Saturday, August 14, 2010

Fannie & Freddie Bailout?

I really enjoyed reading the article linked in Chad's post yesterday, and the good points in the comments so far.  I've linked or mentioned a few times about the need to rethink housing policy with respect to the primacy of homeownership.  But with all the talk in the article and elsewhere of reforming or replacing Fannie and Freddie, there is talk in the wind of a different plan: a Fannie-Freddie Bailout.

James Pethokoukis, the Reuters money & politcs blogger, wrote recently about such a bailout as an August Surprise:

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie. A few key points:

Then a couple of days ago the Boston Globe published an op-ed by Paul McMorrow titled One More Bailout.   

WHEN PRESIDENT Barack Obama signed legislation overhauling the nation’s financial regulations last month, he declared an end to Wall Street bailouts. Going forward, he said, failing finance houses won’t skirt by on the taxpayers’ dime. Bay State Representative Barney Frank characterized the new law as a death penalty for reckless institutions.

Both men are only half right. Congress has one more bailout to complete. That job — bringing Fannie Mae’s and Freddie Mac’s toxic balance sheets onto the government’s ledger — was left out of last month’s financial overhaul because the job is so massive and so politically unpalatable that it dwarfs every record-breaking handout that came before it.

That approach is also the only realistic option on the table.

Next Tuesday, policymakers will convene a summit to help determine what to do with Fannie and Freddie, the two government-owned mortgage giants. It’s bound to conclude that there’s little to do but nationalize them, stuff them with $300 billion in taxpayer funds, and hope that when they’re eventually able to stand on their own as semi-private corporations, the nation’s economy doesn’t implode again.

We'll we're certainly seeing mixed signals in the air about the future of housing, real estate, and land use in public policy and finance.  Keep your eyes on Tuesday's Treasury meeting

Matt Festa

August 14, 2010 in Affordable Housing, Budgeting, Federal Government, Finance, Financial Crisis, Housing, Mortgage Crisis, Mortgages, Politics, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, August 12, 2010

A Potential Fundamental Change...

...for decades, the U.S government has promoted a policy of encouraging "home ownership" (or, more accurately, a rent-to-own system through home mortgages).  

Now, the idea itself is not inherently bad if the homes are purchased with loans that can be repaid and downpayments are made that represent real equity on the front end.

Unfortunately, that has not been the case as the current economic mess clearly reveals.  The federal government has subsidized an unsustainable form of rent-to-ownership through tax deductions, highway/road spending policy, and a host of other relatively hidden incentives.

In light of all this, a recent story in the USA Today caught my attention:

Just how much should Uncle Sam do to help Americans buy their own homes? 
For 70 years — and for the last 15 in particular — the answer has been: Whatever it takes. Now, policymakers are pausing to reconsider. 
In the next few months, they'll weigh whether there can be too much of a good thing when it comes to helping families finance the American Dream. The rethink could mean a shake-up for a mortgage market addicted to government subsidies.
If this type of change really happened, it could have some fundamental effects on land use patterns, policies, and regulations since much of the current zoning system in many jurisdictions is predicated on the express idea of single, family-detached homes being at the top of the use pyramid as well as the implied idea that those homes will be owned (or, again, rent-to-owned).

Add in the proliferation of HOA rules and regs that address the ability to rent your house, and its easy to see how a shift away--even a small way--from federal policies that promote home ownership could have a major trickle down effect on the American land use system.

--Chad Emerson, Faulkner U.

August 12, 2010 | Permalink | Comments (3) | TrackBack (0)

Wednesday, August 11, 2010

Controversy Over Vineyard Development in Napa

Jennifer Wells has published the Note "In Vino Veritas: Grapes, Greed, and Lawsuits in the Napa Valley," 16 Hastings W.-N.W. J. Env. L. & Pol'y 515.  From the Introduction:

If blood will have blood, then Napa will have wine. Or so the sentiment goes. In actuality, a storm has been brewing in Napa County for the past fifteen to twenty years, pitting neighbor against neighbor, developer against environmental organization, and locals against outsiders. The coalescence of numerous elements - increased environmental awareness, hometown preference, a weakened economy, and revolutionary advances in wine-making - has led to numerous disputes in both California and federal courts. The underlying factor of the disputes centers around what for many longtime Napa residents amounts to a destruction of the environment in the bid to develop more wineries. Conversely, vintners see the locals'  opposition as wholly unreasonable and detrimental to the future economic health of Napa County, not to mention an abrogation of personal property rights, as county officials intervene in the disputes and force changes upon the wineries. In assessing how the three different factions - the wineries, the residents, and the Napa County government - interact and resolve environmentally induced wine disputes, important lessons can be drawn in negotiating tactics and the art of exploiting new (and old) technology to better everyone's position.

