New bill would limit which title products Fannie Mae and Freddie Mac accept

What does this do?

HR 3206 would require Fannie Mae and Freddie Mac to purchase only mortgages that use title and lien protection products regulated by a state insurance authority or state financial regulator. Newer, less regulated alternatives to traditional title insurance would be pushed out of the mortgage system unless they meet that oversight standard. The regulator overseeing Fannie Mae and Freddie Mac would have 180 days after passage to write the implementing rules.

Who does it affect?

The bill directly affects mortgage lenders, Fannie Mae, Freddie Mac, traditional title insurance companies, and companies offering newer title alternatives. Everyday homebuyers could also be affected if lenders change which loan products they offer based on what Fannie Mae and Freddie Mac will purchase.

Why does it matter?

If a mortgage uses a non-qualifying protection product, Fannie Mae and Freddie Mac would be required to hold an extra 1% of that loan's remaining balance as a financial cushion. That added cost would likely discourage lenders from selling those mortgages to Fannie Mae or Freddie Mac, making it harder for borrowers to obtain those loans.

What does it cost, and who pays?

• 1% reserve on non-qualifying loans
• Applies to remaining loan balance
• Cost falls on Fannie Mae and Freddie Mac