Wednesday, April 10, 2013

Davidson on New Formalism in the Aftermath of the Housing Crisis

Nestor Davidson (Fordham) has posted New Formalism in the Aftermath of the Housing Crisis, Boston University Law Review, Vol. 93, No. 389, 2013.  The abstract:

The housing crisis has left in its wake an ongoing legal crisis. After housing markets began to collapse across the country in 2007, foreclosures and housing-related bankruptcies surged significantly and have barely begun to abate more than six years later. As the legal system has confronted this aftermath, courts have increasingly accepted claims by borrowers that lenders and other entities involved in securitizing mortgages failed to follow requirements related to perfecting and transferring their security interests. These cases – which focus variously on issues such as standing, real party in interest, chains of assignment, the negotiability of mortgage notes, and the like – signal renewed formality in nearly every aspect of the resolution of mortgage distress. This new formalism in the aftermath of the housing crisis represents something of an ironic turn in the jurisprudence. From the earliest history of the mortgage, lenders have had a tendency to invoke the clear, sharp edges of law, while borrowers in distress have often resorted to equity for forbearance. The post-crisis caselaw thus upends the historical valence of lender-side formalism and borrower-side flexibility. 

Building on this insight, this Article makes a normative and a theoretical claim. Normatively, while scholars have largely embraced the new formalism for the accountability it augurs, this consensus ignores the trend’s potential negative consequences. Lenders have greater resources than consumers to manage the technical aspects of mortgage distress litigation over the long run, and focusing on formal requirements may distract from responding to deeper substantive and structural questions that still remain largely unaddressed more than a half decade into the crisis. Equally telling, from a theoretical perspective, the new formalism sheds light on the perennial tension between law’s supposed certainty and equity’s flexibility. The emerging jurisprudence underscores the contingency of property and thus reinforces – again, ironically – pluralist conceptions of property even in the crucible of hard-edged formalism.

Matt Festa

April 10, 2013 in Affordable Housing, Housing, Mortgages, Politics, Property, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, April 8, 2013

Professors' Corner teleconference on Legal Education and Uniform Laws

From Wilson Freyermuth (Missouri) via the property listserv comes the announcement for this Wednesday's Professors' Corner--the monthly free teleconference sponsored by the ABA's Section on Real Property, Trusts, & Estates.  This one looks really interesting.  See below for the info and dial-in instructions.

Matt Festa

Professors' Corner: Legal Education and Uniform Laws Group Call

April 10, 2013, 12:30pm Eastern/11:30am Central/9:30am Pacific

Call-in number: 866-646-6488

Passcode: 5577419753

The April 2013 program is entitled "Real Estate-Related Uniform Laws in Progress." This program will discuss the status of the two major uniform law projects related to real estate that are currently underway within the Uniform Law Commission (which we all used to know as NCCUSL).

The first project is a comprehensive revision of the Uniform Residential Landlord and Tenant Act. The URLTA was originally promulgated nearly 40 years ago and has been adopted, either in part or in whole, in approximately 20 states. During this month’s program, Professors Sheldon Kurtz (University of Iowa) and Alice Noble-Allgire (Southern Illinois University), who are the co-Reporters for this Act, will discuss the current status of this project and some of the key issues being addressed in this revision. These revisions will receive their "first reading" at this summer's annual meeting of the Uniform Law Commission in July 2013. In case you’re curious, here is a copy of the current draft of the Act:

The second pending real-estate related uniform law project is a new project to produce a uniform act governing residential mortgage foreclosure processes. This project began earlier this year after extended study by the Uniform Law Commission, as well as a stakeholder meeting at which input was taken from both industry and consumer groups, as well as federal and state regulators. The Act proposes to address residential mortgage foreclosure processes and mortgagor protections in both judicial foreclosure and nonjudicial foreclosure. During the program, Professors James Smith (University of Georgia) and Alan White (City University of New York), who are the co-Reporters for this project, will discuss the status of this project and the key issues being addressed in this project. Here is a copy of the current draft of this Act, which will likewise receive its "first reading" at this summer's Uniform Law Commission meeting:

Please join us on Wednesday for this month’s call!

April 8, 2013 in Conferences, Landlord-Tenant, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, February 25, 2013

Bipartisan Policy Center Housing Commission Report

I am just finished streaming the press conference for the release of the Bipartisan Policy Center's Housing Commision Report.  Led by its Co-Chairs, Sens. George Mitchell, Mel Martinez and Kit Bond, as well as former HUD Secretary Henry Cisneros, the Commission is offering a far-reaching set of recommendations regarding the housing finance system, public subsidy for affordable housing development and preservation (particularly in rural areas) and promotion of housing counseling as a vital resource.  Even if the Executive Summary is too long for you, I would encourage you to check out a two-page article available on Politico authored by the four co-chairs.   

Jim K.

