Friday, October 21, 2011

Wilson on Navigating the Land Use Maze

Perusing the latest issue of Tierra Grande, the magazine of the Texas A&M Real Estate Center, I came across this short article by Reid C. Wilson called All the Right Moves: Navigating the Land Use Maze.  The "takeaway":

Land use regulations can be daunting. Landowners and developers must understand why land use regulation exists; appreciate the tough position of city staff members; do their own homework on specific regulations; and reserve adequate time for the process.

Wilson is one of the leading real estate attorneys in Texas.  This brief article is a good introduction to the process of navigating land use regulation, and might be a good read for students and professionals who want to start learning about it.

Matt Festa

October 21, 2011 in Development, Local Government, Planning, Politics, Real Estate Transactions, Texas | Permalink | Comments (0) | TrackBack (0)

Thursday, October 13, 2011

Chan, Sharygin, Been, & Haughwout on What Happens to Distressed Mortgage Borrowers and Their Homes

Sewin Chan (NYU Wagner School), Claudia Sharygin (NYU Furman Center), Vicki Been (NYU Law), and Andrew Haughwout (Federal Reserve Bank--NY) have posted Pathways after Default: What Happens to Distressed Mortgage Borrowers and Their Homes? The abstract:

We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default – from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with whether a borrower behind on mortgage payments receives a legal notice of foreclosure, and with what ultimately happens to the borrower and property. In particular, we focus on a borrower’s ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: the terms of the loan; the borrower’s credit history; current loan-to-value and the presence of a junior lien; the borrower’s post-default payment behavior; the borrower’s participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower’s race and ethnicity.

Matt Festa

October 13, 2011 in Affordable Housing, Housing, Mortgage Crisis, Mortgages, New York, Race, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 5, 2011

Orszag on Renting our way to a Housing Recovery

Peter Orszag, former OMB director for the Obama Administration, has a piece in Bloomberg where he argues that the U.S. Can Rent Its Way Toward a Housing Recovery:

No matter what the government might try to do to break the housing-economy cycle, the deleveraging process will still be painful and take some time. But that’s not an argument against action; just because a headache can still hurt some even if you take aspirin doesn’t mean you should skip the aspirin. One thing the Obama administration could do now -- probably with Republican support -- would be to attack the oversupply of housing stock by allowing a tax write-off for investors who buy empty properties and rent them out.

Very interesting. If renting is the new owning, there might be something to this idea. I'm generally in favor of reducing rather than increasing tax incentives to promote real estate purchases, but if Orszag's proposal were narrowly tailored towards purchases specifically for rental housing, it might make some sense.

Matt Festa

October 5, 2011 in Federal Government, Housing, Mortgage Crisis, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, September 29, 2011

McLaughlin on Conservation Easements and Merger

Nancy McLaughlin (Utah) has made another fine contribution to our understanding of the use of long-term land protection devices with her essay Conservation Easements and the Doctrine of Merger, 77 J. Contemp. Probs ___ (forthcoming 2011).  Here's the abstract:

Conservation easements raise a number of interesting legal issues, not the least of which is whether a conservation easement is automatically extinguished pursuant to the real property law doctrine of merger if its government or nonprofit holder acquires title to the encumbered land. This article explains that merger generally should not occur in such cases because the unity of ownership that is required for the doctrine to apply typically will not be present. This article also explains that extinguishing conservation easements that continue to provide significant benefits to the public through the doctrine of merger would be contrary to the conservation and historic preservation policies that underlie the state enabling statutes and the federal and state easement purchase and tax incentive programs. 

Jim K.

September 29, 2011 in Conservation Easements, Property, Property Rights, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, September 23, 2011

Pet Friendly Home Designs from Japan

Given all the bad real estate news around the world, it's nice to see something from the lighter side - cutting-edge, pet-friendly home designs from Japan.  (As an interesting sidelight, note the tiny footprints of these houses.)

According to [the designer's] estimates, the cost to design a two-story, detached wooden home built to cat specifications ranges from 3.2 million yen (about $42,000 in U.S. dollars) for a 20-square-meter space (about 215 square feet) -- on up to 13 percent of the total construction costs for a space measuring more than 50 square meters (about 538 square feet), the company reports.

