7.30.26 Fannie and Freddie Profitability; ALTA’s Chris Morton on Title Insurance; Fed Takeaways

Robbie ChrismanWelcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include Fannie and Freddie News Continues Takeaways from the Federal Reserves meeting yesterday, and my interview with ALTA's Chris Morton on first quarter title insurance premiums and the industry's preventative role in resolving title defects before closing as a form of reducing long-term underwriting risk. Here, take a listen to a little preview. When we talk about title claims out there, people know some of the usual culprits, fraud or forgery, undisclosed liens, errors in public records. What are we seeing in the data for common reasons for title claims in the first quarter of 2026? And are we seeing any shifts? Chris MortonThe increase in fraud and forgery, I think is we're seeing a significant trend upward in that space. And that continues. Robbie ChrismanFreddie Mac reported net income of $3.8 billion for the quarter ended June 30th, a 61% increase from a year earlier as net revenues reached $6 billion, and there was a $0.9 billion, that's $900 million, benefit for credit losses replaced a prior year provision. But the main news yesterday was the Federal Reserve holding interest rates steady, as was expected, but it did acknowledge internal pressure to tackle inflation by raising rates. Long-term government borrowing costs hit a two-decade high after the Fed's in decision. Chair Warsh said little in his follow-up press conference, and his bare bones communication style has led to investors doubting his commitment to curbing inflation. Unlike the highly transparent communication style of recent years, Walsh's reduced reliance on forward guidance has left markets increasingly focused on interpreting incoming data and the Fed's evolving estimate of the neutral interest rate. While inflation remains above the Federal Reserve's 2% target, policymakers view much of the recent price pressure as stemming from tariffs, geopolitical supply disruptions, and temporary AI-related supply bottlenecks rather than an overheating labor market. With inflation expectations still well anchored and several of these forces expected to ease over time, the Fed believes its current policy stance is appropriately restrictive, supporting a gradual return to price stability while maintaining steady economic growth. The risks to idea geopolitical developments and the pace of AI investment remain elevated. The U.S. Iran war showed new signs of spreading across the Middle East as the U.S. retaliated against a number of targets. Since the conflict began, investors have shifted back towards safer assets as expectations for rate cuts have faded, widening credit spreads and increasing borrowing costs across riskier segments of the bond market. Fortunately, the U.S. economy continues to demonstrate notable resilience with GDP growth, a stable labor market, and strong AI-driven investment helping offset headwinds from higher energy prices, weak housing activity, and reduced government spending. The mortgage servicing industry has become significantly more concentrated as higher interest rates and the collapse in refinancing activity have favored firms with large servicing portfolios. Rocket's acquisition in Mr. Cooper has created the dominant conventional mortgage servicer, while the exit of banks from the Ginnie Mae market has accelerated consolidation even further, leaving the top ten servicers responsible for nearly 60% of conventional loans and roughly 75% of Ginnie Mae servicing. Although this scale provides operational efficiencies and greater resilience, it also concentrates servicing risk among a smaller number of firms, particularly in the more complex Ginnie Mae market, where policymakers will scrutinize the industry's growing concentration. For today's interview, I wanted to welcome back to the show Alta's Chris Morton to talk about first quarter title insurance premiums and the mortgage industry's preventative role in resolving title defects before closing as a form of reducing long-term underwriting risk. He's chief executive officer for the American Land Title Association, the National Trade Association representing title insurance companies, title and settlement agents, independent abstractors, title searchers, and real estate, attorneys who protect real property owners and mortgage lenders against losses from defects in title. The American Land Title Association, the National Trade Association of the Land Title Insurance Industry, announced that the title insurance industry generated $4.5 billion in title insurance premiums during the first quarter of this year, according to ALTA's latest market share analysis. This is up from $3.9 billion during the same period a year ago. The title insurance industry paid nearly $151 million in claims during the first three months of 2026, which is down actually from about $161 million in claims paid during the same period a year ago. So, Chris, anything else in the Q1 data that caught your eye? Trends out there. More premiums and less payouts is not necessarily a good recipe for homeowners. Chris MortonWell, first of all, I appreciate you asking the question because I think, you know, what's really important is that people understand the data. And I think you asking the question allows us to explain it. So from a premium volume perspective, let's take that one first. That simply reflects market activity. And it's not just residential, right? It's residential and commercial activity. So premium volume is affected by a number of different things. It's it's the number of the transactions that are that are out there, right? It's the insured values of those transactions. And then it's that deal