attorney's title opinion letter backed by a proportionate sum of transactional liability insurance. It will be available in select states, followed by a national rollout shortly after.

According to Voxtur, the new offering could save homebuyers a significant sum compared to purchasing a traditional title insurance policy. According to some estimates, the savings could amount to "an entire mortgage payment."

According to Fannie Mae news and Jim Albertelli, CEO of Voxtur, closing costs are currently a barrier to home ownership. To address that need and reduce closing costs in the bargain, title insurance alternatives are routinely being developed. 

In 2003, a title insurance company called Radian Group Inc. launched Radian Lien Protection Policy. It was marketed as an alternative to traditional title insurance.

A California judge later ruled that the product was title insurance. Meanwhile, the mortgage and real estate services provider decided to purchase its own insurance underwriter.

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