[C]at-friendly features...include:

    a cat-accessible loft that features skylights and windows;
    a multistage cube of shelves with cat beds; and
    a floor-to-ceiling scratching post column, wrapped in hemp rope.

And for dog lovers?

Features of a dog-friendly home typically include proper ventilation to eliminate hair shed; odor absorbent materials; and a dog shower or toilet. Other dog-friendly home features include: dog-level peepholes in garden walls, pet-door installations in each room, outdoor courtyards in dense urban housing areas, and scratch-resistant flooring.

"For dogs it's ... more difficult (than designing a home for cats)," Koyama said, adding that special attention must be given to materials used for the floors and stairs.

The cost to design a two-story wooden home to dog specifications can range from 3 million yen (about $39,000 in U.S. dollars) for a 20-square-meter space (about 215 square feet) up to 12 percent of total construction costs for a space exceeding 50 square meters (about 538 square feet).

American home designers and real estate developers, take note of this potential niche market in an otherwise troubled housing sector!

Jamie Baker Roskie

September 23, 2011 in Architecture, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, September 15, 2011

Juergensmeyer & Nicholas on Growth Management in the Recession

Julian Conrad Juergensmeyer (Georgia State) and James C. Nicholas (Florida) have posted Loving Growth Management in the Time of Recession, published in The Urban Lawyer, vol. 42 (2011). The abstract:

The current deep and long lasting recession has challenged the value of local government growth management programs – especially those which rely heavily on developer funded infrastructure finance programs such as impact fees. An examination of the characteristics of the current recession reveal that its severity is due in large part to excessive exuberance in housing development in the years preceding the burst of the housing bubble. Many local governments intensified the consequences of over-building by adopting ambitious infrastructure programs funded by impact and other fees charged to developers upon the issuance of building permits or other development approval actions. With residential building permit issuance at near zero in many formerly double-digit growth areas, local governments can no longer pay for nor do they need much of the planned or already constructed infrastructure. The authors advocate greater restraint by local governments in accepting growth projections and issuing bonds to be repaid through impact fee collection. Most importantly, the authors suggest as a pre-condition of development approval requiring developers to submit market studies establishing probable market demand for the proposed development.

Matt Festa

September 15, 2011 in Development, Housing, Impact Fees, Local Government, Mortgage Crisis, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Sunday, September 11, 2011

9/11 and land use at Ground Zero

Today America commemorates 9/11 on its tenth anniversary.

While the tragedy and heroics of that day appropriately take precedence, 9/11 has created long-running and controversial land use issues since 2001. From the logistics of managing the rescue operations and the excavation, to last year's "ground zero mosque" kerfuffle, issues from the local to the international have played out in discussions over land use at the WTC site in lower Manhattan.

Two of the most controversial land use questions, especially as the years passed, have been (1) how should 9/11 be remembered at the site, and (2) what and how to build/rebuild to replace the twin towers.

On the first question, public memory and historic presentation, you may have seen the news that the 9/11 Memorial opens with a dedication ceremony today. The project seems to be a classic American example of public-private cooperation:

The National September 11 Memorial & Museum at the World Trade Center Foundation, Inc. began formal operations in the spring of 2005 and worked with the Lower Manhattan Development Corporation on the design and construction management plan. In the summer of 2006, the organization assumed responsibility for overseeing the design and working with The Port Authority of New York and New Jersey (PANYNJ), the construction manager on the project. . . . In the beginning of October 2006, the Honorable Michael R. Bloomberg, Mayor of the City of New York, became Chair of the Foundation’s Board of Directors. Following the election of the Mayor as Chairman, the Foundation named Joseph C. Daniels as President.

At the website, there are links to a lot of of great photos and interactive views of the site and the Memorial.