mix, residential, commercial, purchase, refi. So we can unpack that, but I think understanding what's in that number is the first step to fully understanding it. The second thing I would say you mentioned claims sort of dipping a little bit. You know, one quarter does not make a trend. And we can talk again more about how claims appear and what that looks like. But while it's slightly down from uh, you know, last year at this time, first quarter, we can talk again more about that. But it's a snapshot in time. I think we have to look at the entirety of what's going on here, is I guess what I would say. Robbie ChrismanWell, I'm I'm ready to talk what's going on here because I want to ask you what caused the Q1 increase? Are policy changes to blame? Do we see the trend reversing anytime? Obviously, one quarter does not make a trend. Thank you for saying that. But but do we see this reversing anytime soon? Chris MortonYeah, I mean, again, I wouldn't attribute the Q1 increase uh to policy changes. Like I said, I would look first at market activity, transaction values. Commercial activity is a meaningful part of the entire story. And the thing I would say about commercial transactions is they do require significant title expertise because insured values are larger and title issues can be more complex. So let's go to the data and let's just sort of take a look at that. Residential activity, you know, remained historically weak in 2025. Existing home sales uh totaled a little over 4 million, uh, essentially flat with 2024. By contrast, again, going to the commercial side, commercial activity by transaction account was up 17% and 27% by dollar volume compared to 2024. So I think that contrast helps in large part to explain why title premium volume rose, even though financial transactions didn't um meaningfully move. States now are looking at building again in a lot of respects. You've got manufacturing facilities, distribution centers, energy projects coming online, and that's that's driving a lot of that. And I think the big, big takeaway, and this is something you know for the audience to understand, is title insurance helps make major commercial investment possible. You know, before investors commit capital to major commercial projects and developments, they need certainty that the land can be owned, that it can be financed, uh, developed, and used as intended. Our product helps, you know, provide that certainty and is part of that really that infrastructure of trust that allows capital to move, projects to proceed, and investment to endure. So, you know, when we talk about what's the trend going forward, the takeaway again is the industry is going to continue to move with the market. That means if commercial activity is vibrant and growing, that's gonna continue to support premium volume. If residential remains uneven, that's gonna show up differently as well. I think again, premium volume will follow what the market is bearing and what's happening. Robbie ChrismanObviously, claims paid in a single quarter don't tell the full risk story. I'm hoping you can elaborate a little bit on how title claims have a long tail and can actually emerge years after a policy is issued. Chris MortonYeah, I appreciate you you making that point, Robbie. Uh claims paid in a single corner really are only, it is only a snapshot. They do have a long tail. They may not show up uh until years later, often after sale or another refi, or property is inherited or it's foreclosed upon. So you can't look at one quarter of claims paid and conclude like risk is less or risk has gone away. In fact, generally speaking, you see actually more than half of all claims don't start to appear until after four or five years down the line of policy issuance. And actually, there was a study that came out last week. First American put out a new report that showed for the policy vintages from 2012, I believe, to 2016, uh, it took six years for 80%, and not even 100, but 80% of losses to be realized on claims. So, you know, that risk unfolds again over years, not months or weeks. Um, so that number shouldn't be interpreted, you know, again, as any real decline in risk or elimination of risk. Um, it's just, you know, it's a snapshot. Robbie ChrismanI did notice in the report there might be some silver linings, namely when we account for inflation, the premium figures might be a little more uh I don't say appetizing, stomachable, that sort of thing. Uh thoughts thoughts on how inflation is is playing into some of the data here. Chris MortonYeah, it's a it's a great question. Again, you know, I think there is some some important news uh to emphasize. If you look at the real cost and current dollars of of title insurance, that's actually declined from 2016 to 2024 by 32%. Looking at home price appreciation and sort of doing the calculation. That's at a time, honestly speaking, when you look at other sort of insurance costs, homeowners insurance being a big one, when those costs have actually increased significantly. So on a relative value, title insurance costs have declined when you account for that. Um, the other thing I'll I'll just say this because I think it's important because there's always this discussion about cost, and it's and it's important for all of us to examine our costs and our expenses in terms of the affordability equation. When you look at the life of the average mortgage loan over seven years, which is the average, average life of the loan, and you look at the costs in that mortgage uh transaction, you break that down over that seven-year period. What's number one? Government taxes is nine plus percent. MBS investors are you know somewhere around nine, lender costs four four point four, four point five, homeowners insurance