Layla Zulfa
President Donald Trump on Thursday signed an executive order designed to alleviate housing costs, a move that could potentially save some mortgage borrowers thousands of dollars. However, the final text of the order is notably more constrained than earlier drafts that had circulated in recent weeks, leading to a more targeted rather than sweeping impact. Analysts from Keefe, Bruyette & Woods (KBW) characterized the order as "more positive than some expectations, especially for mortgage insurers," and deemed it "fairly benign for both mortgage and title insurers."
The core directive of the executive order mandates that Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), establish a pilot program. This program will leverage automated valuation models (AVMs) to ascertain current market values. The ultimate goal is to identify borrowers who may be eligible for the cancellation of their private mortgage insurance (MI) once specific equity and other requirements are met. This initiative represents a step towards streamlining the process by which homeowners can shed this often significant monthly expense.
A pivotal aspect of the executive order’s scope lies in its limitation to "mortgages made after the establishment of the pilot program." This contrasts sharply with a previous draft reviewed by HousingWire, which had proposed applying the pilot to all mortgages purchased by the GSEs. Industry estimates at the time suggested that such a broader application could have potentially affected approximately 40% of borrowers whose loan-to-value (LTV) ratios were below 80% and who might otherwise qualify for MI cancellation based on current market valuations. The narrower focus of the signed order significantly curtails its immediate reach to existing homeowners.
Seth Appleton, president of U.S. Mortgage Insurers, stated in a released statement that private MI is inherently designed to be a temporary protection. He emphasized that the existing system already incorporates mechanisms for MI cancellation, which directly results in a reduction of a borrower’s monthly payment. "This is why we supported Director [Bill] Pulte’s recent action aligning the GSEs’ policies to allow mortgage servicers to proactively contact current mortgagors who may qualify for MI cancellation through home price appreciation," Appleton added, indicating industry support for efforts that facilitate existing processes.
The existing regulatory framework for mortgage insurance cancellation is governed by the Homeowners Protection Act of 1998. Under this act, MI automatically terminates when scheduled amortization brings the LTV ratio below 78%. Homeowners also possess the right to request cancellation based on a new appraisal. This is permissible if their LTV is below 75% for loans that have been in effect for two to five years, or below 80% for loans seasoned for more than five years. Mortgage insurance serves a crucial role by enabling borrowers who cannot, or choose not to, provide substantial down payments to secure homeownership. However, this benefit comes at the cost of an additional monthly expense.
Appleton further elaborated that a pilot program focused on new loans, as stipulated in the executive order, can still serve as a valuable testing ground for tools that could eventually expedite MI cancellation. This acceleration would be particularly relevant in scenarios where significant home price appreciation supports such a move, while simultaneously preserving the fundamental role of MI in helping borrowers achieve homeownership earlier in their financial journey.
Expanding the Title Insurance Pilot
Beyond mortgage insurance, the executive order also directs the expansion of a pilot program initiated in 2024. This existing pilot explores the use of alternatives to traditional lender’s title insurance policies for certain low-risk refinances, specifically those with LTV ratios below 80% in designated geographic areas. The new directive contemplates allowing the use of these alternatives on loans with LTVs exceeding 80%, removing existing geographic limitations, and certifying additional providers of title assessment services.
Fannie Mae has been an early adopter of such innovations. The GSE has integrated attorney opinion letters (AOLs) into its selling guide and launched a title acceptance program that relies on its own internal data and analytics to waive lender title insurance on eligible loans. To date, lenders have submitted approximately 8,000 loans backed by AOLs and an additional 22,000 through the title acceptance program. Fannie Mae has reported zero instances of title defects arising from these initiatives. Over the past approximately 18 months, Fannie Mae estimates that these programs have collectively saved borrowers an estimated $25 million, translating to savings of roughly $500 to $1,500 per loan.
Similarly, Freddie Mac offers a comparable "lender title assessment" option. This program empowers originators to conduct title examinations and rectify any defects without the necessity of purchasing a traditional title insurance policy or an AOL. Freddie Mac reports that borrowers utilizing this option save an average of $600 to $650 per transaction, with individual savings potentially ranging from $400 to $1,700, contingent upon state-specific rate structures. Launched approximately a year ago, this program has supported loan volumes exceeding $3 billion.
The executive order signifies a sustained interest in exploring and implementing alternatives to conventional lender’s title insurance policies, particularly for streamlined refinancing transactions. The extent to which these alternative approaches will be extended to higher-LTV loans and a broader range of markets will ultimately depend on the implementation strategies adopted by the Federal Housing Finance Agency (FHFA).