The second enduring issue--whether and what to rebuild on the site--has generated a lot of criticism as a decade has passed without any replacement for the towers. This issue has been a perfect storm of land use issues: real estate, economics, regulation, federalism, urbanism, architecture, planning, transportation, culture, history, and of course, politics, politics, politics. For what it's worth, my impression has been that on the one hand, it's too simplistic to just say we should have built a ginormous tower immediately to stick it to the terrorists--yes, NY got the Empire State Building up in about 15 months during the Great Depression, but that's not realistic in lower Manhattan today. On the other hand, I think that the decade-long wait for putting some of the world's most valuable real estate to use says something important about the effect of the burdens that we have placed on property in the modern regulatory environment. Many of the procedural and political issues and delays might have been for justifiable ends, but really, a decade?

Things are finally moving along, though. From the Wall Street Journal's Developments real estate blog comes the helpful post Six Questions on Rebuilding the World Trade Center. The signature tower is in progress:

What’s the status of the office buildings? Some are further along than others. One World Trade Center, the site’s signature office building, is going up about a floor per week and is currently around 80 stories out of a total 104, and it’s already the tallest structure in Lower Manhattan.

On the delays:

What’s taken so long? Conflict has been a big theme of the rebuilding. There have been battles with insurers, wars between agencies, and repeated fights between the public sector and private developer Larry Silverstein over how to rebuild and fund his office towers. Those fights have often led to stalemates. Add onto that the fact that the site is extraordinarily complex — it’s often likened to a Rubik’s cube, but it’s sometimes more like a messy ball of rubber bands. The mechanics of the site are all intertwined — exits and emergency systems for the PATH station are in the neighboring towers, and deliveries to One World Trade Center need to run underneath 2, 3, and 4 World Trade Center. This means everything underground had to be built more or less at once, with precision. There is a laundry list of public agencies involved, and historically they hadn’t been great at communicating with each other.

The WSJ also has a great interactive graphic Exploring Ground Zero, Ten Years Later.

9/11 deserves our remembrance today, our continuing thanks for those serving in harm's way, and--secondarily--our commitment to good land use at this very important place for commerce, human activity, and public memory.

Matt Festa

September 11, 2011 in Architecture, Development, Downtown, Federal Government, History, Local Government, New York, Planning, Politics, Property, Real Estate Transactions, Redevelopment, Urbanism | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 24, 2011

NYU Furman Center on Mortgage Lending in the Recession

The NYU Furman Cente for Real Estate and Urban Policy has published some great stuff over the last few weeks. Here's one of their terrific recent reports:

We are pleased to share with you the latest publication from the Furman Center’s Institute for Affordable Housing Policy, Navigating Uncertain Waters: Mortgage Lending in the Wake of the Great Recession.

This report summarizes our February 4, 2011 Roundtable of the same name, and provides an in-depth exploration of credit availability and lending patterns during the recession. The event brought together 75 policymakers and academics from across the nation to assist government, the mortgage industry, academics, and non-profits address the challenge of mortgage credit need and availability through informed discussion and research.

By publishing this report, we aim to make the discussion and insights shared during the Roundtable available to a wider audience. We hope you find the materials informative, and we look forward to receiving your feedback.

Matt Festa

August 24, 2011 in Finance, Financial Crisis, Housing, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, August 18, 2011

South Texas job announcement: Property

Here's some exciting news, for me anyway. South Texas College of Law is looking to hire a property scholar:

South Texas College of Law invites applications from both experienced and entry-level faculty for one or more full-time, tenure-track positions beginning in the 2012 - 2013 academic year. While all candidates will be considered, we particularly seek candidates interested in teaching the required property courses, and commercial law (including courses covering the Uniform Commercial Code). Other areas of interest include real estate development and finance, and international law. We seek candidates with outstanding academic records who are committed to both excellence in teaching and sustained scholarly achievement. Members of minority groups and others whose backgrounds will contribute to the diversity of the faculty are especially encouraged to apply.

South Texas College of Law provides a diverse body of students with the opportunity to obtain an exceptional legal education, preparing graduates to serve their community and the profession with distinction. The school, located in downtown Houston, was founded in 1923 and is the oldest law school in the city. South Texas is a private, nonprofit, independent law school, fully accredited by the American Bar Association and a member of the Association of American Law Schools, with 55 full-time and 40 adjunct professors serving a student body of 1,300 full and part-time students. South Texas is home to the most decorated advocacy program in the U.S. and the nationally recognized Frank Evans Center for Conflict Resolution.

