The nation’s largest mortgage lender said brokers “will no longer be required to work with a title company or settlement agent on title work, balancing fees, arranging closings or any related communications.”
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The nation’s largest mortgage lender has once again angered the title insurance industry, expanding a program it says will save borrowers time and money by excluding title and settlement service providers from certain loan processes.
When initially announced in 2022, United Wholesale Mortgage’s Title Review and Closing (TRAC) program was designed to replace lenders’ title insurance policies with attorney title opinions issued by in-house attorneys who review title documents. UWM CEO Mat Ishbia said at the time that the company intended to expand TRAC quickly, although title industry trade groups condemned the move as “irresponsible.”
This week, UWM launched TRAC+, an expanded version of the program that provides pricing incentives to mortgage brokers who agree to let UWM not only handle title reviews, but also handle settlement and payments for clients who refinance existing loans.
“As a result, brokers will no longer need to work with a title company or settlement agent on title work, balancing fees, arranging closings or any related communications when using TRAC+,” UWM said in a news release.
In a pricing breakdown on the company’s website, UWM said it will offer TRAC service for a flat fee of $1,600, while TRAC+ will cost $1,850. UWM also offers brokers pricing incentives of 10 to 60 basis points depending on loan size.
TRAC is available for purchase mortgages and refinances, but only conventional mortgages eligible for support from Fannie Mae and Freddie Mac. There is an additional settlement agent fee of up to $500.
While TRAC+ is only available on refinances, conventional loans, Federal Housing Administration (FHA) and Veterans Administration (VA) loans are all eligible and there are no additional closing agent fees.
“With TRAC pricing incentives based on loan amount, TRAC+ fees of $1,850 and no additional closing agent fees, brokers will be able to save borrowers thousands of dollars and provide a streamlined process streamlined through UWM,” the company said.
Expanding adoption of title insurance alternatives has been a priority for the Biden administration, which sees lower closing costs as one way to address housing affordability issues.
In 2022, Fannie Mae followed Freddie Mac’s lead and gave lenders the option of using an attorney’s title opinion instead of traditional title insurance on certain loans.
In March, the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, took the concept a step further and said it would allow lenders to sell low-risk refinance loans to Fannie Mae and Freddie Mac without the need for a lender Title policy or attorney’s opinion.
The American Land Title Association (ALTA), a Washington, D.C.-based title industry advocacy group, has been conducting an extensive public relations and lobbying campaign against “unregulated alternatives to title insurance,” such as attorney opinions, that could cut into the Member of an industry association.
ALTA also supports legislation in the Senate and House of Representatives that would require lenders to provide title insurance on all loans purchased by Fannie Mae and Freddie Mac, although both bills have languished in committees for months without a hearing.
When asked for comment on UWM’s expansion of its TRAC program, ALTA provided Inman with the following statement:
“The title industry plays a critical role in helping American families build wealth through homeownership, ensuring the proper transfer of real estate from seller to buyer, securing title and facilitating the growth of the secondary mortgage market. As fraudulent and forged claims increase significantly, caution Lenders should ensure their investments are protected. Title insurance remains the most cost-effective way to limit the risk of these problems. Less protective alternatives to title insurance often cost more and add unnecessary risk, especially for first-time home buyers. and the low- and middle-income consumers who need it most.
UWM declined to comment on ALTA’s suggestion that TRAC could pose “unnecessary risks” to consumers.
Both Fannie Mae and Freddie Mac require lenders that use title opinions in lieu of title insurance to agree to indemnify mortgage investors for losses resulting from negligence in stating that the title is free of liens and other “clouds.”
UWM acknowledged in its most recent annual report to investors that TRAC and another plan to hire appraisers directly rather than through an appraisal management company could put the company at risk.
“While we believe that these plans comply with all regulatory and legal requirements, there is a risk that regulators may determine that our plans do not comply with all regulatory and legal requirements, or that the plans will not be accepted by other institutions. Market participants may expose us to additional liability or subject us to repurchase obligations.
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