Title Opinions v. Title Insurance

An article in The Wall Street Journal on January 16, 2024, discussed a plan by Fannie Mae that would allow this major governmental agency to accept attorney title opinions rather than title insurance. Fannie Mae stated that its intention was to save money for consumers, because attorney title opinions were likely to be less expensive than title insurance.

That may be so, but home purchasers in Louisiana should beware. Even if Fannie Mae will accept an attorney title opinion in connection with a homeowner’s loan that Fannie Mae is purchasing, the homeowner is not well protected, even if the attorney’s title opinion is directed to the homeowner as well.

That is because Louisiana establishes a three-year preemption period for lawsuits against attorneys. This is a complete bar to any action against the attorney, with very limited (if any) exceptions.

This means that an action against the attorney based on the attorney’s title opinion can only be taken within three years of the date of the title opinion. After that, the title opinion is essentially of no value to the homeowner if an adverse title claim arises.

Moreover, an attorney title opinion does not provide many of the benefits of a title insurance policy, such as litigation defense. If a homeowner relies on the attorney title opinion, the homeowner has to pay for the litigation regarding his or her title, and then, if there is an adverse result, the homeowner has to seek compensation from the attorney issuing the opinion. Also, the attorney title opinion may contain qualifications or exceptions, and therefore a homeowner may need to have another attorney review it, which would add to the homeowner’s expense.

For these reasons, it is unlikely that this new move by Fannie Mae will get much traction in Louisiana, and even if it does, home buyers should realize the importance of this three-year limitation.