Resolution Reaffirming Support for the U.S. State-Based System of Title Insurance Regulation in Response to Growing Federal Encroachment

NOTE: Prior to task force meetings, ALEC posts these legislative member-submitted draft model policies to our website. The draft model policies are then discussed, debated, and voted on by ALEC task force members. Policies that receive final approval by legislators on the ALEC Board of Directors become official ALEC model policy. Draft model policies that fail to become official ALEC model policy are removed from the website.

Summary

The federal government has signaled plans that would undermine the current state-based title insurance structure that has served consumers well for decades. These proposals are federal overreach and would erode federalism and be a blow to small businesses in the states. This resolution affirms support for the existing state-based system of title insurance regulation.

Resolution Reaffirming Support for the U.S. State-Based System of Title Insurance Regulation in Response to Growing Federal Encroachment

WHEREAS, the U.S. state-based system of insurance regulation has effectively protected consumers and helped create the largest, most competitive and innovative insurance market in the world; and

WHEREAS, Congress has continually affirmed the primacy of state-based insurance regulation, including in the McCarran-Ferguson Act in 1945 and most recently in the Dodd-Frank Act of 2010; and

WHEREAS, preventing federal overreach into state insurance markets is imperative to ensure that insurance is accessible and accountable to the public and sensitive to local social and economic conditions in order to adequately meet the varying needs of the different states; and

WHEREAS, title insurance is subject to a comprehensive state regulatory structure, enforced by state insurance commissioners, resulting in lowered risk for lenders and consumers alike; and

WHEREAS, despite this success and affirmation, there has been a growing trend in recent years at the federal agency level of encroaching on the longstanding framework of the state-based title insurance regulatory system; and

WHEREAS, this encroachment is extremely troubling and poses a threat to the state-based system of title insurance regulation, and with it the stability and success the state regulatory system has produced; and

WHEREAS, this threat is illustrated by recent actions such as:

  • the Federal Housing Finance Agency’s (FHFA) announcement of a “Title Acceptance Pilot” (Pilot) which would permit title insurance obtainment requirements to be waived in certain transactions;
  • updates to Government-Sponsored Enterprises (GSE) (Fannie Mae and Freddie Mac) Selling Guides to allow the use of attorney opinion letters in lieu of title insurance for certain loans;
  • certain activities within the Department of Treasury’s Federal Insurance Office such as convening a roundtable of relevant industry stakeholders, including consumer advocates and academics, in order to discuss the title insurance industry and analyze potential reforms; and
  • the Consumer Financial Protection Bureau’s (CFPB) Request for Information regarding fees imposed on residential mortgage transactions, including fees charged by providers of title insurance.

NOW, THEREFORE, BE IT RESOLVED, that the state of ___ reaffirms its unqualified support for the U.S. state-based title insurance regulatory structure; and

NOW, THEREFORE, BE IT FURTHER RESOLVED, that the state of ___ will continue to monitor and push back on any and all attempts by the federal government to infringe upon the state-based system of title insurance regulation and oversight; and

NOW, THEREFORE, BE IT FURTHER RESOLVED, that the state of ___ will continue to monitor and push back on any and all attempts by federal agencies or the GSE’s to encourage or promote alternatives to title insurance such as insured attorney opinion letters accompanied by transactional, surplus lines or errors & omissions insurance wrappers that seek to provide coverage for title risk, in violation of state insurance laws, and monoline restrictions, applicable to the business and regulation of insuring title risk.

NOW, THEREFORE, BE IT FURTHER RESOLVED, that the state of ___ will continue to monitor and push back on any and all attempts to waive title insurance in any mortgage transaction where federal agencies or GSE’s act as insurers or are self-insurers of title risk where they are neither state-chartered title insurance companies nor required to hold reserves for the resulting exposure as state-regulated title insurance companies must do