fees, you know, look almost three percent. GSEs are taking uh two and a half percent. So title and settlement combined is 0.7 tenths of 1% over that life. So I think it's really important to have that relative look over that period because there are affordability challenges, but like let's bucket them out and in in sort of the you know the the matrix. Robbie ChrismanSome would say, I guess I will say that title professionals are doing a lot of the work up front, which is good news. So problems are resolved before they become losses. Do you agree with my amateur assessment here? Armchair quarterbacking, any anything to elaborate? Chris MortonIt's not amateur, it's not amateur. I think it's informed. I I really, I really do agree completely, and I I appreciate it. Here's what I'd say low claims aren't evidence. The product is uh is a problem. It's that the product is working and the process that title professionals go through is working. It is a prevention first model. That's the heart of the sort of title and settlement process, prevention first. Professionals go, they search, they examine, they cure problems and defects before closing so they don't become claims on the back end. If we had a system, as an example, that was a claims first model, homeownership in America would be imperil because people's property rights would be suspect. That's the greatest creator of wealth, and we don't want that kind of a situation. So it's really important to recognize that these professionals deal with millions of transactions each year. Again, that's it's that economic infrastructure that provides the certainty, provides those rights for homeowners, lenders, businesses, you know, and secondary mortgage market to operate effectively. The data shows basically from a risk mitigation perspective, the industry manages potential title risk exposure on an annual basis of $600 billion a year. That's a massive amount. And you don't see anywhere near that in claims because of that uh prevention first model. So, Robbie, I really appreciate the opportunity to have this conversation because I think it really not only again unpacks the data, but it allows for a really thoughtful discussion about some of the things that you're seeing and others are seeing and allows us to answer those questions. Robbie ChrismanI do have one bonus question for you since ALTA is the title and settlement services industry. What's the latest on the advocacy front? Obviously, the road to housing bill was was big and in the news recently, but but for you, what's what's kind of been on your desk recently? What are you paying attention to? What are you working on? Chris MortonYeah, well, I'll just say, first of all, congratulations to the House and Senate on the Road to Housing Bill. That was a magnificent effort, a lot of hard, hard work. We've been very supportive of that effort, working uh collaboratively. We're excited. That took up a lot of time and energy. I think the other big thing from an advocacy perspective that we're doing, uh Robbie, is education. It's this type of conversation about how does title insurance work and what's the value proposition and what do not just lenders and partners in the real estate ecosystem need to know, but also what does the public need to know? You know, I think there's a lot of discussion in the and and out there, and we're still working to educate on attorney opinion letters or elimination or waiver of title in certain transactions. And here's what I'll say about that. On a refinance uh transaction, they may look simple, but they're not risk-free. And we're talking a lot about this. Our research shows that the average fraud and forgery claim on a refi is over $206,000. A homeowner is in a real peril if that happens and they don't have protection, as is the lender. And so we're spending a lot of time on generating a conversation around that topic. We think at the end of the day, innovation shouldn't replace protection with risk transfer. And I think that's the big takeaway. So anything we can do to help people understand that, uh, we're doing that. Robbie ChrismanI wish you the best of luck. You know, I appreciate you making the time to come on the podcast and speak with me. It's always a pleasure. So thank you very much, sir. Chris MortonYeah, thanks, Robbie. Always. Robbie ChrismanToday's economic calendar kicked off with a bang. Inflation returns to the spotlight today with the release of the July Core PCE price index, which was up 0.1% for core. We've also received first or the first estimate of second quarter economic growth in the form of advanced Q2 GDP up 1.5%, up 2.1% year over year, weekly jobless claims, which came in at 197,000 initial claims and 1.782 million continuing claims, and June personal income and spending. Real GDP growth was forecast to pick up due to strong non-residential fixed investment, reflecting the AI boom and resilient consumer spending. Without any other releases of note on today's economic calendar, after the slew of economic news, we have agency MBS prices worsen eighth to a quarter versus Wednesday's close, the two-year yielding 4.25, and the ten-year yielding 4.27 after closing yesterday at 4.62%, as analysts still ponder yesterday's Warsh news conference. Let's wrap up with a joke and some housekeeping. I stopped arguing with my neighbor when he pulled a knife on me. That was when I realized he had a point. By the way, if you ever get in a knife fight with a group of clowns, go for the juggler. Thanks again to Experian Verify for sponsoring this week's podcasts. Experian Verify provides mortgage lenders with automated income, employment, identity, and asset verification solutions that help accelerate underwriting while reducing fraud risk and manual documentation.