Please send letters of interest and resumes to Professor Kevin Yamamoto, Chair, Faculty Appointments Committee, South Texas College of Law, 1303 San Jacinto Street, Houston TX 77002; Tel: (713) 646-2945; Email: kyamamoto@stcl.edu

Via Fran Ortiz, a property colleague on the hiring committee. You can contact Kevin or Fran about the position, and of course I'd be more than happy to talk with anyone about the great opportunities for teaching and scholarship at South Texas College of Law, or about living in the diverse and dynamic city of Houston.

Matt Festa

August 18, 2011 in Finance, Houston, Property, Real Estate Transactions, Scholarship, Texas | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 20, 2011

Cities With Not-So-Bad Housing Markets

According to CNBC/MSN, of the top ten cities with housing prices that have stayed flat or gone up during the recession, seven are in the south.  Okay, LU Prof Blog readers, you've been pretty quiet this summer - give us your two cents on why this is so.  Extra points to commenters from the Carolinas or Arkansas, where things seem to be quite rosy!

Jamie Baker Roskie

July 20, 2011 in Financial Crisis, Mortgage Crisis, Real Estate Transactions | Permalink | Comments (1) | TrackBack (0)

Sunday, June 5, 2011

Homeowner Forecloses on Bank

Yes, you read that right.  A homewoner in Collier County, Florida foreclosed on a bank branch!  Bank of America gets Padlocked after Homeowner Forecloses on It.

It started five months ago when Bank of America filed foreclosure papers on the home of a couple, who didn't owe a dime on their home.

The couple said they paid cash for the house.

The case went to court and the homeowners were able to prove they didn't owe Bank of America anything on the house. In fact, it was proven that the couple never even had a mortgage bill to pay.

A Collier County Judge agreed and after the hearing, Bank of America was ordered, by the court to pay the legal fees of the homeowners', Maurenn Nyergers and her husband. 

The Judge said the bank wrongfully tried to foreclose on the Nyergers' house.

So, how did it end with bank being foreclosed on?  After more than 5 months of the judge's ruling, the bank still hadn't paid the legal fees, and the homeowner's attorney did exactly what the bank tried to do to the homeowners. He seized the bank's assets.

About an hour after the sheriff locked the doors, the bank branch manager handed the attorney a check.  Nice to see at least one instance of good news for Florida homeowners in the foreclosure crisis.  Thanks to Dru Stevenson and Louie Rodriguez for the pointer.

Matt Festa

June 5, 2011 in Financial Crisis, Housing, Humorous, Mortgage Crisis, Mortgages, Real Estate Transactions | Permalink | Comments (1) | TrackBack (0)

Monday, May 23, 2011

Fitzpatrick on Land Banking and Disposition of Vacant REO Properties

Among the more visible, lasting land-use legacies of the foreclosure crisis is an abundance of vacant REO (Real Estate Owned) properties held by foreclosing lenders.  Tom Fitzpatrick (Federal Reserve Bank of Cleveland) has posted How Modern Land Banking Can Be Used to Solve REO Acquisition Problems in REO and Vacant Properties: Strategies for Neighborhood Stabilization (Federal Reserve Banks of Boston and Cleveland). Here's the abstract:

Modern land banks hold great promise as a dynamic community development tool that can help shrinking cities and local nonprofits overcome the two biggest challenges they face when trying to acquire REO property: interest in only a small number of properties and a lack of funding for acquisition. Practice provides us with a powerful example of their successes. As regions struggle to control their inventories of vacant, abandoned, or REO properties, they would be remiss not to consider the innovative modern land banking approach that is currently being employed in states like Ohio.

Jim K.

