As part of an effort to reduce closing costs for homeowners, Federal Housing Finance Agency Director Sandra Thompson on Thursday announced that the agency has launched a pilot program to waive the requirement that lenders first provide independent verification through either a legal opinion or a lender’s title insurance policy when they sell mortgage loans to Fannie Mae or Freddie Mac.
Currently, lenders are permitted to sell mortgage loans to Fannie and Freddie only if they show that the mortgage is a valid first lien that is free of any prior lien or encumbrance, Thompson said. They also must provide independent verification through either a legal opinion or a lender’s title insurance policy, with the cost of the latter usually passed onto homeowners. The pilot will test whether waiving that requirement is a responsible approach to reducing the closing costs incurred by existing homeowners, according to Thompson.
Lenders will retain the option to provide evidence of clear title through other options, such as title insurance or an attorney opinion letter, and homeowners are always able to purchase their own title insurance policy or AOL, Thompson said.