February 25, 2013 in Affordable Housing, Federal Government, HUD, Mortgage Crisis, Mortgages | Permalink | Comments (0) | TrackBack (0)

Thursday, November 15, 2012

Ghent on the Historical Origins of America's Mortgage Laws

Andra C. Ghent (Arizona State--Finance) has posted The Historical Origins of America's Mortgage Laws.  This paper would be a really good resource for students, teachers, or practitioners who are interested in a concise but explanatory introduction to the development of state mortgage laws, including mortgage theory, foreclosure, and other important topics.  The paper is a report for the Research Institute for Housing America.  The abstract:

This paper examines the different legal frameworks for mortgage markets in different states, focusing on how and when they came into existence, including the British influence on laws in some of the older states, with a particular emphasis on foreclosures, including judicial vs. non-judicial regimes, redemption rights and deficiency judgments. The paper concludes that mortgage laws in America are a patchwork driven by path dependence, rather than a coordinated effort or a reaction to some economic event or condition.

Matt Festa

November 15, 2012 in History, Housing, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 9, 2012

ABA Professor's Corner on Eminent Domain for Mortgage Modifications

This month's installment of the ABA Section on Real Property's "Professor's Corner"--a free monthly teleconference featuring scholars' takes on important new property cases and issues--will feature a really hot topic, the proposal for municipal governments to take property by eminent domain to combat the mortgage/foreclosure crisis.  The info, via David Reiss (who also recently posted a related public comment):

 FREE Professors’ Corner teleconference, sponsored by the ABA Real Property, Trust and Estate Law Section and its Legal Education and Uniform Laws Group.

The program is Wednesday, October 10, at 12:30 pm EDT; 11:30 am CDT; 10:30 am MDT; 9:30 am PDT.

Call-in number: 866-646-6488
Participant Passcode: 5577419753

This month’s topic is Can/Should Municipalities Use Eminent Domain to Take Mortgages to Facilitate Mortgage Modifications? This conference call will be moderated by Professor James Geoffrey Durham, University of Dayton School of Law. Professor Steven J. Eagle, Professor of Law, George Mason University School of Law, is one of the nation’s leading scholars on eminent domain and regulatory takings. Professor Eagle will discuss whether it is possible for local governments to use eminent domain to acquire notes secured by mortgages in order to resell them to a private party which will then modify them, both under the 5th Amendment to the U.S. Constitution and also under state constitution taking clauses as they have been limited by amendments and statutes seeking to define what is a public use. Professor Robert C. Hockett, Professor of Law, Cornell Law School, is the scholar who in June proposed that municipalities could use eminent domain to acquire mortgages, in order to facilitate mortgage modifications to benefit underwater homeowners, in his article: It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery (download paper). Professor Hockett will discuss his proposal, which has received widespread attention. Professor Dale A. Whitman, James E. Campbell Missouri Endowed Professor Emeritus of Law, University of Missouri, Columbia, School of Law, is one of the premier experts on American property law and one of the nation’s foremost mortgage law scholars. Professor Whitman will discuss the impact that implementation of Professor Hockett’s proposal might have on the mortgage markets.

Check out the free telecast on this very interesting and current issue.

Matt Festa

October 9, 2012 in Conferences, Eminent Domain, Financial Crisis, Housing, Local Government, Mortgage Crisis, Mortgages, Property, Real Estate Transactions, Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

Thursday, October 4, 2012

Reiss on the Use of Eminent Domain to Restructure Mortgages

David J. Reiss (Brooklyn) has posted Comment on the Use of Eminent Domain to Restructure Performing Loans, which was submitted to the Federal Housing Finance Agency (No. 2012–N–11) (2012).  The abstract:

There has been a lot of fear-mongering by financial industry trade groups over the widespread use of eminent domain to restructure residential mortgages. While there may be legitimate business reasons to oppose its use, its inconsistency with Takings jurisprudence should not be one of them. To date, the federal government’s responses to the current crisis in the housing markets have been at cross purposes, half-hearted and self-defeating. So it is not surprising that local governments are attempting to fashion solutions to the problem with the tools at their disposal. Courts should, and likely will, give these democratically-implemented and constitutionally-sound solutions a wide berth as the ship of state tries to right itself after being swamped by a tidal wave of mortgage defaults.

A concise and thoughtful public comment on what is emerging as a hot, hot issue.

Matt Festa

October 4, 2012 in Constitutional Law, Eminent Domain, Finance, Housing, Local Government, Mortgage Crisis, Mortgages, Property Rights, Real Estate Transactions, Scholarship, State Government, Takings | Permalink | Comments (0) | TrackBack (0)

Monday, September 10, 2012

Levitin & Wachter ask Why Housing?

Adam J. Levitin (Georgetown Law) and Susan Wachter (Penn--Wharton--Real Estate) have posted Why Housing?, Housing Policy Debate, vol. 23 (2012).  The abstract:

Asset bubbles come and go. Only the housing bubble, however, brought the economy to its knees. Why? What makes housing uniquely a cause of macroeconomic risk?

This Article examines the workings of the housing market as well as theories and empirical evidence about the housing bubble. It explains why housing is a particular source of macroeconomic risk and how changes in the housing finance channel were the critical element in the formation of the bubble.

Interesting stuff.  A lot has been written about the mortgage/financial crisis, but this is a good point in time for looking back with a more long-term perspective. 