May 23, 2011 in Economic Development, Financial Crisis, Mortgage Crisis, Mortgages, Nuisance, Real Estate Transactions, Redevelopment | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 18, 2011

Rose on the Rights of Tenants of Residential Properties in Foreclosure

Henry Rose (Loyola-Chicago) has posted The Due Process Rights of Residential Tenants in Mortgage Foreclosure Cases, 41 N. M. L. Rev. ___ (forthcoming 2011). Here's the abstract:

The purpose of this article is to explore the rights of tenants who reside in buildings undergoing foreclosure to receive notice and an opportunity to be heard when foreclosures threaten to terminate their tenancies. The federal Protecting Tenants at Foreclosure Act of 2009 (PTFA) will significantly reduce the incidence of residential tenancies being terminated as a result of foreclosure. However, PTFA offers weak procedural protections if the mortgagee or the person who acquires ownership pursuant to a foreclosure seeks to terminate the tenancies of residents in the foreclosed building. In those states that require judicial foreclosures, the Due Process Clause of the Fourteenth Amendment to the United States Constitution should afford tenants faced with termination of their tenancies due to foreclosure with notice and an opportunity to be heard before their tenancies are terminated. In states that allow non-judicial foreclosures, Due Process protections are not likely to be available to tenants due to a lack of state action in the foreclosure process. PTFA should be amended to afford all tenants, including those who reside in non-judicial foreclosure states, with notice and an opportunity to be heard before their tenancies are terminated pursuant to a foreclosure.

Jim K.

May 18, 2011 in Affordable Housing, Federal Government, Financial Crisis, Housing, Landlord-Tenant, Mortgage Crisis, Mortgages, Property, Property Rights, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Sunday, May 15, 2011

Washington Post Investigative Report on HUD

Courtesy of Mark Edwards at Property Prof, a link to what looks like an important and troubling report, Million-Dollar Wasteland: HUD's Mismanagement of America's Affordable Housing.  Here's Edwards' initial reaction:

Given that Congress is looking for areas to budget-cut, I suspect this series could be a game-changer for HUD.  That's unfortunate, because the need for affordable housing in the United States is enormous.  No doubt there is waste at HUD.  But I suspect that the committed and well-intentioned people at HUD are trapped in a downward spiral: they aren't given enough resources to adequately oversee the projects they fund; the projects they fund are wasteful; so their resources are cut.

Matt Festa

May 15, 2011 in Affordable Housing, Federal Government, Housing, HUD, Politics, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, May 5, 2011

Massachusetts SJC Hears Arguments in Bevilacqua (and so can you)

The Massachusetts Supreme Judicial Court heard oral arguments Monday in a foreclosure title case called Bevilacqua v. Rodriguez. Earlier in the year, I blogged about the Court's Ibanez opinion invalidating a bank's foreclosure title based on a botched securitization. Bevilacqua concerns the validity of the title claim of a foreclosure sale purchaser. In the Land Court proceedings below, U.S. Bank was unable to establish its ownership of the underlying loan leading to a declaration that the foreclosure and sale left the original owner's title unaffected.

In addition to video of the oral arguments (brought to you by the good folks at Suffolk Law), the SJC website features an amicus brief supporting the decision below submitted by Adam Levitin (Georgetown) and three other leading real estate law professors. If the Court agrees with these prominent academics that "U.S. Bank, N.A. was no more capable of passing good title to the Rodriguez property than a common thief", then the decision could have broad implications for titles coming out of nonjudicial mortgage foreclosures in Massachusetts and possibly many other states. But, that would only happen if slapdash securitizations turned out to have been somewhat commonplace. The Court should issue a ruling in the next few months.

Jim K.

May 5, 2011 in Caselaw, Finance, Financial Crisis, Mortgage Crisis, Mortgages, Property, Property Rights, Real Estate Transactions, Remedies | Permalink | Comments (0) | TrackBack (0)

Boyack on Keeping HOAs Above Water in Foreclosure Storms

Andrea Boyack (GW) has posted Community Collateral Damage: A Question of Priorities. In it, she deals with the very timely issue of lien priority for statutory condominium and homeowner association (HOA) dues. Many such common interest communities are facing high homeowner foreclosure rates and an inability to maintain services without a viable collection mechanism. The Maryland state legislature has now passed a lien priority bill of the kind discussed in the article. The Governor should be signing it into law any day now. Here's the abstract:

Today’s soaring mortgage default rate and the uncertainty and delay associated with mortgage foreclosure proceedings threatens to cause financial tragedies of the commons in condominiums and homeowner associations across the country. Assessment defaults in privately governed communities result in an inequitable allocation of upkeep costs, and current law provides no way to prevent this spillover effect. But the collateral damages caused by delayed foreclosures and insufficient recoveries can be minimized by gradually increasing the priority position of the association lien.

