ALTA Responds to CFPB Request for Information Regarding Mortgage Refinances and Forbearances

December 6, 2022

ALTA recently submitted a letter in response to a request for information (RFI) issued by the Consumer Financial Protection Bureau (CFPB) on mortgage refinances and forbearances. The RFI focused on two issues:

  1. Ways to facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances
  2. Ways to reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments.

In the letter, ALTA highlighted how the title insurance industry is crucial to the safety and soundness of the mortgage market. Specifically, ALTA highlighted the critical role title professionals play in assisting consumers during a mortgage refinance, as well as how innovation over the past decade has made the process of refinancing easier and faster than ever.

To further push down cost and increase transaction speeds, the title insurance industry has invested in data acquisition and automated decision engines. This investment in technology has already brought down costs, with the national average cost of title insurance coverage decreasing by 6% over the last 10 years. This contrasts with home prices, which have increased 67% in the same time frame.

In 2021, the industry invested over $200 million into this type of technology. This is on top of more than $175 million invested in 2020. While new technology comes with high upfront costs, the expectation is that by leveraging decision engines, title companies will be able to speed up underwriting and reduce the number of manual processes needed to get to closing. Since staff costs account for the majority of title premium dollars, this should further help reduce costs over time.

“Enhancing the consumer experience drives many of these investments and changes,” ALTA’s letter said. “Between the COVID-19 pandemic and the new-era of advancements in automation, title industry professionals have spearheaded efforts to serve their consumers and continue to reduce risks while providing the same comprehensive protection. The industry has been proactive in creating products specifically for refinance transactions such as short form policies.”

In addition, the letter informed the bureau of increased risk alternative title insurance products pose to lenders and consumers. These products provide less coverage than title insurance, and undermine the property rights of homebuyers, particularly low- and moderate-income homebuyers.

“For example, one core protection of title insurance is that it protects against fraud or forgery related to the property rights purchased by the buyer,” ALTA stated. “This is one of the largest sources of claims paid in the industry and is not covered by certain alternative products. This is just one of several gaps in protection that exist between title insurance and emerging alternatives. Consumer protection drives the title insurance industry’s work. However, alternative products do not provide the same safeguards in a refinance and expose homebuyers to additional risks.”

Contact ALTA at 202-296-3671 or [email protected].