The Market Institute President Charles Sauer has a new piece out in Human Events on a proposal that would see the government-sponsored enterprise Fannie Mae essentially take over the title insurance industry from thousands of small businesses that already offer coverage.
Fannie Mae is planning to launch a pilot program that would centralize title insurance, currently offered by small businesses, which has raised concerns among stakeholders. Title insurance is a crucial but small part of homebuying expenses that protects against defects in the title.
The proposed program aims to make homebuying more affordable for low-income families, but critics argue that it would exclude many of the intended beneficiaries as it targets homeowners who can afford a 20 percent down payment. This move by Fannie Mae has sparked concerns about the potential impact on the financial markets and the accessibility of title insurance for those who need it the most.
And is Fannie even up to the task?
Fannie Mae has no background in conducting title searches and providing title insurance and the insurance it is considering offering is what amounts to title insurance ‘lite.’
“The proposed pilot program would centralize the market, placing more responsibility on an enterprise that is already under federal conservatorship because it mishandled risk in the past. Until Fannie Mae is sound enough to operate independently, giving it additional risk-bearing authority in the housing market is ill-advised.
The federal government should learn its lessons from 2008 and the recent collapse of Silicon Valley Bank and the subsequent bailout of depositors are additional warnings. The government doesn’t need to take extra gambles, especially through an enterprise that ran afoul of excess risk in the past. Fannie Mae should let the market work – and consumers to make their own choices – in a very competitive industry. Title insurers have been doing a good job and do not need government intervention to potentially make things worse.”