May 13, 2025

Fannie Mae issued an update to its Multifamily Selling and Servicing Guide that modified title and closing requirements for multifamily mortgages.

The changes went into effect for loan applications received on or after May 8.

The published changes to Form 4650 include requirements for:

• acceptable title insurers
• ordering title commitments
• due diligence for the borrower’s organizational documents and the property’s title condition
• closing and funding multifamily mortgages with the title company
• the issued title policy

The major change impacting title agents is that Fannie Mae now requires title insurance underwriters to perform all funding functions—except where limited by law. This would be in jurisdictions where holding of escrows or funding loan proceeds is considered the practice of law. In these instances, Fannie Mae says a title agent may be perform the funding functions as long as it is reviewed and approved by an underwriter.

These changes are similar to escrow and settlement function requirements Freddie Mac announced last year.

ALTA has met with Fannie Mae and Freddie Mac since last year about these funding changes. ALTA will continue to engage with the agencies to share concerns members have with the new requirements.

After Fannie Mae announced some minor changes last year, it was expected the agency would make additional changes after it identified gaps in its processes for managing multifamily loan origination fraud risk and for overseeing its multifamily seller/servicer counterparties. In its quarterly SEC filing, Fannie Mae reported it has “discovered instances of multifamily lending transactions in which one or more of the parties involved engaged in mortgage fraud or possible mortgage fraud, and we continue to investigate additional multifamily lending transactions in which we suspect fraud may have occurred.”

Fannie Mae said it delegates underwriting in which lenders make specific representations and warranties about the characteristics of the mortgage loans it purchases and securitizes.

“As a result, we do not independently verify most borrower information that is provided to us,” Fannie Mae said in its filing. “This exposes us to the risk that one or more of the parties involved in a transaction (such as the borrower, borrower’s attorney, sponsor, seller, broker, appraiser, property inspector, title agent, lender or servicer) will engage in fraud by misrepresenting facts about a mortgage loan.”

In February 2024, Fannie Mae notified its lenders that it would no longer accept loans from Riverside Abstract and Madison Title. The title companies were involved in deals with New York City-based investor Boruch Drillman, who pleaded guilty in a $165 million mortgage fraud case last year.

Additionally, three real estate investors pleaded guilty to conspiracy in a $119 million mortgage fraud scheme involving a Fannie Mae loan, according to the Department of Justice.

Best Practices

Title companies are encouraged to implement ALTA’s Best Practices and showcase to their lender clients the policies and procedures that are followed to ensure a positive and compliant real estate settlement experience.

Specifically, Pillar 2 of Best Practices recommends procedures to help ensure accuracy and minimize the risk of loss of funds.

With fraud continuing to increase, it’s important settlement service providers understand the demands being put on lenders. Financial institutions will be more inclined to work with title companies, attorneys and settlement service providers that can ensure the least amount of risk when closing real estate transactions.