


Government-sponsored mortgage giant Fannie Mae has proposed a plan that would save American homebuyers $1,000 on closing costs.
Fannie Mae said that it’s expanding the types of mortgages it will purchase, giving buyers lower-cost alternatives to expensive title insurance, a contractual obligation that protects property owners and mortgage lenders against losses relating to the property’s title.
Going forward, homebuyers can opt to use an “Attorney Opinion Letter,” in which a real estate confirms that there are no problems with a property’s title.
By skipping out on paying title insurance, “on average, borrowers have saved over $1,000 when an AOL was used,” Fannie Mae reported last month.
For reference, title policies in New York traditionally range from 0.5% to 1% of the home’s purchase price.
In the state, a home that sells for $451,434 — the average home value in New York, according to Zillow — title insurance could cost as much as $4,514.
Though it varies by the law firm, having an attorney draft an opinion letter can range from $1,500 to $5,000 depending on the borrower’s transactional costs, or as little as $199 if done on LetterDash, which charges a flat fee for licensed attorneys to draft legal letters like AOLs.
AOLs aren’t a common part of the homebuying process in states outside of Ohio and Indiana, according to The Wall Street Journal, as it wasn’t until last year that Fannie Mae expanded which mortgages were eligible for submitting opinion letters with.
Fewer than 10 lenders have sold Fannie Mae loans with an opinion letter since 2022, The Journal reported, citing the finance company, formally known as the Federal National Mortgage Association.
As of December 2023, Fannie Mae said it would start accepting AOLs on the majoring of the single-family loans it buys from lenders.
According to Fannie Mae’s site, transactions involving co-op shares, properties owned by a community land trust, loans secured by a manufactured home and loans executed using a power of attorney are not eligible for an AOL.
President Joe Biden’s administration has asked Fannie Mae and its smaller counterpart Freddie Mac to make housing more affordable, pointing to closing costs such as title insurance, which increases with the loan amount.
However, under Biden, average monthly mortgage payments on a new home have increased a staggering 90% since late 2020.
Meanwhile, the average 30-year mortgage rate topped 8% in October 2023 for the first time since the year 2000, according to Freddie Mac, which said that the figure has since cooled to 6.66% as of Jan. 11.
The surge in mortgages finds its roots in the Federal Reserve’s assertive drive to elevate interest rates from near-zero in April 2020 to a 22-year high, between 5.25% and 5.5%.
Fannie Mae’s push to promote lower-cost alternatives has been bashed by the title-insurance industry, which has noted that opinion letters are unregulated and expose consumers and lenders to risk, according to The Journal.
Representatives for Fannie Mae did not immediately respond to The Post’s request for comment.