Matt Festa

September 10, 2012 in Financial Crisis, Housing, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 5, 2012

Pomeroy on the Case for Standardized Vesting Documents

Chad Pomeroy (St. Mary's) has posted A Theoretical Case for Standardized Vesting Documents.  The abstract:

Practitioners, real estate professionals, and lay people throughout the country rely on the recording system to provide critical information regarding ownership rights and claims. Indeed, the recording system acts as a virtually mandatory repository and disseminator of all potential parties’ claims. This system, in turn, relies on these claimants and their agents to publicize their claims: property purchasers, lenders, lien-claimants, title companies, attorneys - these parties interact, make deals, make claims, order their affairs, and then record. The information system available to us, then, is only as good as what we make of it and what we put into it.

As such, it is surprising how little thought has been put into exactly what it is that we record. Should the mortgage of a lender in Ohio look like that of a lender in Florida? Should a deed from an individual in Texas differ from that of a corporation in Nevada? As it stands now, no one familiar with real estate law or commerce would expect different parties in different jurisdictions to record identical, or even similar, instruments. In an immediate sense, this heterogeneity of the recorded documents (“vesting heterogeneity”) does not seem a good thing: parties utilizing the recording system generally seek to make known, or to discern, the same generic type of information – that is, evidence of claims upon property – so why are different forms and types of documents utilized all over the country?

This article analyzes this vesting heterogeneity from a new perspective and concludes that it is, in fact, cause for significant concern. Vesting heterogeneity has arisen organically, growing with the recording system as they both evolved over time. This historical explanation does not, however, excuse the cost associated with such a lack of uniformity. Anyone seeking information with respect to any piece of property must navigate the complexities and uncertainties that arise because all such information is heterogeneous and, as a consequence, difficult to understand and utilize. This represents both a immediate transactional cost and an increased risk of ill-informed behavior.

This is particularly troublesome because this sort of cost-based concern arising from variability has a well-established analogue in property law that the law clearly desires to avoid. That analogue is the cost that would arise if property law were to permit unlimited property forms and gives rise to what is known as the numerus clausus theory. This theory explains the law’s hostility toward new, or different, types of property and holds that such heterogeneity is not generally permitted because of the extremely high informational costs associated with such creativity.

This article suggests that this common law concept can, and should, inform our analysis of vesting heterogeneity and that it precipitates strongly against such lack of uniformity. This is because the costs that drive the numerus clausus to hold that variability should be limited are strikingly similar to those created by variability of vesting documents. As such, this theory is relevant here such that the same analysis should be applied to vesting heterogeneity by asking whether a different (or “new”) document is helpful enough to outweigh the informational costs inherent therein.

Based on this reasoning, this article concludes that the law is wrong to systematically ignore heterogeneity in vesting documents. Instead, a numerus clausus type of analysis should be applied to new or different vesting documents to determine whether any inherent lack of uniformity is defensible. Where it is not, uniformity should be imposed.

Matt Festa

September 5, 2012 in Contracts, Finance, History, Mortgages, Property, Property Theory, Real Estate Transactions, Scholarship, State Government | Permalink | Comments (0) | TrackBack (0)

Saturday, August 11, 2012

Can Eminent Domain Solve the Mortgage Crisis?

There has been some discussion over the past couple of months over an innovative proposal to have governments use the eminent domain power to take ownership of underwater mortgages, to decrease the risk of default and then refinance the obligations, all to promote the common good.  Here are some links to give you a sense of the major points of this debate.

The launch of this idea comes from a proposal by Law Professor Robert C. Hockett (Cornell) in his piece It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery.  The abstract:

Respected real estate analysts now forecast that the U.S. is poised to experience a renewed round of home mortgage foreclosures over the coming 6 years. Up to 11 million underwater mortgages will be affected. Neither our families, our neighborhoods, nor our state and national economies can bear a resumption of crisis on this order of magnitude.

I argue that ongoing and self-worsening slump in the primary and secondary mortgage markets is rooted in a host of recursive collective action challenges structurally akin to those that brought on the real estate bubble and bust themselves. Collective action problems of this sort require duly authorized collective agents for their solution. At present, the optimally situated such agents for purposes of mortgage market clearing are municipal governments exercising their traditional eminent domain authority.

I sketch a plan pursuant to which municipalities, in partnership with investors, can condemn underwater mortgage notes, pay mortgagees fair market value for the same, and systematically write down principal. Because in so doing they will be doing what parties themselves would do voluntarily were they not challenged by structural impediments to collective action, municipalities acting on this plan will be rendering all better off. They will also be leading the urgently necessary project of eliminating debt overhang nationwide and thereby at last ending our ongoing debt deflation.

Professor Hockett's idea was then promoted in the media by, among others, Prof. Robert J. Shiller (Yale--Economics & Finance), in the New York Times Piece Reviving Real Estate Requires Collective Action.  As the title indicates, Schiller theorizes the mortgage crisis as in part a collective action problem that can be addressed by Hockett's proposal to use eminent domain to seize underwater mortgages. 

But eminent domain law needn’t be restricted to real estate. It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair market value for them. This is common sense too. The true fair market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.

Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners.

