UWM Expands Program That Dispenses With Title Insurance coverage
Nation’s largest mortgage lender says brokers “will not have to work with a title firm or settlement agent for title work, balancing charges, scheduling closing or any associated communication.”
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The nation’s largest mortgage lender is as soon as once more ruffling feathers within the title insurance coverage business, by increasing a program that it says saves debtors money and time by chopping title and settlement providers suppliers out of the method on some loans.
When initially introduced in 2022, United Wholesale Mortgage’s Title Overview and Closing (TRAC) program was geared toward changing lenders title insurance coverage insurance policies with legal professional title opinion letters issued by in-house legal professionals who evaluate title paperwork. UWM CEO Mat Ishbia mentioned on the time that the corporate supposed to rapidly scale TRAC, whilst a title business commerce group denounced the observe as “irresponsible.”
This week, UWM unveiled an expanded model of this system, TRAC+, that gives pricing incentives to mortgage brokers who comply with let UWM deal with not solely title evaluate however closing and disbursement for shoppers who’re refinancing present loans.
“Because of this, a dealer will not have to work with a title firm or settlement agent for title work, balancing charges, scheduling closing or any associated communication once they use TRAC+,” UWM mentioned in a press launch.
In a breakdown of pricing on the corporate’s web site, UWM mentioned it can present TRAC providers for a flat charge of $1,600, whereas TRAC+ will value $1,850. UWM can be providing brokers pricing incentives of 10 to 60 foundation factors, relying on mortgage dimension.
TRAC is obtainable for each buy mortgages and refinancings, however solely standard mortgages eligible for backing by Fannie Mae and Freddie Mac qualify. A further settlement agent charge of as much as $500 is assessed.
Whereas TRAC+ is just out there for refinancings, standard, FHA and VA loans can all qualify — and there’s no further settlement agent charge.
“With TRAC pricing incentives utilized primarily based on mortgage quantity, a flat TRAC+ charge of $1,850 with no further settlement agent charges, brokers will be capable to save debtors hundreds of {dollars} and supply a simplified course of that’s streamlined by way of UWM,” the corporate mentioned.
Increasing the adoption of title insurance coverage alternate options has been a priority for the Biden administration, which sees lowering closing prices as one approach to handle housing affordability points.
Fannie Mae in 2022 adopted Freddie Mac’s lead in permitting lenders the choice of utilizing an legal professional title opinion letter as an alternative of conventional title insurance coverage on some loans.
In March, Fannie and Freddie’s regulator, the Federal Housing Finance Company (FHFA), took the idea one step additional, saying it could enable lenders to promote low-risk refinance loans to Fannie and Freddie with no lenders title coverage or an legal professional opinion letter.
The American Land Title Affiliation (ALTA), the title business’s Washington, D.C.-based advocacy group, has been engaged in in depth public relations and lobbying campaigns opposing “unregulated title insurance alternatives” akin to legal professional opinion letters, which threaten to chop into the enterprise of the affiliation’s members.
ALTA can be backing laws within the Senate and House that might require lenders title insurance coverage on all loans bought by Fannie Mae and Freddie Mac, though each payments have been languishing in committees for months with no listening to.
ALTA supplied the next assertion to Inman when requested for remark about UWM’s growth of its TRAC initiative:
“The title business performs a crucial position in serving to American households construct wealth by way of homeownership by making certain the correct switch of actual property from vendor to purchaser, securing property rights and facilitating the expansion of the secondary mortgage market. With fraud and forgery claims considerably on the rise, prudent lenders ought to guarantee their funding is protected. Title insurance coverage stays probably the most cost-effective approach to restrict their threat towards these points. Decrease safety alternate options to title insurance coverage are sometimes extra expensive and improve pointless threat, notably for first time homebuyers and low- and moderate-income customers who want it most.”
UWM declined to touch upon ALTA’s suggestion that TRAC may create “pointless threat” for customers.
Fannie and Freddie each require that lenders utilizing title opinion letters rather than title insurance coverage comply with indemnify mortgage buyers towards losses attributable to an oversight in declaring {that a} title is freed from liens and different “clouds.”
In its most up-to-date annual report to buyers, UWM acknowledged that TRAC and one other program, during which it hires appraisers instantly as an alternative of by way of an appraisal administration firm, may expose the corporate to threat.
“Whereas we consider that these packages meet the entire regulatory and authorized necessities, there’s a threat {that a} regulatory company may resolve that our packages don’t meet the entire regulatory and authorized necessities, or that these packages won’t be accepted by different market contributors, may expose us to further legal responsibility, or topic us to repurchase obligations.”
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