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Fannie Mae’s title insurance pilot program could save borrowers up to $2.19 billion. This is according to a study released in January by Legal Economics’ Andrew Rodrigo Nigrinis and Todd Zywicki of the George Mason University’s Antonin Scalia School of Law. Nigrinis is a former enforcement economist at the Consumer Financial Protection Bureau (CFPB).
In their analysis, Nigrinis and Zywicki found that borrowers refinancing their mortgage could save an estimated $2.19 billion in total or as much as $1,692 per loan. The Federal Housing Finance Agency had previously estimated that the pilot could save consumers between $500 and $1,500 per transaction.
The pilot program is slated to run through May of 2026. Under the program, in limited circumstances Fannie Mae is able to accept the results of an automated title review in lieu of traditional title insurance on refinance transactions.
According to the release, Nigrinis and Zywicki analyzed how much widespread use of automated title risk assessments would lower consumer costs, promote greater transparency and increase industry competition.
They say their findings are premised on the expectations that “there will be a direct savings benefit to consumers who take advantage of the program, there will be a market benefit as title insurers reduce their prices by roughly 10%, and there will be a competitive benefit because about 10% of consumers who would be customers of the entrenched incumbents will switch to an automated review.”
The report found that the state that could experience the most savings per transaction would be Texas at a savings of $1,692 per loan, followed by Florida ($1,275 per loan), and New Mexico ($978 per loan). The authors also believe that the pilot could generate increased title insurance competition, which they believe would benefit solo female householders, Hispanic, Black, AAPI homeowners, homeowners aged 55 and older and non-urban homeowners.
“In sum, our analysis shows Fannie Mae’s title insurance pilot will have a profound and long- lasting impact on closing costs, potentially eliminating a barrier that prevents many homeowners from pursuing a refinance or other financially beneficial transaction. It is clear this program should continue and expand,” a summary of the study states.
State attorneys general as well as the American Land Title Association (ALTA) have pushed back against the pilot program, as they believe it “will shift title risk on refinanced loans purchased by Fannie Mae from state-regulated title insurance companies to Fannie Mae itself,” according to a letter sent by 14 attorneys general in July to FHFA director Sandra Thompson.
