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Requires the housing Enterprises to manage risks from liens, title defects, and invalid or unenforceable liens by purchasing or relying on third-party lien and title protection products that are regulated by state insurance or state financial regulators. Loans that do not use such regulated protections will be subject to a capital surcharge, and the Director must issue rules and guidance to implement these requirements within 180 days.
Adds a new paragraph (12) to Section 1108(a) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 requiring Enterprises to manage risk related to loss or damage from liens, encumbrances, title defects, or invalid or unenforceable liens by using third-party products that are subject to regulation by either a State insurance authority (as defined in 15 U.S.C. 6809(11)) or a State regulator (as defined in 12 U.S.C. 5481(22)).
When setting minimum capital levels under section 4612 of title 12, the Director must require the Enterprises to hold an additional 1.00 percent of the unpaid principal balance of any mortgage purchased by the Enterprises that does not meet the requirements of the new prudential management paragraph (subsection (a)).
The Director must issue regulations and guidance necessary to ensure compliance with the new prudential management requirement, including requiring Enterprises to verify that products meeting the definition are appropriately regulated.
Defines terms for this section: 'Enterprises' has the same meaning as in 12 U.S.C. 4502(10); 'Director' has the same meaning as in 12 U.S.C. 4052(9).
Who is affected and how:
Enterprises (the government-sponsored mortgage entities) are directly affected because they must require or use regulated third-party lien and title protection and apply capital surcharges when mortgages do not comply. They will need to adjust acquisition and credit policies and capital models.
Mortgage originators and lenders will likely need to change origination and delivery practices to ensure loans include the required regulated protection products; loans that lack such products may be harder or more expensive to sell into Enterprise channels because of the capital surcharge.
Third-party title and lien protection providers will be affected: those already regulated by state insurance or financial regulators may see increased demand; unregulated providers could lose market share or face pressure to seek state regulation or restructure their offerings.
Homeowners and mortgage borrowers could see mixed effects: stronger, regulated protections could reduce title-related losses and disputes, but added compliance costs or capital surcharges could translate into higher fees or slightly higher mortgage costs for loans that fail to meet the requirement.
Investors in mortgage-backed securities and secondary-market participants may see changes in pricing, risk transfer, and capital treatment for Enterprise-held loans.
State insurance and financial regulators may have increased oversight responsibilities because the statute requires reliance on products they regulate.
Timing and enforcement:
Referred to the House Committee on Financial Services.
Introduced May 6, 2025 by Andrew R. Garbarino · Last progress May 6, 2025
Expand sections to see detailed analysis
Referred to the House Committee on Financial Services.
Introduced in House