Yesterday in The Atlantic Cities, Amanda Erickson published an excellent overview story about the proposal, Can Eminent Domain Solve our Mortgage Woes?.  Of note to us are the comments by the eminent eminent domain expert (that's not a typo) Prof. Thomas Merrill (Columbia). 

It's a clever idea. But is it legal? "It's very unusual," says Thomas W. Merrill, a law professor at Columbia University who specializes in property law. But, he notes, "this doesn't mean it's unconstitutional."

Before the landmark 2005 Kelo vs. New London decision, Merrill says, there's little doubt that the courts have upheld this kind of law. "Before Kelo, courts took a hands-off approach," Merrill says. In the 1984 case Hawaii Housing Authority vs. Midkiff, the Supreme Court ruled that the Hawaiian legislature could take a property controlled by landlords and sell it back to leasees. "Condemning a landlord's interest in property to transfer to a tenant is not too different," Merrill says.

But Kelo changed that. In that case, the Supreme Court ruled that cities could use eminent domain to transfer land from one private owner to another, and that doing so for economic development purposes constitutes a public use. "At this point, I guess you'd have to say all bets are off in terms of what is and isn't eminent domain," Merrill says.

And finally for now, Prof. Richard Epstein is critical of the idea. From More Nonsense on the Home Mortgage Front: Don't Let Municipal Governments Condemn Mortgages at Bargain Rates:

The idea has already been rightly panned by the Wall Street Journal. But the entire proposal needs still further consideration. First off, Hockett and his group insist that there is a huge collective action problem that prevents the rationalization of mortgage matters. And there is. It is called local government regulations that have blocked the foreclosure measures set out above. Handle those and the externalities to which they refer disappear. No longer do we have owners neglecting property or clogging the courts with endless motions.

Again, this post is just to give you some links to look at the arguments.  From my perspective, these are some fascinating arguments that illuminate not only the mortgage crisis but also the general debate over eminent domain. 

Matt Festa

August 11, 2012 in Constitutional Law, Eminent Domain, Finance, Housing, Local Government, Mortgage Crisis, Mortgages, Politics, Property Theory, Real Estate Transactions, Scholarship, Takings | Permalink | Comments (1) | TrackBack (0)

Thursday, June 21, 2012

In the Conservation Easement versus Mortgage Battle...

the mortgage wins. Because I am a conservation easement nerd savvy academic, I have Westlaw alert me every time a case mentions the term "conservation easement." For years, this yielded very few cases and I only received alerts once a month or so. Lately, I have been getting them daily. Many of these cases come from the tax court and have to do with valuation issues, one line of cases however explores mortgage subordination.

Conservation easements are nonpossessory interests in land that restrict a landowner's use of her property with a goal of yielding a conservation benefit. Many landowners donate conservation easements (i.e. voluntarily restrict the use of their property). Such donations can yield significant federal tax deductions. For a conservation easement (or historic preservation easement) to qualify for a charitable tax break, the restriction must be perpetual. The IRS, Tax Court, and others have acknowledged that it is well nigh impossible to ensure perpetuity of these things. Instead, the IRS has explained that it will consider a restriction to be perpetual if when the restriction is terminated, the beneficiary gets the proceeds. Basically, when a conservation easement is terminated (for any variety of reasons/methods), the holder of the conservation easement will get cash for its porportionate value. Ideally, the holder then uses that money to protect other lands. If your conservation easement doesn't have a provision detailing this procedure, the IRS (in theory) will disallow your deduction. To ensure that the holder will be able to get the proceeds from a land sale, the conservation easement holder must have primary rights to the proceeds. That is, other restrictions on the land must be subordinated (everyone else gets in line behind the conservation easement holder when proceeds from the sale are passed out). This is why the IRS requires any mortgages on the land to be subordinate to the conservation easement.

There have been a few cases from the tax court exploring this issue and most of them seem to involve historic facade easements. In Kaufman v. Commissioner (134 T.C. 182 Apr. 2010), the Tax Court concluded that a facade easement did not qualify for a tax deduction because it wasn't really perpetual because there was a non-subordinated mortgage encumbering the property. The landowners argued that the lack of subordination did not necessarily mean that the holder would not get its proceeds, but the court didn't care. There was a possibility that the facade easement holder would  not be able to receive the proportionate share.

Last week in Wall v. Commissioner (T.C. Memo. 2012-169, June 2012), the Tax Court reached a similar result even though the conservation easement (again a facade preservation easement) declared that it all exisiting mortgages were subordinate. The court did not take the conservation easement at its word and instead looked at the text of the mortgage subordination. The two banks involved executed documents appearing to subordinate the mortgages (based on the title and opening provisions of the documents), but a closer reading revealed that the banks still were claiming that they had "prior claims" in the event of any foreclosures or eminent domain proceedings. The presumption that the mortgages get first dibs at the moola stems mostly from the fact that they encumbered the land prior to the facade easement.

However, I think the main lesson here is that there is almost a presumption against the restrictions being perpetual and any possibility that the proportionate proceeds won't get paid to the conservation easement holder mean no tax deduction.

