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Fannie, Freddie affordability initiatives lead to increased interest in AOLs
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Regulatory Updates
Monday, July 10, 2023
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Attorney opinion letters (AOLs) may have been around in some form for a number of years, and Freddie Mac may have accepted loans with AOLs instead of title insurance policies for years, but the use of AOLs has garnered greater consideration in the last year following the government-sponsored enterprises’ (GSEs) efforts to make housing more affordable.
Freddie Mac
In Section 4702.3 of Freddie Mac’s Single-Family Seller Servicer Guide, Freddie Mac states that an attorney’s opinion of title is acceptable in lieu of a title policy if all of the following conditions are met without exception:
- “The opinion must be addressed to the seller and all successors in interest of the seller.
- “The opinion must provide the following statement: ‘We agree to indemnify you and your successors in interest in the mortgage/deed of trust opined hereto, to the full extent of any loss attributable to a breach of our duty to exercise reasonable care and skill in the examination of the title and the giving of this opinion.’
- “The opinion must be given by an attorney licensed to practice law in the jurisdiction where the mortgaged premises is located. The attorney must also be insured against malpractice in rendering opinions of title in an amount commonly prevailing in the jurisdiction, taking into account the volume of opinions rendered by the attorney.
- “The opinion must not take exception to survey matters. When the attorney’s opinion takes exception to survey matters, the seller must provide whatever information is required by the attorney to remove the exception. If the attorney will not issue the title opinion without a survey exception, Freddie Mac will not purchase the mortgage. In addition, the opinion must not be subject to any title exceptions other than those permitted under Section 4702.4.”
For the rest of this story, and all the stories included in the free Investigating Title Insurance Alternatives special report, click here.
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