Fannie Mae Research Highlights the Impact of Tangled Titles

When Hurricane Maria hit Puerto Rico in 2018, Fannie Mae's Disaster Recovery & Resilience team and our housing counselor partners went to work helping homeowners access FEMA funds and collaborate with servicers to find relief. The storms were devastating, but we helped a lot of people start their path to recovery despite many challenges along the way. One of the most persistent and consistent challenges we encountered was the number of homeowners who couldn't readily get the support they needed because they didn't have a clear title to their property. Without that proof of ownership, services that many households rely on – like FEMA and other federal disaster assistance programs, or even the ability to insure a home – were unavailable.

These homeowners were facing challenges around heirs' property, or tangled titles, where the ownership of a property has been left to multiple heirs, sometimes over the course of several generations. Whether it's the result of a homeowner lacking an estate plan to name a clear heir for the property or a homeowner leaving it to multiple heirs in their estate, tangled title can hinder homeowners from accessing critical resources for maintaining their homes or even force the sale of a property, perhaps at below-market value.

As we delved deeper into this problem, we found that, although there had been some regionalized efforts to understand the issue, there wasn't any comprehensive research at the time speaking to how widespread heirs' property was across the country. So, last year we partnered with the Housing Assistance Council (HAC) to estimate the prevalence of residential heirs' property on a national scale.

Billions in value

One of the primary obstacles we faced was identifying impacted properties. With local variations in how deeds and assessment data are recorded and reported and owner information is updated, HAC split its estimate into two broad categories:

• "Most likely" heirs' properties are residential parcels with an occupied housing unit of which there are multiple owners, no outstanding mortgage loans, no record of the property having undergone the testate process, and an indication of fractionated interest, which is based on the presence of certain terms in the owners' names that strongly suggest divided interest.
• "At risk" properties involve residential parcels with an occupied housing unit that has multiple owners and no outstanding mortgage loans. These properties do not contain owner name terms that strongly suggest fractionated interest, but instead have all of the following closely related heirs' property characteristics: no recorded sale in 30 years, no full tax exemptions, low building quality and condition, and no mortgage amount.

The combined total of "at risk" and "most likely" heirs' properties came to more than 580,000 properties, totaling more than $32 billion in assessed value.

While the national figure is noteworthy, local impacts of heirs' property can be significantly greater, particularly in rural areas. Our report estimates that more than 10% of properties in West Virginia and nearly 4.5% of properties in Alabama meet criteria to be considered "at-risk" or "most likely" heirs' property.

Given the scale of the report, the results we found are based on the most commonly used factors across the country in identifying heirs' property, but local variations in recording deed and assessment data means that the numbers reported were a conservative estimate. The study also focused exclusively on residential properties and didn't reflect the impact of heirship and tangled titles among commercial, farm, or vacant properties.

We expect that regional research with a more nuanced understanding of local record-keeping practices would likely find heirs' property to be more prevalent than reported here.

Some of the other learnings we gathered from our research with HAC:

• Although rural areas contain only 30% of the country's residential properties, nearly 2 out of every 3 heirs' properties (64.6%) were located in rural areas.
• More than 1 out of every 100 properties in persistent poverty counties, which are counties where the poverty rate has been 20% or higher over three decades, were identified as heirs' property.
• Despite heirs' property being more prevalent in rural areas, impacts of the problem are felt in urban and suburban environments as well.

Starting the conversation

Understanding the scope of the problem is a critical first step, but it's also just the start of the journey.

On April 4, 2024, we took another step toward finding a solution by convening stakeholders in the heirs' property space for a conversation about what they are seeing in their local areas, how they are addressing the problem, and what could help them further support their communities.

We heard a number of common themes:

• While estate planning can be time consuming and sometimes complicated, it often takes a fraction of the time and cost that are required instead to resolve heirs' property and tangled title issues. Working with homeowners to produce estate plans with clear intentions for property ownership is an important means of preventing these problems in the future.
• The costs of untangling a title can put the process out of reach, particularly for the most vulnerable property owners.
• Solutions at the state and local level, from governments and non-profits, are seeing some successes. However, challenges often exist in the form of limited resources and reach to educate the public about the issue.

These learnings and other findings from our research will continue to guide us as we consider how to address heirs' property moving forward. With gaps around consumer knowledge, we are exploring how we can better educate homebuyers about estate planning, and we're continuing to work with HAC to understand how heirs' property impacts disparate communities. We are also having conversations with stakeholders to understand how we can support their efforts.

To learn more about heirs' property, read our research at A Methodological Approach to Estimate Residential Heirs' Property in the United States.