FANNIE MAE is reportedly considering a pilot program that grants certain mortgage lenders a waiver on title insurance requirements for loans sold to Fannie Mae. This would be in place of traditional title insurance.

ALTA and several members of Congress have raised concerns about Fannie Mae moving beyond its charter and the additional risk put on lenders, consumers and the economy. This “mission creep” occurs when the government sponsored entities (GSEs) enter areas outside their core business of guaranteeing mortgages on the secondary market.

“Fannie Mae is threatening to extend beyond its charter and mission and move directly into the title insurance business,” said Diane Tomb, ALTA’s chief executive officer. “They were not established for this purpose, and it should raise significant alarm bells. Fannie Mae is not licensed, regulated or reserved for such purposes. Oversight of this business is the purview of state insurance regulators. The Federal Housing Finance Agency (FHFA) should instruct Fannie Mae to halt this activity.”

This proposed expansion of activities beyond the authorities expressly outlined in the Federal National Mortgage Association Charter Act is deeply troubling.

Several members of the Senate Banking Committee have already taken issue with Fannie Mae moving beyond its charter into primary market activities. Last year, the lawmakers warned FHFA Director Sandra Thompson against repeating past mistakes learned from the 2008 financial crisis by allowing the GSEs to extend themselves and take on more risk.