Jessica Owley

June 21, 2012 in Caselaw, Conservation Easements, Historic Preservation, Land Trust, Mortgages, Property, Real Estate Transactions, Servitudes | Permalink | Comments (0) | TrackBack (0)

Saturday, May 19, 2012

Reiss on Reforming the Residential Mortgage-Backed Securities Market

David J. Reiss (Brooklyn) has posted Reforming the Residential Mortgage-Backed Securities Market, forthcoming in Hamline Law Review (2012).  The abstract:

This essay is a lightly-edited version of a talk given at the “Federal Housing Finance Policy, Secondary Mortgage Market Issues: Causes and Cures, Secondary Mortgage Market Reform” symposium at Hamline University School of Law. The issues that we are struggling with now are, in many ways, the equivalent of the issues that we struggled with during the Great Depression: what should housing policy look like and what decisions should be made in the next five years or so to bring us from crisis to stability? In all likelihood our answer to this question will define the housing market for generations. To help answer the question, this essay will proceed as follows. First, it will provide some context for American housing policy discussions. It will then outline three ethics that inform housing policy. The essay will then focus on one of the key issues that we face — what should happen with Fannie and Freddie as they exit conservatorship? It concludes by highlighting some of the other housing finance issues that must be addressed before we can move forward with a coherent plan of reform. These additional issues include, first, what is the future of the 30-year mortgage? Second, what is the fate of the lock-in, whereby a person could get a guaranteed interest rate prior to closing the loan? Third, what is the fate of the low-down-payment mortgage? Fourth, what is the appropriate role of the FHA in the context of the entire housing finance infrastructure, and in relationship to Fannie and Freddie in particular? And finally, how much will we allow the goal of increasing homeownership to impact the design of our housing finance system?

Matt Festa

May 19, 2012 in Finance, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (1) | TrackBack (0)

Wednesday, May 16, 2012

Furman Center's State of New York City Housing & Neighborhoods

Last week the NYU Furman Center published its latest research on the State of New York City's Housing and Neighborhoods.

The Furman Center is pleased to present the 2011 edition of the State of New York City’s Housing and Neighborhoods. In this annual report, the Furman Center compiles statistics on housing, demographics and quality of life in the City, its five boroughs and 59 community districts.

This year we examine the distribution of the burden of New York City’s property tax, analyze the changing racial and ethnic makeup of city neighborhoods, evaluate the state of mortgage lending in New York City and highlight the Furman Center’s latest research on public and subsidized rental housing.

Here is a link to the full report:

The Furman Center does the leading empirical analysis of land use policy today.  This report shows that "owners of New York City’s large rental apartment buildings are subject to a higher effective property tax rate than owners of one-to three-family homes, and bear a disproportionate share of the city’s overall property tax burden."  Very interesting stuff.  Thanks to Meghan Lewit for the link. Here is the web link to the project, and the full report is here.

Matt Festa

May 16, 2012 in Affordable Housing, History, Housing, Mortgages, New York, Property, Real Estate Transactions, Scholarship, Urbanism | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 15, 2012

Boudreaux on The Housing Bias

Boudreaux Housing BiasPaul Boudreaux (Stetson)--the original Founding Editor of the Land Use Prof Blog-- has published a book that addresses one of the most critical issues in American land use in the 21st century: The Housing Bias--Rethinking Land Use Laws for a Diverse New America (Palgrave MacMillan, 2011).  Here's the SSRN abstract:

As more than 300 million Americans squeeze into our country, and as single-person households now outnumber families of parents and children, it's time to rethink our land use laws that favor the single-family house. Our zoning laws were created in an age that assumed that nearly everyone outside of central cities preferred to live a house separated from neighbors; this assumption is no longer valid and no longer sustainable for a crowded nation. The Housing Bias explores the legal discrimination against apartment buildings and other forms of low-cost residences and how these laws make housing more expensive for modest-income Americans – a key factor in the development of subprime loans and other risky practices that eventually sparked our current economic crisis. Why do our laws prohibit the construction of low-cost housing? It is largely because existing homeowners prefer to exclude them – an astonishing example of law’s granting a legal privilege to wealthier citizens, a privilege that our nation can no longer afford.

This provocative book explores real-world 21st-century controversies of the housing bias. It visits the recent effort of Virginia suburbs to enforce “overcrowding” laws against mostly Latino families who migrated to the area to build new subdivisions, and then moves to New York, where eminent domain is used through a dubious interpretation of law to seize condominiums of middle-class families to build a new pro basketball arena. The book reports on the story of how laws requiring large house lots prevented the construction of a mobile-home community in a growing rural county in southern Michigan, and then examines the failed effort to legalize the widespread phenomenon of small “granny flats” in the backyards of the middle-class homes in the packed city of Los Angeles.

The Housing Bias concludes by exploring how we could update our laws to accommodate the housing needs of a diverse new America, in which half of all households now consist of only one or two persons. The prescriptions range from the complex, such as using state laws to override the power of local homeowners to zone out low-cost housing in certain zones, to the simple, such as facilitating the construction of apartments above suburban malls. It is useful for libraries and for college courses on society or law or for any intelligent reader. Written in an entertaining and jargon-free style, The Housing Bias is essential reading for understanding the flaws and the future of the American community.

