Making the Old New Again: The Resurgence of Attorney Opinion Letters as an Alternative to Title Insurance
The Mortgage Bankers Association ("MBA") recently published a whitepaper titled “Making the Old New Again: The Resurgence of Attorney Opinion Letters as an Alternative to Title Insurance.” The paper, authored by Blank Rome partners Jonathan K. Moore and Wayne Streibich and associate Louise Bowes Marencik, provides a look at the landscape of attorney opinion letters and how they may differ from traditional title insurance.
MBA commissioned Blank Rome to write the whitepaper as a resource for its lender members to better understand these new alternatives and their possible benefits and risks. The conclusions expressed in this paper are not endorsed by MBA and are the opinion of the team at Blank Rome.
Executive Summary
Before the advent of title insurance, attorney opinions of title were the sole form of risk management for title issues related to conveyances of land. However, there were limited options for recovering losses from the attorneys issuing the opinions. These limitations, and increased demand for coverage of losses associated with title defects, resulted in the emergence of title insurance. Attorney opinion letters (“AOLs”) and title insurance are similar products, but they have historically diverged with respect to coverage of defects that cannot be ascertained by simply reviewing the land records, and with regard to the protection of successors-in-interest to the property. However, in recent years, alternative products have emerged that are modeled after traditional AOLs, but also include certain enhanced coverage features.
The government-sponsored enterprises (“GSEs”) have been seeking ways to reduce barriers to homeownership for low-income individuals by cutting closing costs. Title insurance is often one of the largest closing costs paid by a homeowner, and Fannie Mae and Freddie Mac have both announced their willingness to accept AOLs in lieu of title insurance, provided certain conditions are met. However, the rollout of these programs has been limited thus far.
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"Making the Old New Again: The Resurgence of Attorney Opinion Letters as an Alternative to Title Insurance" was published by the Mortgage Bankers Association. Reprinted with permission.
This whitepaper was cited in an article published by The Wall Street Journal titled “Inside a Plan to Save Homeowners Hundreds of Dollars Closing Their Mortgages” (January 16, 2024, subscription required).