President Joe Biden’s proposals for the housing and mortgage markets, announced during the 2024 State of the Union address on Thursday night, are “dead on arrival or troubling,” according to Isaac Boltansky, an analyst for financial services firm BTIG.
Some of the proposals, which include tax incentives for borrowers or people selling their starter homes, are unlikely to be approved by the current U.S. Congress. Lawmakers are still debating the official federal budget, and there’s an elevated risk of a government shutdown, Boltansky wrote in a report on Friday.
Other housing- or mortgage-related initiatives focus on increasing demand for housing, but the real problem is on the supply side, according to Boltansky. Data from Altos Research, an HW Media company, shows that weekly inventory from March 1-8 was at 500,579 single-family units, up from 498,339 the previous week but still low compared to the 2023 peak of 569,898.
Biden called for a one-year tax credit of up to $10,000 for middle-class families who sell their starter homes, which is estimated to help nearly 3 million families. The initiative helps with the lack of houses for sale, but these sellers are likely to become buyers again and will continue pressure the market. In addition, the proposal has “no viable path to passage during this Congress,” Boltansky said.
The president also announced an annual tax credit of $5,000 for two years for middle-class first-time homebuyers, equivalent to an interest rate reduction of more than 1.5 percentage points and helping about 3.5 million families. At HousingWire’s Mortgage Rates Center, the 30-year fixed rate for conforming loans was 7.09% on Monday morning.
“This is a brilliant, thoughtful tax credit … for a completely different housing market. The country is suffering from a dearth of housing supply, not a lack of demand,” Boltansky wrote in the report. “The logic of proposing a demand-side housing credit escapes us, but it is no matter as this proposal is dead on arrival in this Congress.”
Boltansky is also bearish on a proposal to provide $25,000 in down payment assistance to homebuyers whose families haven’t benefited from generational housing wealth building, since the proposal “has not made any headway during this Congress.”
Title insurance and closing costs
Title insurance and mortgage companies criticized a pilot project that waives the requirement of lender title insurance for some refinances, which Boltansky considered a “narrow” initiative.
In an emailed statement, the American Land Title Association (ALTA) called the program a “purely political gesture offering a false promise of savings for homeowners while exposing consumers, lenders, and taxpayers to greater financial risk.”
Regarding the U.S. Department of the Treasury‘s Federal Insurance Office roundtable to discuss potential reforms on title insurance, Boltansky sees it more as a “fact-finding exercise than a quest for change.” The industry should be “on guard,” but structural reforms take “considerable time and political will.”
One point of concern in the package is the Consumer Financial Protection Bureau’s (CFPB) move to include “anti-competitive” closing costs in its agenda. Market participants await more clarity on this topic in the coming weeks. Meanwhile, a CFPB blog post on Friday that called some closing costs “junk fees” caused a strong reaction.
“We are concerned that the CFPB could reopen its work on TILA-RESPA integrated disclosures (TRID),” Boltansky said. “There was a considerable amount of blood and treasure spilled on TRID, and the ultimate product delivered a considerable amount of clarity and transparency to the homebuying process.”
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit said in a statement on Friday that closing fees are “clearly disclosed to borrowers well before a home purchase on forms developed and prescribed by the Dodd-Frank Act and the CFPB itself.”
On Monday, National Association of Mortgage Brokers (NAMB) President Valerie Saunders said in a statement that “all of these fees are currently regulated by federal and state authorities, and in many instances, their elimination would result in higher costs and more risk for homeowners.”