I spent many of my formative years in Sonoma County, the next valley over from Napa, and I recently made a visit home.  We drove through Napa and I was stunned at the number of new wineries that have been built in the last 10 years.  Wells describes the various political and legal controversies over those vineyards, and the newer phenomenon of underground wineries, being developed as a way around strict viewshed regulations.  A very interesting read, whether you're a wine drinker or not!

Jamie Baker Roskie

August 11, 2010 | Permalink | Comments (0) | TrackBack (0)

Jerry Weitz Moves to ECU

Planner Jerry Weitz is leaving Georgia to become a professor and director of the new planning program at East Carolina University.  According to Jerry, the program is in "the urban and regional planning program in the department of geography at East Carolina University (ECU) in Greenville, NC.  The program has an accredited bachelor’s degree in urban and regional planning (since 1974) and a master’s degree in geography with a planning concentration.  Plans are to establish an accredited master of planning degree in the next 1-5 years.  ECU is the third largest and fastest growing university in NC, with 28,000 students."

This is a great move for Jerry, who has long been one of the leading planners in the Southeast and in the nation.  Some of you may know Jerry from his book Sprawl Busting: State Programs to Guide Growth or his other scholarship.

Jamie Baker Roskie

August 11, 2010 in Books, Planning, Teaching | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 10, 2010

Smith on the Structural Causes of Mortgage Fraud

James Charles Smith (Georgia) has posted The Structural Causes of Mortgage Fraud, forthcoming in the Syracuse Law Review, Vol. 60.  The abstract:

Mortgage fraud, often a violation of federal and state criminal statutes, covers a number of different types of behavior, all of which have the common denominator of conduct that has the intent or effect of impairing the value of residential mortgage loans. Mortgage fraud has become prevalent over the past decade and shows no signs of diminishing despite the collapse of domestic housing markets during the past two years. This paper analyzes the complex relationships between prime mortgage loan markets, subprime markets, and various types of mortgage fraud. This paper concludes that the root causes of mortgage fraud are associated with the core institutional and structural components of mortgage markets, which cut across all types of residential mortgage products. The organizing principle is the historical evolution from proximity to distance within the mortgage market, which is explored along three axes. First, geographical distance between lenders and borrowers has replaced geographical proximity. The mortgage market is national, with local lending institutions no longer making a significant proportion of the loans that are originated. Second, transactional distance has replaced transactional proximity. Lenders and borrowers have little direct contact; instead intermediaries such as mortgage brokers, appraisers, insurers, and closing officers, separate the principals. Third, financial distance has replaced financial proximity. Previously both borrowers and lenders had significant financial interests in the mortgage loan transaction. The borrower had equity in the property, and the lender held the loan in its portfolio. Presently many borrowers have no equity (or negative equity) in their homes, and due to the securitization of loans through the secondary mortgage market, few originating lenders retain a stake in the loans they create. Reforms that could serve to reduce borrower-lender distance or to ameliorate its effects include the fashioning of better closing procedures for verifying borrower identity, providing a premium for community-bank loans to local borrowers, making originating lenders liable for all misconduct by appraisers, requiring significant down payments for borrowers, and allowing secondary market purchasers full recourse against originating lenders for losses caused by borrower defaults.
I saw Prof. Smith present an early version of his research on mortgage fraud last year; he announced "tentatively, I'm against it."  That cracked me up.  Anyway, check out the paper.

