Government-backed mortgage giant Fannie Mae has proposed a plan to save U.S. home buyers $1,000 on closing costs.
fannie mae Said Expands the types of mortgages available for purchase and provides buyers with a lower-cost alternative to expensive title insurance, which is a contractual obligation that protects property owners and mortgage lenders from losses related to ownership of real estate It is said that it will.
From now on, home buyers will be able to choose to receive a “lawyer's opinion letter'' from a real estate company confirming that there are no problems with the ownership of the property.
Fannie Mae says that by eliminating title insurance payments, “borrowers saved on average more than $1,000 when using AOL.” report last month.
For reference, New York title policies traditionally range from 0.5% to 1% of the home purchase price.
In the state, a home selling for New York State's average home price of $451,434 can cost as much as $4,514 in title insurance, according to Zillow.
Depending on the law firm, having an attorney prepare an opinion ranges from $1,500 to $5,000, depending on the borrower's transaction costs, but it costs a licensed attorney to prepare legal documents. It's only $199 with Letterdash, which charges a flat rate. Like AOL.
According to , AOL is not a common part of the home buying process in states other than Ohio and Indiana. wall street journal, It wasn't until last year that Fannie Mae expanded the types of mortgages subject to opinion submissions.
Less than 10 lenders have sold Fannie Mae loans with opinions since 2022, the Journal reported, citing the financial company officially known as the Federal Home Mortgage Association.
Fannie Mae announced that as of December 2023, it will begin accepting AOL for majoring of loans for single-family homes purchased from lenders.
According to Fannie Mae sitetransactions involving co-op stock, real estate owned by community land trusts, loans secured by manufactured housing, and loans made using powers of attorney are not eligible for AOL.
President Joe Biden's administration has called on Fannie Mae and its smaller Freddie Mac to make homes more affordable, pointing to closing costs such as title insurance that increase with loan amounts.
But under the Biden administration, average monthly mortgage payments for new homes have increased by a staggering 90% since the end of 2020.
Meanwhile, the average interest rate on a 30-year mortgage exceeded 8% in October 2023 for the first time since 2000, and that number has since fallen to 6.66% as of Jan. 11, according to Freddie Mac.
The root of the mortgage surge is the Federal Reserve's aggressive moves to raise interest rates from near zero in April 2020 to a 22-year high of 5.25% to 5.5%.
Fannie Mae's efforts to promote lower-cost alternatives have been criticized by the title insurance industry, which says the opinion is unregulated and puts consumers and lenders at risk, according to the Journal. Pointed out.
Fannie Mae representatives did not immediately respond to the Post's request for comment.