One of the great things about land use is that it is fundamentally about places and their stories, and in this book Paul uses these examples to make a larger point about a critical issue of law and policy.  The Housing Bias is definitely worth reading and thinking about.

Matt Festa

May 15, 2012 in Affordable Housing, Books, California, Housing, Mortgage Crisis, Mortgages, New York, Planning, Property, Scholarship, Zoning | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 8, 2012

ABA "Professors' Corner" Teleconference on Property Cases

On Wednesday I'll be part of the ABA's "Professor's Corner" teleconference, to discuss Severance v. Patterson, the Texas Open Beaches Act case. The teleconference is Wednesday, May 9 at 12:30 eastern/11:30 central. All are welcome to participate at the number below. The blurb:

The ABA Real Property, Trust and Estate Law Section’s Legal Education and Uniform Laws Group has a regular (and free!) monthly teleconference, “Professor’s Corner,” in which a panel of three law professors highlight and discuss recent real property cases of note.

Members of the AALS Real Estate Transactions section are encouraged to participate in this monthly call (which is always on the second Wednesday of the month).

The May 2012 call is this Wednesday, May 9, 2012, at 12:30 p.m. Eastern time (11:30 a.m. Central, 9:30 a..m. Pacific). The call-in number is 866-646-6488. When prompted for the passcode, enter the passcode number 557 741 9753.

The panelists for May 9, 2012 are:

Professor Tanya Marsh, Assistant Professor of Law, Wake Forest University School of Law. Professor Marsh will discuss Roundy’s Inc. v. National Labor Relations Board, 674 F.3d 638 (7th Cir. 2012). Decided in March 2012, this case held that Roundy’s (a non-union supermarket chain) did not have the right to exclude third parties (in this case, non-employee union organizers) from common areas of shopping centers in which it operated.

Professor Matt Festa, Associate Professor of Law, South Texas College of Law. Professor Festa will discuss Severance v. Patterson, 2012 WL 1059341 (Tex. 2012). In this case, decided March 30, 2012, the Texas Supreme Court struck down the “rolling easement” theory of public beachfront property access under the Texas Open Beaches Act.

Professor Wilson Freyermuth, John D. Lawson Professor and Curators’ Teaching Professor, University of Missouri. Professor Freyermuth will discuss Summerhill Village Homeowners Ass’n v. Roughley, 270 P.3d 639 (Wash. Ct. App. 2012), in which the court refused to permit the mortgage lender to exercise statutory redemption after its lien was extinguished by virtue of a foreclosure sale by an owners’ association to enforce its lien for unpaid assessments. He will also discuss First Bank v. Fischer & Frichtel, 2012 WL 1339437 (Mo. April 12, 2012), in which the Missouri court rejected the “fair value” approach to calculating deficiency judgments under the Restatement of Mortgages.

It should be an interesting conversation with a good variety issues to discuss. Please feel welcome to participate, whether or not you are a currently a section member.

UPDATE: Thanks to everyone who participated, and to Wilson Freyermuth for moderating and Tanya Marsh for inviting me.  The ABA RPTE Section will be doing this every month, so stay tuned for more interesting discussions to come!

Matt Festa

May 8, 2012 in Beaches, Caselaw, Conferences, Mortgages, Property, Property Rights, Real Estate Transactions, Scholarship, State Government | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 18, 2012

Nelson Symposium--Digging up some Dirt (Law)

Michael Allan Wolf sends along information about the 11th Robert Nelson Symposium at the University of Florida School of Law: “Digging Up Some Dirt (Law): How Recent Developments in Real Property Law Affect Landowners and Local Governments.”  From the description:

“Digging Up Some Dirt (Law): How Recent Developments in Real Property Law Affect Landowners and Local Governments” will welcome national and state experts to explore the impact on landowners and local governments of recent and proposed changes in the law of adverse possession, eminent domain, easements and mortgages.

Here is a link to the brochure.  You can register at the website.  Looks like a timely and interesting event with an excellent lineup of speakers, including Carol Brown (UNC), Ann Marie Cavazos (FAMU), Alex Johnson (UVA), Jessica Owley (Buffalo), and Professor Wolf (UF).

Matt Festa

January 18, 2012 in Conferences, Conservation Easements, Eminent Domain, Local Government, Mortgages, Scholarship, Servitudes | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 14, 2011

Voicu, Been, Weselcouch, & Tschirart on HAMP vs. non-HAMP Loan Modifications

Ioan Voicu (US Gov't--Office of the Comptroller of the Currency), Vicki Been (NYU), Mary Weselcouch (NYU Furman Center), and Andrew Tschirart (US Gov't--OCC) have posted Performance of HAMP versus non-HAMP Loan Modifications--Evidence from New York City.  The abstract:

Policymakers have heralded mortgage modifications as a key to addressing the ongoing foreclosure crisis. However, there is a lack of research about whether modifications are successful at helping borrowers stay current on their loans over the long run and what kinds of modifications are most successful. Our empirical strategy employs logit models in a hazard framework to explain how loan, borrower, property, servicer and neighborhood characteristics, along with differences in the types of modifications, affect the likelihood of redefault. The dataset includes both HAMP modifications and proprietary modifications. Our results demonstrate that borrowers who receive HAMP modifications have been considerably more successful in staying current than those receiving non-HAMP modifications.