Chris Morton, CEO of the American Land Title Association (ALTA), acknowledged the critical focus on housing affordability but cautioned that any modifications must prioritize the maintenance of robust protections for homeowners. "Fraud is unaffordable, and the threats facing homeowners are growing," Morton stated in a release. "Research shows that seller impersonation fraud attempts have more than doubled in two years, and fraud and forgery claims associated with mortgage refinances average nearly $207,000. Now more than ever, we need to ensure that efforts to lower housing costs do not shift significant financial risks onto American families or the broader housing finance system."
KBW analysts anticipate that the direct earnings impact on title insurers from these directives will be limited. Refinances currently constitute approximately 7% of total title premiums. This share is projected to decrease further by 2027, particularly if prevailing interest rates remain elevated.
Reducing Refinance Costs Directly
In addition to the MI and title insurance components, the executive order also directly addresses the costs associated with refinancing. It mandates the waiver of appraisals, income reverification, and other documentation requirements for certain limited cash-out refinances that result in a reduction of the borrower’s monthly payment. Furthermore, it calls for the reduction or elimination of loan-level price adjustments (LLPAs) and other fees associated with these specific types of refinance loans.
Brendan McKay, chief advocacy officer at the Broker Action Coalition (BAC), highlighted the potential financial benefits, stating, "We’re talking about reforms that could cut refinancing costs by nearly $2,400 on an illustrative $500,000 loan, as well as a new pilot that would proactively cancel mortgage insurance once appropriate equity thresholds have been met. That’s real money." He further added, "It also means more Americans could take advantage of lower interest rates when they arrive. FHFA now has the opportunity to turn this executive order into one of the most significant reductions in mortgage costs in years."
However, in the current interest rate environment, refinance activity remains subdued. Marty Green, a principal at Polunsky Beitel Green, expressed that limiting the loan-level pricing relief solely to refinances restricts its overall benefit. "Nevertheless, market participants hope that the administration considers expanding this program to temporarily suspend these cost add-ons for purchase transactions to boost affordability for those purchasing a home in today’s rate environment," Green commented in a statement.
Jason Madiedo, CEO of SimplyPMG, offered a broader perspective, suggesting that much of the executive order represents a "long play," with the benefits of the mortgage insurance component likely to be realized by consumers years from now. "The title insurance piece is real, but it’s aimed at the wrong part of the problem. Nobody refinances to save $800 on title. People refinance for one of two reasons: to lower a payment, which is rate-driven, or to pull cash out," Madiedo stated. "If the goal was to move the needle on refinancing, the lever was the loan-level price adjustment on cash-out, which FHFA also sets. Removing that would have made a far bigger difference than the closing cost."
Creighton Oswald, managing partner at Agility 360 Advisory, acknowledged the administration’s efforts to address systemic issues within housing finance. "The administration should get credit for trying to break the production logjam we have, but this EO is focused on the plumbing inside of housing finance and the problem right now is rates and affordability," Oswald remarked. "With rates above 7%, and staying higher for longer, I don’t see these proposed changes moving volume in a meaningful way anytime soon."
Background and Broader Context
The executive order emerges at a time when housing affordability remains a significant challenge for a substantial portion of the American population. Persistent high interest rates, coupled with a limited supply of available homes, have created a difficult market for prospective buyers and those seeking to refinance existing mortgages. The administration’s stated objective with this order is to chip away at these cost barriers by targeting specific components of the mortgage and title insurance processes.
The inclusion of Fannie Mae and Freddie Mac in the mortgage insurance pilot program is significant, as these GSEs play a dominant role in the secondary mortgage market. Their involvement ensures that any changes implemented through the pilot program will have a broad potential reach, even if initially limited in scope. The use of AVMs, which leverage vast datasets to estimate property values, represents a technological approach to potentially expedite the MI cancellation process, moving beyond traditional, often time-consuming, appraisal methods.
The expansion of the title insurance pilot also reflects a growing recognition within the industry and among regulators that traditional practices may not always be the most efficient or cost-effective. The success of Fannie Mae’s title acceptance program and Freddie Mac’s lender title assessment option, as evidenced by reported savings for borrowers, provides a data-driven foundation for exploring these alternatives further.
However, concerns raised by industry stakeholders, such as ALTA, underscore the delicate balance that must be struck between reducing costs and maintaining essential consumer protections, particularly against the backdrop of increasing fraud risks in real estate transactions. The financial implications of fraud, as highlighted by ALTA, can be substantial, and any policy changes that inadvertently increase this risk could undermine the very affordability goals they aim to achieve.
Ultimately, the long-term impact of President Trump’s executive order will depend on the FHFA’s implementation details and the evolving economic landscape, particularly interest rate trends. While immediate, sweeping changes may not materialize, the order signals a continued governmental focus on identifying and addressing points of friction within the housing finance system to make homeownership more accessible. The pilot programs, in particular, are designed to test and refine these approaches, paving the way for potentially broader reforms in the future.
