UWM can quickly scale new loans without title insurance
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The CEO of the nation’s largest wholesale mortgage lender says he can quickly expand his latest offering – a mortgage that doesn’t require title insurance from the lender – even though a title industry trade group is denouncing the practice as “irresponsible”.
United Wholesale Mortgage (UWM) announced its new Securities Review and Closeout (TRAC) tool at an industry conference this weekend, to capitalize on rule changes by mortgage giants Fannie Mae and Freddie Mac to help borrowers save on their closing costs.
The rule changes give lenders the ability to use a lawyer’s opinion letter instead of traditional title insurance on many types of loans, and UWM CEO Mat Ishbia says he sees an opportunity to win business from competitors saving consumers an average of $1,000 per loan.
UWM is hiring and training attorneys to generate in-house attorney opinion letters to meet what the company expects will be high demand for TRAC, Ishbia told Inman on Wednesday.
“I’m the largest lender in America, we can handle the size of every loan if it came down to that,” Ishbia said of UWM’s ability to offer TRAC as an alternative to title insurance. lender. “We can handle the volume. We will continue to hire lawyers. We will have several attorneys…licensed in each state. We have all the rules, all the processes, but we have everything under control, and we’re really excited because it’s going to have an impact for consumers.
On average, UWM expects TRAC to save consumers about $1,000 over the cost of obtaining title insurance from the lender, and the savings could reach $2,000 to $3,000. in some states where title insurance costs are higher.
In August, proptech companies SingleSource Property Solutions and Voxtur launched an “Attorney Conclusion of Title” (ACT) product that is also designed with Fannie and freddiethe new directives in mind. SingleSource says that, depending on the location of the borrower, the new product can save consumers 20 to 70 percent over the cost of traditional title insurance.
Ishbia said UWM decided it could offer its lawyers “significantly cheaper” op-eds by hiring its own attorneys.
“We’re not like a little guy who doesn’t know what we’re doing,” Ishbia said of UWM’s ability to take such initiatives. “It’s not like I don’t have, you know, 50 lawyers here and all these different at-risk people and stuff. Like, we’re in the weeds on this. We do what is good for consumers.
UWM, which went public in a 2020 SPAC merger, is locked in a fierce battle for market share with rivals such as Rocket Mortgage.
Last year, UWM launched Appraisal Direct, a new in-house appraisal capability that gives mortgage brokers the ability to bypass appraisal management companies. UWM also equipped brokers with BOLT, an automated document recognition and processing system the company developed in-house to provide initial approvals to qualified borrowers in 15 minutes.
Then, in June, UWM announced an “aggressive pricing strategy,” Game On, which UWM says will be “the final boost we believe retail loan officers need to convert to a brokerage store. loan officer or start their own brokerage store,” Ishbia said at the time.
That same month, UWM announced a new service for mortgage brokers, Boost, which serves as their marketplace to buy leads, stay in touch with past clients, connect with real estate agents, and agree to receive mortgage transfers. live calls.
Title insurance trade group issues warnings
But UWM’s latest innovation, TRAC, has drawn the ire of the title insurance industry’s trade group, the American Land Title Association (ALTA).
ALTA raised objections to Fannie and Freddie’s policy change with its federal regulator, the Federal Housing Finance Agency (FHFA), in a September 6 letter to Sandra Thompson, Director of the FHFA.
The letter warns that “there are many areas” where the protection provided by attorney’s opinion letters “falls far short of what a standard title policy provides and will expose the buyer to additional risk. “.
In a statement provided to Inman, Diane Tomb of ALTA said title insurance policies can insure against depreciation of liens caused by embezzlement and similar risks and that without title insurance coverage, lenders assume these financial risks.
“It is irresponsible for lenders to adopt title insurance alternatives that increase risk,” Tomb said. “The market has moved away from lawyers’ opinion letters decades ago because they don’t provide the protection that matters most to lenders and landlords.”
Tomb said lawyers’ opinion letters and other alternatives to traditional title insurance do not defend contested property disputes in court, and that title insurers are backed by legally required financial reserves to cover risk of future claims.
“During the last financial crisis, we unfortunately witnessed several systemic financial problems caused by shortcuts to well-established processes,” Tomb said. “If this crisis has taught us anything, it’s that underwriting standards and risk protection need to be strong and well tested. Strong underwriting protects both lenders and consumers – and title insurance is a key part of that due diligence.
SingleSource, which did not respond to a request for comment for this story, says on his site that its Attorney Conclusion of Title product is also backed “by specialized transactional insurance, issued by carriers rated AM Best A, which covers the full value of the loan for the full term of the loan.”
Ishbia has largely ignored concerns that attorney notice letters carry increased risk compared to lender title insurance.
“It’s a complete joke, so I don’t even know how to respond to it,” Ishbia said. “If my business were to be disrupted by someone doing a better job and offering a cheaper, better, faster and easier product, I would probably come up with a lot of stuff too, right? is better for consumers.
The Consumer Financial Protection Bureau notes that lender’s title insurance policies only cover claims that affect the lender’s loan. If buyers want to protect their equity in the event of a title issue, the the office advises tell them that “you may want to purchase a homeowner’s title insurance policy”.
While Fannie and Freddie have opened the door for lenders to rely on a lawyer’s opinion on title over title insurance, the mortgage giants won’t accept legal advice. an attorney on title for condos, co-ops or manufactured homes.
Ishbia envisions a day when borrowers can take out any mortgage without having to pay for the lender’s title insurance. UWM says its new TRAC process helps mortgage brokers prepare title deeds in an average of three to five days.
“I don’t know anyone who says hey, give me the most expensive, goofy version,” Ishbia said. “There is no additional risk, in our opinion [in substituting an attorney’s opinion of title for a lender’s title policy], and you can still get an owner’s title policy. I don’t really see the need for it. But if people want to do it, they can do it too. But it is a much better product. And I hope that title insurance companies will innovate themselves, so that they also improve things.
Ishbia advised borrowers and realtors who want to explore the savings they could realize by forgoing lender title insurance to speak with a mortgage broker. The website supported by UWM FindAmortgagebroker.com connects borrowers and agents with independent mortgage brokers in their area.
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