Matt Festa

December 14, 2011 in Federal Government, Finance, Housing, Mortgage Crisis, Mortgages, New York, Politics, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, December 8, 2011

Renuart on the Ibañez Time Bomb

Elizabeth Renuart (Albany) has posted Property Title Trouble in Non-Judicial Foreclosure States: The Ibanez Time Bomb? It's the first piece that I've come across to explore the title law ramifications of the Mass. Supreme Judicial Court's Ibañez decision that I alluded to in a post earlier this year.  Hat tip to my colleague, Judy Fox, for sharing it with me. Here's the abstract:

The economic crisis gripping the United States began when large numbers of homeowners defaulted on poorly underwritten subprime mortgage loans. Demand from Wall Street seduced mortgage lenders, brokers, and other players to churn out mortgage loans in extraordinary numbers. Securitization, the process of utilizing mortgage loans to back investment instruments, not only fanned the fire; the parties to these deals often handled and transferred the legally important documents that secure the resulting investments — the loan notes and mortgages — in a careless manner. 
The consequences of this behavior are now becoming evident. All over the country, courts are scrutinizing whether the parties initiating foreclosures against homeowners legally possess the authority to repossess those homes. When the authority is absent, foreclosure sales may be reversed. The concern about authority to foreclose is most acute in the majority of states where foreclosures occur with little or no judicial oversight before the sale, such as Massachusetts. Due to the decision in U.S. Bank N.A. v. Ibanez, in which the Supreme Judicial Court voided two foreclosure sales where the foreclosing parties did not hold the mortgage, Massachusetts is the focal jurisdiction where an important conflict is unfolding. 
This article explores the extent to which the Ibanez ruling may have traction in other nonjudicial foreclosure states and the likelihood that clear title to foreclosed properties is jeopardized by shoddy handling of notes and mortgages. I focused on Arizona, California, Georgia, and Nevada because they permit nonjudicial foreclosures and they are experiencing high seriously delinquent foreclosure rates. After comparing the law in these states to that of Massachusetts, I conclude that Ibanez should be persuasive authority in the four nonjudicial foreclosure states highlighted herein. However, property title trouble resulting from defective foreclosures may be more limited in Arizona and Nevada. The article also provides a roadmap for others to assess the extent to which title to properties purchased at foreclosure sales or from lenders’ REO inventories might be defective in other states. Finally, the article addresses the potential consequences of reversing foreclosure sales and responds to the securitization industry’s worry about homeowners getting free houses. 

Jim K.

December 8, 2011 in Finance, Financial Crisis, Mortgage Crisis, Mortgages, Real Estate Transactions, Remedies, Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, December 5, 2011

Morgan Stanley says US moving toward "Rentership Society"

I came across a link to this Bloomberg report in reading for my previous post on the Leinberger-Kotkin debate.  The article is a few months old, but I still think it's highly relevant: U.S. Moves Toward Home 'Rentership Society,' Morgan Stanley Says, discussing a report on housing.

The U.S. homeownership rate has fallen below 60 percent when delinquent borrowers are excluded, a sign of the country’s move toward a “rentership society,”Morgan Stanley said in a report today. . . .

The homeownership rate reached an all-time high of 69.2 percent in 2004 as relaxed lending standards fueled home sales and President George W. Bush promoted an “ownership society.” Mortgage delinquencies, foreclosures and tighter credit for housing loans are reducing property buying, [Morgan Stanley analysi Oliver] Chang said.

“Taken together they are forcibly moving the country away from being an ownership society,” Chang, based in San Francisco, said in an e-mail. “This change is only beginning, and is moving the country towards becoming a rentership society.”

A real estate professional demurs, but look at the reason why:

Most Americans still aspire to own their houses and don’t want to be renters forever, said Rick Davidson, president and chief executive officer of Century 21 Real Estate LLC in Parsippany, New Jersey.

“It isn’t about the financial aspects, but about building a family and having a part of the American dream,” Davidson, whose company is a unit of Realogy Corp., said today during an interview at Bloomberg’s offices in New York. “What really drives purchases at the end of the day is emotional and has to do with lifestyle.”

We're still conditioned to think of homeownership as the sine qua non of the American Dream--but it's not necessarily in our financial or economic interest; it's emotional and about lifestyle.  But is there an adequate range of opportunities presented for Americans to choose (emotionally?) between different forms of lifestyle?  I believe that at their base, issues of housing, community, and urban form are primarily cultural.

Matt Festa

December 5, 2011 in Financial Crisis, History, Housing, Landlord-Tenant, Mortgage Crisis, Mortgages, Property, Real Estate Transactions, Suburbs | Permalink | Comments (1) | TrackBack (0)

Wednesday, November 9, 2011

Ballot Box Zoning -- A Response to Festa

OK, I'll bite.  Matt has laid down the gauntlet with his criticism of the initiative process.  This subject is of great importance to land use profs because, at least in many sunbelt states, a good deal of land use policy is made through direct democracy -- so-called "ballot box zoning."  In this post, I want to respond to some of Matt's criticisms and offer a very tentative defense of ballot box zoning.  For those who are interested, I have defended ballot box zoning at greater length (although I ultimately call for its abolition anyway) in this paper.