In a majority of states, association liens are completely subordinate to the first mortgage lien. At foreclosure of the mortgage lien, the junior priority assessment lien will be extinguished whether or not there are sufficient proceeds to reimburse for community charges. Assessment delinquencies grow over time, so the longer it takes to complete foreclosure, the greater the costs to the neighborhood. Although several states have adopted a limited lien priority for up to six months’ worth of unpaid assessments, foreclosures today take far longer than six months, and the amount ultimately owed to a community can be significant and far exceed that cap. Federal housing policy impacts the resolution of the issue because the FHA, Fannie Mae and Freddie Mac only permit qualifying mortgages to be subject to a six-month assessment lien priority. The decelerating pace of foreclosure further exacerbates the already unjustifiable financial impact borne by non-defaulting neighbors. The lien priority status quo fails to adequately protect communities in today’s context of widespread and delayed foreclosures and under-collateralized mortgage loans. Decreasing the first mortgage lien’s priority during a foreclosure delay would mitigate the harm.

Lien priority statutory changes can protect association finances in the future, and such provisions may be applied retroactively as well. In other contexts, states have held that changes to a lien priority regime can apply to existing associations and existing mortgages without unconstitutionally impairing contract or property rights. This is particularly true where the association’s lien is deemed to be created as of the date the organizational documents for the community were recorded (prior in time to any unit’s mortgage). Bank lobbyists have historically opposed any enhanced assessment lien priority, but supporting property upkeep and making assessments more predictable and collectible would actually benefit lenders by shoring up the value of their collateral. Better certainty with respect to homeowner payment obligations will also enable more responsible credit underwriting and contribute to economic recovery. Shoring up assessment lien priority not only ensures a fair allocation of community costs, but also helps to contain the current housing market decline.

Jim K.

May 5, 2011 in Common Interest Communities, Financial Crisis, Mortgage Crisis, Mortgages, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 3, 2011

Introducing Troy Rule

The Land Use Prof Blog is delighted to welcome its newest guest blogger, Professor Troy A. RuleRule-t Prof. Rule is an Associate Professor at the University of Missouri School of Law.  He teaches land use, secured transactions, and sales & leases, and his research focuses on renewable energy and property law.  He's an alum of BYU and Chicago and worked in the finance industry before a law practice in Seattle focused on commercial real estate and wind energy.

We've featured his scholarship several times on the blog, including Shadows on the Cathedral: Solar Access Laws in a Different LightRenewable Energy and the Neighbors; and, most recently, Sharing the Wind.  His next piece is Airspace in a Green Economy, forthcoming in the UCLA Law Review.  He was also recently on a well-received panel at ALPS with some of our regular Land Use bloggers. 

It's a great privilege to introduce Troy and to add him to the list of outstanding new voices in land use law that we've been lucky enough to host here.  It's fantastic that he has volunteered to guest-blog during May, which is the month that most of us love to procrastinate by reading blogs, but are too busy grading to write very much.  So thanks to him for signing up!  On top of all of his scholarly accomplishments, Troy Rule might just have the single greatest name of any junior scholar in the legal academy.  We look forward to reading.

Matt Festa

May 3, 2011 in Clean Energy, Property, Real Estate Transactions, Scholarship, Teaching, Wind Energy | Permalink | Comments (0) | TrackBack (0)

Saturday, April 23, 2011

Boyack on the Role and Control of Fannie Mae and Freddie Mac

Andrea J. Boyack (George Washington) has posted Laudable Goals and Unintended Consequences: The Role and Control of Fannie Mae and Freddie Mac, forthcoming in the American University Law Review.  The abstract:

