S&P Accepts Title Options
Standard & Poor's Rating Services will begin accepting several lien protection policies instead of title insurance for U.S. residential mortgage loans included in rated mortgage-backed securities transactions, the rating agency said.
The following title insurance alternatives have been reviewed by S&P: First American Title Insurance Co., Group 9-Second Mortgage Protection Policy, United Specialty Services and Winter Group.
Alternative title insurance has been widely used in the refinance and second-lien market for the past 18 months for loans that issuers hold in portfolios, the rating agency said. The new criteria allowing the products to be used for securitized loans is an expansion of S&P's previously established criteria.
"The lien protection policies cover losses arising from a borrower's default that resulted due to an undisclosed lien," said Standard & Poor's credit analyst Venkat Veerubhotla.
The policies are offered for first-lien cash out or rate and term refinancings, second-lien mortgage loans and home-equity lines of credit that meet a minimum FICO score requirement.
Lenders are using alternative lien products and requesting warranties of accuracy for properties on which title insurance has already been obtained.
These include repeat refinance and new equity loans or increased limits on existing equity loans. S&P believes that these policies will expedite the origination process, as well as reduce refinancing costs to the borrower.
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