Title Insurance Helps Homeownership for Black Americans and Others

By Benjamin F. Chavis Jr., President and CEO, NNPA

Photo: iStockphoto / NNPA

NNPA Newswire – During the State of the Union, President Joe Biden spoke eloquently and passionately about one of the Biden-Harris Administration’s key priorities: housing affordability. The President’s proposals included ideas that would boost housing supply and make homeownership more attainable for those that are currently being priced out of the market.

While the vast majority of President Biden’s new proposals would thought fully address some of the country’s most pressing issues, one idea that flew under the radar was a proposal about title insurance, a lesser known but vital part of the homebuying and refinancing process.

It was concerning to hear about the proposal – a new pilot program that would waive title insurance requirements for certain qualified homeowners – as one of the ideas being considered by the Administration to improve access to affordable housing. Given that the program – which was previously abandoned by Fannie Mae last year – only applies to higher wealth individuals who are refinancing properties, should it be a top public policy priority now for The White House?

It is no secret that high interest rates and a low supply of affordable homes stand in the way of homeownership for low and middle-income families and people of color. According to the National Association of Realtors, the gap between Black and White homeownership is worse than it was a decade ago, with the Black homeownership rate at 44.1% compared to the White homeownership rate of 72%.

The National Association of Real Estate Brokers (NAREB) in its 2023 State of Hous ing in Black America reported that “In 2022, the Black homeownership stood at 45%, only modestly higher than the level at the passage of the 1968 Fair Housing Act. This disparity between Blacks and Whites has expanded over the past half-century.”

Additionally, data from Zillow shows that only 7.8% of Black non-home owning families have enough income to pay a typi cal mortgage payment in their area with out being cost burdened. This is where the focus should be – on building more homes for those who need them. We commend the Biden Administration for its work through the Housing Supply Action Plan to do just that. By increasing the supply of affordable housing of all types in our communities, we can expand access to the housing market to those in our communities that are currently shut out and ensure the dream of homeownership is truly avail able all to Americans.

That is why, while well intentioned, the proposed title waiver pilot under consideration will cause unintended negative consequences in particular for African American, Latino Ameri can, and other communities of color across the nation. All communities should have access to fair housing opportunities and ac questions.

Often misunderstood, title insurance is a product that comprehensively pro tects homeowners’ prop erty rights and their lend ers’ financial interest in a property. It is vastly differ ent than other types of in surance because it is a one time fee and title profession als do the majority of the work upfront to both exam ine title issues and rectify any problems found. That is why many homeowners thankfully don’t experience the challenge of a claim that threatens their homeowner ship – but if they do, title insurance is paramount to protecting their biggest investment.

Some may ask: why do I need to purchase title insurance when refinancing? When refinancing, a home owner purchases a new loan, and title issues can arise between the old loan and the new loan. For ex ample, if a homeowner does not pay their contractor for repairs to their roof, there could be a lien against the property. Lenders need assurance that if a home owner defaults on their mortgage, they have first lien priority.

That is why the proposal to waive title insurance on refinancing is extremely risky. If a title issue arose, Fannie Mae and Freddie Mac would essentially turn into title insurers and would have to bear the risk of making lenders whole on those loans. These are the same companies that are under conservatorship due to their role in the 2008 financial crisis which cost taxpayers more than $200 billion and devastated minority communities by chasing profits for them selves. I don’t believe it is prudent to shift more risk to Fannie Mae or Freddie Mac, especially when the proposal at hand would not meaningfully address the nation’s housing affordability challenge.

This is not a partisan is sue, nor is it a new proposal. This same pilot pro gram was withdrawn last year after members of Congress from both sides of the aisle and industry experts criticized the idea. Ed DeMarco, Acting Director of the Federal Housing Finance Agency (the agency that oversees Fannie Mae and Freddie Mac) under President Obama, stated during a Congressional hearing last May, “It certainly is disturbing to think that Fannie Mae or Freddie Mac might displace title insurance by taking on this insurance itself.”

As the Administration continues to work towards improving housing affordability, first-time, low-income, and minority homebuyers should continue to be the focus. Waiving title insurance on a few refinancing transactions will not move the needle, and it could actually in crease risk for little gain.

Homeownership is largest driver of wealth creation for all Ameri cans. If we truly want to close the racial wealth gap, we must not only ensure that homeownership is available to communities of color, but we must also ensure those homes are protected for generations to come.

I urge the Administration, therefore, to reconsider its focus on removing the critical protections provided by title insurance and continue to work on solutions that will truly address the availability and affordability of homes in all communities in America, and in particular for underserved communities.

Dr. Benjamin F. Chavis Jr. is President and CEO of the National Newspaper Publishers Association (NNPA) and Executive Producer/Host of The Chavis Chronicles on PBS TV stations across the US and can be reached at dr.bchavis@nnpa.org.