I must first concede to Matt that the initiative process has serious deficiencies.  He mentions transparency and voter ignorance.  The social science literature confirms that these are major problems.  I would also add a few more: the initiative process is often captured by special interest groups, as money and organizational resources are often decisive in initiative contests; the initiative tends to favor the affluent and well educated, which is not surprising since the affluent and well educated are more likely to vote on initiatives; voters are easily confused by deceptive wording on initiatives, and initiative advocates often deliberately use deceptive terms to confuse voters; the initiative process reduces complex issues to a simplistic yes/no dichotomy in which hyperbolic sound bytes replace rational discourse.  I suppose I could go on, but you get the point.

So what virtues could the initiative process possibly have?  I want to focus specifically on the land use initiative, although some of my comments may be generalizable.  Although it is often asserted that local politics are controlled by homeowners who seek to limit or manage growth, that is generally true only in smaller municipalities.  Sunbelt states like Texas and California, however, have a disproportionate number of medium to large-size municipalities, dubbed "boomburbs" by sociologists Robert Lang and Jennifer LeFurgy.  The larger size of these municipalities gives homeowners less political power.  At the same time, sunbelt boomburbs have often pursued headlong development as a means of economic growth and to overcome fiscal constraints imposed by constitutional or political limitations on raising tax revenue.  Lang and LeFurgy accordingly assert that these municipalities tend to be in thrall to the "growth machine," a matrix of developers and related cohorts who facilitate urban growth.  As I further argue in my paper, the fact that many of these boomburbs use at-large voting structures rather than ward voting systems further enhances the power of developers and dilutes the ability of neighborhood groups to fight development.

Obviously, this system is less than ideal for homeowners.  And let's face it: while we might hate those NIMBYs, they have some pretty good reasons for opposing new growth.  For years it has been national policy to induce Americans to purchase property through a combination of incentives, including low-interest mortgages and municipal zoning ordinances that provide some assurances to homeowners that their property values, and hence their ability to pay off their mortgages, will be protected against unpredictable declines.  New growth and the externalities that accompany it are very likely to diminish property values, and hence prejudice the ability of homeowners to finance what is likely to be by far their most significant asset.  Existing homeowners are in effect subsidizing new growth through diminished property values, and although city officials claim that everyone benefits from new growth, it is often a concentrated group of homeowners alone who must bear a disproportionate degree of the cost.  As I questioned in a previous post, it can even be argued that homeowners have a regulatory takings claim -- but courts have never recognized such a cause of action.

As envisioned by its Progressive-era architects, the initiative is supposed to correct the defects in the ordinary legislative process, particularly the dominance of special interests.  And that is exactly what ballot-box zoning appears to do in the sunbelt states -- the very states where boomburbs, at-large voting and the growth machine dominate the political landscape are also the states where ballot-box zoning is most robust.  Ballot box zoning has proven to be a powerful weapon with which homeowners can fight back against the growth machine, because prevailing on a local initiative requires only a one-time infusion of cash and a constituency that is easily organized and highly motivated -- ie, a group of neighboring homeowners who are all extremely ticked off about land use changes around their neighborhood.  This can counteract the repeat player and other advantages that the developer has in the legislative process.  Granted, the initiative process itself invites special interest abuses and all sorts of other problems, but it seems no less messy or dysfunctional than the system of government it is designed to counterbalance. 

Ken Stahl

November 9, 2011 in California, Density, Development, Exurbs, Local Government, Mortgages, NIMBY, Politics, Suburbs, Sun Belt, Takings, Texas, Zoning | Permalink | Comments (0) | TrackBack (0)

Monday, October 31, 2011

Bevilacqua: In Massachusetts, the Other Shoe has Dropped

Earlier in the year, I blogged about a decision (Ibañez) by the Massachusetts Supreme Judicial Court finding as invalid a land title claimed by a foreclosing bank that could not show that it held the mortgage at the time of foreclosure.  Prior to that ruling, a stated practitioners' standard recognized as curative post-foreclosure assignments of mortgages.  The Bevilacqua v. Rodriquez case presented the Court (previously blogged about here) with similarly sloppy handling of the mortgage assignments but also a third-party purchaser (and redeveloper) of the property from the foreclosing bank.   

Earlier this month, the Mass. SJC again found that the foreclosing bank had no title to transfer and that the title claimant's more sympathetic position with regard to the botched securitization process did not create title.  The Court dismissed his "try title" action and suggested that his equitable rights to the (as yet unforeclosed) mortgage might support a possible reforeclosure--a less than reassuring directive if the purchaser has invested in the property more than the lien value of the mortgage.  

Adam Levitin (Georgetown) submitted a winning A.C. brief in the Bevilacqua case.  His Credit Slips blog post on the decision can be found here. Congrats!

Jim K. 

October 31, 2011 in Caselaw, Financial Crisis, Mortgage Crisis, Mortgages, Property, Property Rights, Real Estate Transactions, Remedies | Permalink | Comments (0) | TrackBack (0)