Matt Festa

August 10, 2010 in Finance, Housing, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (2) | TrackBack (0)

Brigham-Kanner Property Rights Conference

William & Mary Law School will be hosting the Seventh Annual Brigham-Kanner Property Rights Conference on Thursday, Sept. 30th and Friday Oct. 1st.  This year's honoree is Prof. Carol Rose of Arizona and Yale.  Scheduled presenters include past honorees such as Robert Ellickson and James Ely as well as other leading property scholars including Jedediah Purdy, Henry Smith, Michael Heller, Thomas Merrill and Laura Underkuffler.  Past conferences have involved very spirited discussions about eminient domain, takings and other land use issues.  More information is below.  I hope to see you there.


The annual Brigham-Kanner Property Rights Conference is presented by the W&M Property Rights Project and the Institute of The Bill of Rights Law.  It is named in recognition of Toby Prince Brigham and Gideon Kanner for their lifetime contributions to private property rights. Now in its seventh year, the conference is designed to bring together members of the bench, bar and academia to explore recent developments in takings law and other areas of the law affecting property rights.  During the conference, the Project presents the Brigham-Kanner Prize to an outstanding figure in the field.  Previous recipients of the Brigham-Kanner Prize include Professor Frank I. Michelman of Harvard Law School (2004), Professor Richard A. Epstein of the University of Chicago Law School (2005), Professor James W. Ely, Jr. of Vanderbilt Law School (2006),  Professor Margaret Jane Radin of the University of Michigan Law School (2007),  Professor Robert C. Ellickson of Yale Law School (2008) and Professor Richard E. Pipes of Harvard University (2009).

 The Seventh annual conference will be held September 30 - October 1, 2010.   Professor Carol M. Rose of James E. Rogers College of Law at the University of Arizona will be honored with the 2010 Brigham-Kanner Property Rights Prize.  Professor Rose is the Ashby Lohse Professor of  Water and Natural Resource Law and the Gordon Bradford Tweedy Professor of Law and Organization, Emerita, and the Fred Johnson Chair in Property and Environmental Law, Yale Law School.

For more information about the 2010 conference, please contact Kathy Pond at 757-221-3796 or email her at ktpond@wm.edu

2010 Brigham Kanner Property Rights Brochure


James J. Kelly, Jr.
Asst. Prof. of Law
University of Baltimore School of Law
Visit Prof. of Law, W&L Law (Spring ’11)

jkelly@ubalt.edu

August 10, 2010 | Permalink | Comments (0) | TrackBack (0)

Hurricane-Proof Dome Homes

I'm back from a summer sabbatical from the Land Use Prof Blog.  Thanks to my fellow bloggers for holding down the blogging fort in my absence.

Also, thanks to Will for lending us his apartment in Charleston for a long weekend earlier this month.  Will's got the southern hospitality thing down pat, and we really enjoyed ourselves.

While in Charleston we visited Sullivan's Island for a beach walk. Unfortunately we got caught in a thunderstorm, but in the subsequent drive around the island we happened upon this interesting house:

HurricaneHouse
I've seen pictures of homes like this before; they are ostensibly hurricane proof.  They're also pretty interesting from an aesthetic point of view, very different from the other beach houses on Sullivan's.  If you Google "hurricane proof house" you find some interesting websites of firms who build these types of homes.  They're funky, but they may be the wave of the future in coastal architecture.

Jamie Baker Roskie

August 10, 2010 in Architecture, Beaches, Charleston, Housing | Permalink | Comments (0) | TrackBack (0)

And Now, A Musical Interlude...

One of the ways that I try to stimulate student thinking about land use issues is to occasionally hold a contest of sorts where they (or their groups) come up songs related to the land use topic we are considering.

It gives them a chance to think about how to apply the information in a unique way--that is, researching lyrics that relate to land use and considering their meaning.

Entries have included "Rockin' the Suburbs" (from the animated Over The Hedge movie soundtrack), "There Used To Be a City" and the Talking Heads' classic "Our House".

Well, there is now a entire new album that takes a satirical look at suburbia--aptly titled "The Suburbs" by Arcade Fire. 

You can find out more here.  There is also a video on YouTube (though, because I'm not sure its been properly posted, I'm not providing a direct link--it's there though for the interested searcher).

