President Addresses Housing with Several Proposals in State of the Union
Written By: Joel Palmer, Op-Ed Writer
President Joe Biden made housing and mortgages a key topic in his State of the Union speech last week, proposing a number of tax credits and proposals to help create more supply and improve affordability.
While the President’s housing proposals received mostly positive feedback, one idea met with resistance.
On the day of the President’s speech, Federal Housing Finance Agency (FHFA) Director Sandra Thompson announced a pilot program to waive the requirement for lender’s title insurance on certain refinances.
According to the administration, this would save thousands of homeowners up to $1,500 and an average of $750.
Thompson said the pilot will waive the requirement for lender’s title insurance or a legal opinion on certain low-risk refinance transactions where there is confidence that the property is free and clear of any prior lien or encumbrance.
“The title acceptance pilot will make it possible to test whether allowing lenders to sell these refinance loans is a responsible approach to reducing the closing costs incurred by existing homeowners. Lenders will also retain the option to provide evidence of clear title through other options, such as title insurance or an attorney opinion letter (AOL).”
Thompson added that the pilot only impacts the requirement for a lender’s title policy or AOL and does not impact a borrower’s title risk, since it only applies to certain refinance loans where the borrower has title to the property already.
“As with any pilot undertaken by an Enterprise, this effort will be subject to robust oversight by FHFA to monitor the effectiveness of the pilot in meeting its desired outcomes,” she said.
The American Land Title Association (ALTA) provided the sharpest criticism of the proposal. It called the pilot “a purely political gesture offering a false promise of savings for homeowners while exposing consumers, lenders, and taxpayers to greater financial risk.By announcing this only hours before the State of The Union address, without outreach to, or engagement with, the title insurance industry, the Administration has reduced the crucial role of the industry to nothing more than a politicized talking point.”
The Wall Street Journal reported last fall that ALTA helped halt a similar pilot program last year undertaken by Fannie Mae. Lawmakers also helped scuttle the plan.
President Biden also proposed a mortgage relief credit of $5,000 for two years. The administration said this credit would have be equivalent to reducing a homeowner’s mortgage rate by 1.5 percentage points for two years on the median home.
“In a time of historically high mortgage rates, such affordability initiatives are critical in empowering first-time and low-income borrowers in purchasing a home and building generational wealth,” said Scott Olson, executive director of Community Home Lenders of America.
The President also wants to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter homes.
The administration also wants to provide up to $25,000 in down payment assistance to first-generation homebuyers whose families haven’t benefited from the generational wealth building associated with homeownership. This proposal is estimated to help 400,000 families purchase their first home.
In another move to lower the cost of getting a mortgage, The Consumer Financial Protection Bureau (CFPB) is looking to “address anticompetitive closing costs imposed by lenders on homebuyers and homeowners.”
The President also spoke about increasing housing supply during the State of the Union. He proposed expansion of the Low-Income Housing Tax Credit to build or preserve 1.2 million more affordable rental units. He also wants to create a grant fund. Lastly, President Biden proposed that each Federal Home Loan Bank double its annual contribution to the Affordable Housing Program – from 10 percent of prior year net income to 20 percent – to raise an additional $3.79 billion for affordable housing over the next decade.
“Tax incentives can help close the affordable housing gap, and we are especially grateful for the President’s willingness to explore new tax measures,” said National Association of Realtors President Kevin Sears. “NAR also supports an all-of-the-above approach to this crisis--from tax incentives to zoning reforms to expanded financing.
“With a nationwide housing shortage of roughly 1.5 million housing units, boosting the supply of housing is the only way to tame inflation, achieve a measure of price stability in the for-sale and rental markets, and ease the nation’s housing affordability crisis,” said Carl Harris, chairman of the National Association of Home Builders.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