The United States is struggling to emerge from an era of loose mortgage underwriting standards – lapses in credit analysis that led to origination and securitization of toxic loans. The fallout has been crippling, costing borrowers their homes, investors their money, and the government its taxes.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) passed last summer was the first comprehensive effort to address the problems in the system that led – in sequence – to the subprime crisis, the housing crisis, and the financial crisis. The Dodd-Frank Act, which contains over 2,300 pages of legislation, is very broad as well as very detailed – even though hundreds of rulemakings have yet to completely define its parameters. But this extensive legislation deliberately did not deal with the biggest elephant (or perhaps elephants) in the room: Fannie Mae and Freddie Mac. These government sponsored enterprises (GSEs), behemoths of the secondary mortgage market, are currently in conservatorship and have (so far) cost taxpayers over $130 billion. Yet our current residential mortgage market is utterly dependent upon them for credit and liquidity. With political pressures to stop taxpayer bailouts and the reality of a frozen mortgage market should Fannie Mae and Freddie Mac cease to exist, when it comes to the GSEs, the administration feels damned if they do and damned if they don’t.

For decades, the U.S. mortgage finance system was the envy of the world – the only industrialized nation to have a significant segment of housing costs covered by private capital through a securitization investment system. The United States is the only country to routinely offer homebuyers 30-year fixed-rate pre-payable mortgage loans. Better capital accessibility has made more homeownership opportunities more available to more Americans. The GSEs have performed a vital role in financing the production of rental housing as well. Our real estate capital markets set the gold standard worldwide for what is possible in freeing trapped asset values and increasing the wealth of borrowers and investors alike.

Over the past decade, this system undoubtedly became unhinged – and it is critical to reform its failings. But a complete wind-down of the government sponsored enterprises that are the linchpin of our housing finance system goes too far. Subtracting Fannie Mae and Freddie Mac from the finance equation may very well be market suicide, and the repercussions for borrowers, communities and investors would be dire indeed. Furthermore, this extreme step is unnecessary: the system’s failures can be adequately (and better) addressed within the GSE framework.

Undoubtedly there is still ample dirty “bathwater” to throw out as we reform the mortgage finance market system. But it would be an excruciating mistake to bow to political pressures and throw out the “baby” too. Current and future mortgage borrowers will only be adequately “protected” if they are empowered through access to capital, appropriately constrained by valid underwriting criteria. A well functioning market – rather than political scapegoating – is the best way to emerge from the recession and protect future buyers and investors alike.

This article first discusses the history and purposes of the GSEs and what went wrong with the system that led to the 2008 conservatorship and bailout. With reference to the Obama Administration’s February 2011 Report to Congress, “Reforming America’s Housing Finance Market,” Part II analyzes proposals to reform and wind down the GSEs in light of their likely legal and market impact. Part III offers some general suggestions on better approaches to crafting America’s future mortgage market and advocates for solutions more precisely tailored to remedy apparent systemic problems while achieving the identified policy goals.

One of several interesting articles coming out this year that will add to our knowledge about Fannie, Freddie, and the mortgage crisis.  An interesting take on reforming the system from within--check it out.

Matt Festa

April 23, 2011 in Federal Government, Finance, Financial Crisis, History, Housing, Mortgage Crisis, Mortgages, Politics, Real Estate Transactions, Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 12, 2011

NYU Furman Center's State of NYC Housing & Neighborhoods

Vicki Been and the NYU Furman Center for Real Estate & Urban Policy have announced the release of their 2010 State of New York City's Housing and Neighborhoods report.  Here's the email announcement, posted with permission:

Dear Friends and Colleagues,

We are pleased to present the 2010 edition of the State of New York City’s Housing and Neighborhoods annual report. As you well know, this report is a critical resource for data on housing, demographics, and quality of life indicators for each borough and for the city’s 59 community districts.

This year, we examine multi-family rental properties, a critical source of housing for more than four in ten New Yorkers. We find that multi-family rental properties received more foreclosure notices in the last two years than any period since the early 1990s. The study finds that smaller multi-family rental buildings (5-19 units) are most likely to receive a foreclosure notice among the multi-family properties, while the largest properties (100 or more units) have experienced the sharpest uptick in foreclosures in the recent years. The report also finds evidence that renters experience deteriorating living conditions when multi-family rental properties fall into financial distress and foreclosure.