Personally, I've found that some of the students find the exercise very useful as they've submitted a song for a wide variety of different land use/property topics.  I generally play the songs right before class and announce the winner at the beginning.  Nothing major, but still a fun way of taking a new twist on land use.

So, with that in mind, I'll close with a little landuseprof blog musical trivia.  "What was the true meaning behind 'Our House' by the Talking Heads"?

--Chad Emerson, Faulkner U.

August 10, 2010 | Permalink | Comments (0) | TrackBack (0)

Monday, August 9, 2010

A New Look at Parking Regulations...

One of the long standing challenges in revitalizing downtowns and other more urban settings is the typical American's expectation of parking right outside the business or office or residence they plan to visit.  Granted, there are times (rain, snow, Moscowian smog) where parking proximity is desirable.

But, most of the time, its just out of habit--a habit that has been fueled by the suburban parking regulatory approach of (to use a technical phrase) "way more spaces that you could ever need except maybe on the day after Thanksgiving".

That's why the research of UCLA urban planning prof Donald Shoup is so useful.  His must-read book is "The High Cost of Free Parking"--an interesting tome that debunks many myths related to the necessity and appropriateness of applying the suburban parking laws in all city settings.

Recently, Prof. Shoup introduced a very useful video as part of his work with the City of San Francisco.  You can view the short video here (less than 3 minutes).  It does an excellent job of explaining how a market-based parking system can help relieve the frustrated groans of prospective parkers as they "circle the block" like hamsters on a wheel.

--Chad Emerson, Faulkner U.

August 9, 2010 | Permalink | Comments (0) | TrackBack (0)

Sunday, August 8, 2010

Kelly on Homes Affordable for Good

James J. Kelly, Jr., of Baltimore Law and intrepid Land Use Prof guest blogger, has posted Homes Affordable for Good: Covenants and Ground Leases as Long-Term Resale Restriction Devices, a symposium piece in the St. Louis University Public Law Journal, Vol. 29, p. 9 (2009).  The abstract:

Covenants and ground leases have been, and continue to be, used to create shared spaces that are fundamentally, and often invidiously, exclusive. Famously made a dead letter in the case of Shelley v. Kraemer, covenants banning resale to nonwhite households put the force of law behind the segregated birth of America’s suburbs. Today, gated residential communities and shopping malls assure a degree of class exclusivity through covenants and commercial ground leases, respectively. These same legal mechanisms, however, are now deployed to assure long-term inclusion as well. 

Developers of affordable housing are creating homes that are not only beneficial to the original homeowners but also available for future generations of qualified home buyers. When selling the newly developed homes, they are having subsidized homeowners promise to pass the good deals on to future home buyers. These resale restrictions allow single-family homes to be sold, and later resold, to low and moderate-income households in neighborhoods that would otherwise be unavailable to them. Affordability protections of 15 years or less are relatively common and can be achieved through a number of legal arrangements. Common law and statutory hostility to long-term private arrangements that limit alienability, however, have made the search for perpetual affordability more challenging. Those seeking to sustain economic diversity in residential communities over multiple generations of homeowners have turned to covenants authorized by statute and ground leases as the vehicles by which these promises can be enforced. 

As stand-alone enforceable promises that run with land, covenants have become the primary vehicle for Inclusionary Zoning programs that seek to preserve the mixed-income nature of affected for-profit housing developments for the long haul. Community Land Trusts have generally preferred the ground lease, a standard device for shopping mall creation, to ensure that subsidized single-family homes developed by nonprofit housing organizations can remain affordable forever. As economic diversity in communities is given its proper place as a long-term goal for America’s metropolitan areas, 21st century real estate law will need to integrate both covenants and ground lease reversion interests as stable, effective means of enforcing affordability-preserving resale restrictions. In addition to arguing for the importance of both covenants and ground leases as affordability conservation mechanisms, this article will analyze and evaluate each device as to its effectiveness in achieving the development goal of creating and sustaining economically diverse communities of choice.
Matt Festa

August 8, 2010 in Affordable Housing, Housing, Inclusionary Zoning, Land Trust, Landlord-Tenant, Local Government, Real Estate Transactions, Scholarship, Servitudes, Zoning | Permalink | Comments (0) | TrackBack (0)