President Joe Biden made new housing announcements during his State of the Union address. (iStock)
Citing rising housing costs in his State of the Union address Thursday night, President Joe Biden said he wants to create a tax credit that would give homebuyers $400 per month.
Biden’s plan would create a $10,000 tax credit, spread out over two years and credited in the form of $400 monthly payments for first-time homebuyers and those who sell their starter homes.
“For many Americans, owning a home is the cornerstone of raising a family, building wealth, and joining the middle class,” the White House said in a statement. “Too many working families feel locked out of homeownership and are unable to compete with investors for a limited supply of affordable for-sale homes.”
Biden called on Congress to create legislation that would give this tax credit to the middle-class, saying it would be the equivalent of reducing interest rates by 1.5 percentage points. By making it available to those who buy their second home, the administration said it will improve housing supply for those in the starter home market.
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Biden calls for changes to lower closing costs
During his State of the Union address, the president also called for changes to closing costs, calling for the elimination of title insurance.
Earlier in the day, the Biden administration approved a pilot program that would waive the requirements for lender’s title insurance on certain refinances. This would save homeowners up to $1,500, and an average of $750, according to the announcement.
“According to independent analysis, across the market title insurance typically pays out only 3% to 5% of premiums in claims to consumers, compared to more than 70% in other types of insurance,” the announcement states. “Homeowners can still purchase their own title insurance policies if they choose to do so.”
The Consumer Financial Protection Bureau (CFPB) will also look into closing costs, and pursue rulemaking on “anticompetitive closing costs imposed by lenders on homebuyers and homeowners.”
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Title industry says promise of savings is false
Despite the potential savings announced, some industry stakeholders say this is a “false promise of savings,” and that it will expose homebuyers, lenders and taxpayers to more risk.
“The announcement made today by the Biden Administration approving a pilot program to waive the requirement for lender’s title insurance on certain refinances in an effort to reduce closing costs for homeowners is a purely political gesture offering a false promise of savings for homeowners,” said the American Land Title Association (ALTA), a trade association for the title industry.
Federal Housing Finance Agency (FHFA) Director Sandra Thompson said that, “closing costs represent a substantial affordability barrier to purchasing or refinancing a home.” However, she also continued on to say that the waiver for title insurance would only apply for certain, more secure, refinances and would be subject to significant oversight, according to The Title Report.
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