This year’s report also includes new chapters: Getting to Work in New York City, which presents an analysis of commuting patterns in New York City, and Public and Subsidized Rental Housing in New York City, which finds that nearly one in five residential units (18.4%) in the city is publicly supported.

A look at the trends in this year’s State of New York City’s Housing and Neighborhoods reveals that the state of New York City’s housing market remains uncertain.  After dramatic declines in housing prices in 2008 and 2009, the prices of condominiums and multi-family buildings began to bounce back in 2010, but the prices of single-family and 2-4 family homes continued to decline. In Manhattan, where the market avoided the sharp declines of the outer boroughs, housing prices are down only 9.9 percent from their peak, compared to 27.8 percent citywide.

Mortgage lending remained low in 2009, but the number of refinancing loan originations jumped as homeowners took advantage of historically low interest rates. While the housing crisis has been felt across the city, it has had a disparate impact on different racial and ethnic groups. Homeownership grew more quickly among white and Asian families in the last decade than Hispanic or black households, and declines in home purchase during the recession were most dramatic among black and Hispanic borrowers.

Despite the recession, most of the city’s social and economic indicators have improved in the last decade. Median inflation-adjusted incomes increased about five percent between 2000 and 2009. Poverty declined citywide, falling from 21.2 percent in 2000 to 18.7 percent in 2009. The population has continued to grow, led by the Asian population, which increased by 32 percent between 2000 and 2010. Health and quality of life factors have improved since 2000, and the city has experienced overall reductions in asthma hospitalizations, infant mortality and crime.

As always, we eagerly await your comments and feedback. If you would like to receive a hard copy, please email furmancenter@nyu.edu.

Vicki Been, Ingrid Gould Ellen, Sarah Gerecke

Fascinating information; you can download the full report at the link.

Matt Festa

April 12, 2011 in Affordable Housing, Housing, Local Government, Mortgage Crisis, Mortgages, New York, Planning, Property, Race, Real Estate Transactions, Scholarship, Urbanism | Permalink | Comments (1) | TrackBack (0)

Monday, March 21, 2011

Brescia on State Enforcement Actions and the Robo-Sign Scandal

Raymond H. Brescia (Albany) has posted Leverage: State Enforcement Actions in the Wake of the Robo-Sign Scandal.  The abstract:

In the fall of 2010, in one of the largest scandals to ever hit the American court system, information gathered from lawsuits across the country revealed that tens of thousands of foreclosure filings were likely fraudulent - if not outright criminal. These revelations sparked a nation-wide investigation by all 50 state attorneys general to assess not only the extent of the scandal and its potential impacts but also potential legal and policy responses to such behavior. One of the tools at the state attorneys general’s disposal that might rein in this behavior includes each state's Unfair and Deceptive Acts and Practices (UDAP) laws. Such laws typically prohibit "unfair" and "deceptive" practices and often give consumers, as well as state attorneys general, the ability to bring affirmative litigation to rein in practices that violate their terms. UDAP laws serve a critical consumer protection function by filling in gaps in the law where other, more targeted statutes might not cover practices that have a harmful impact on consumers. Since their inception, UDAP laws have been used to rein in abusive practices in such areas as used car sales, telemarketing and even the sale of tobacco products. This paper explores the availability of UDAP laws and the remedies they provide to rein in the range of practices revealed in the so-called "robo-sign scandal." It concludes that such practices - the false affidavits, reckless claims and improper notarizations - all violate the essence of most state UDAP laws; accordingly, the remedies available under such laws may be wielded by state attorneys general to halt abusive foreclosure practices throughout the nation. Such remedies include civil penalties, actual and punitive damages, attorney's fees and injunctions. What's more, UDAP actions in light of robo-sign abuses could help chart a path towards a more robust mortgage modification regime, one that would result in principal reduction, which is the clearest path out of the current crisis.

Matt Festa

March 21, 2011 in Finance, Financial Crisis, Housing, Mortgage Crisis, Mortgages, Property, Real Estate Transactions, Remedies, Scholarship, State Government | Permalink | Comments (0) | TrackBack (0)