PropertyProf Blog

Editor: Stephen Clowney
Univ. of Arkansas, Fayetteville

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Friday, December 31, 2010

Why the East Side of Town is Usually Poor

It has to do with wind and industrial pollution.

Steve Clowney

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December 31, 2010 | Permalink | Comments (0) | TrackBack (0)

Yellin on The Case for a Reliance Interest Associated with Economic Development Takings

David Yellin (Georgetown) has posted Masters of Their Own Eminent Domain: The Case for a Reliance Interest Associated with Economic Development Takings  (Georgetown). Here's the abstract:

When the Supreme Court, in Kelo v. City of New London, held that economic development was a valid justification for the use of eminent domain, there was a massive public outcry. In the resulting backlash, many communities enacted legislation aimed at restricting economic development takings, but most of these reforms were largely symbolic and had little or no actual effect on such takings. This Note accepts the reality that economic development takings will inevitably occur, and identifies the greatest threat associated with such takings as the risk that when they do they may cause more harm than good. For example, after the failure of the development project at issue in Kelo, Pfizer has recently announced that they will be shutting down their facility in New London, Connecticut, taking 1,400 jobs with them. As a result, the price New London paid by condemning the homes of its residents has been for nothing and the city is left even worse off than before.

This Note analogizes the failures of eminent domain takings to some of the harms that arose during the rash of plant shut-downs in the 1980s and early 1990s. Faced with the loss of the foundations of local economies, municipalities and scholars alike tried to come up with ways to protect the reliance that communities place in economic actors. This Note argues that although many of these proposals were not suitable for responding to the problems of plant closings, they are well-suited to use in the takings context. To that end, I discuss key differences between the two scenarios that justify applying some of the most progressive of these proposals in the takings context. Specifically, I propose that courts recognize a reliance interest, similar to an easement, which gives a municipality a legally enforceable right against corporate entities that benefit from economic development takings.

Steve Clowney

December 31, 2010 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 29, 2010

Five Surprising Findings From the US Census

From the Christian Science Monitor.

Steve Clowney

December 29, 2010 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 28, 2010

Woe Betide Those Who Disregard Property Norms

I spend a great deal of time writing about behavior with regard to property that is legal, but socially unacceptable.  But the denizens of South Boston live it.  When someone there engages in the legal but socially unaccepable behavior of parking in a public spot she didn't shovel out, her neighbors enforce property norms with screwdrivers and the occasional plunger:

By dawn on Tuesday, the space savers were out in abundance on East Seventh Street in South Boston. Someone had staked out a neatly shoveled parking spot with a potted plant, its dead fronds trembling in the wind. Someone else had reserved a space with a hot-pink beach chair.

Elsewhere in the neighborhood, the epicenter of the parking wars that erupt here after a snowstorm, the narrow streets were lined with bar stools and coolers, end tables and shopping carts, all meant as warnings: This shoveled-out space is mine until the snow melts. Occupy it at your own risk.

. . . .

When snow puts parking spots at a premium, as the blizzard that just left 18 inches of snow here did, snatching someone’s marked space can lead to hurled insults, slashed tires or worse — in 2005, a man was arrested after smashing a car window with a plunger during an argument over a freshly shoveled spot.

“A lot of people around here carry screwdrivers in their trunk,” said Kim Rader, 35, who had just started digging out her Mazda and predicted it would be a two-hour job.

BOSTON-1-articleLarge-v2 
Note, too, the normative strategy of informally marking property in which one has invested one's labor, as a means of communicating a claim rightful possession.  Whaler Ghen would undoubtedly be proud of his Massachusetts descendants.  Let's just hope they leave the bomb-lances at home.

Picture from the New York Times article linked above.

Mark A. Edwards

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December 28, 2010 | Permalink | Comments (2) | TrackBack (0)

African Farmers Booted Off Land They Thought They Owned

For anyone interested in international property issues, the NY Times reports on a conflict between subsistence farmers in Mali (who unkowningly don't have good title to the land they farm) and international agricultural investors:

Across Africa and the developing world, a new global land rush is gobbling up large expanses of arable land. Despite their ageless traditions, stunned villagers are discovering that African governments typically own their land and have been leasing it, often at bargain prices, to private investors and foreign governments for decades to come.

Organizations like the United Nations and the World Bank say the practice, if done equitably, could help feed the growing global population by introducing large-scale commercial farming to places without it.

But others condemn the deals as neocolonial land grabs that destroy villages, uproot tens of thousands of farmers and create a volatile mass of landless poor.

Steve Clowney

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December 28, 2010 | Permalink | Comments (2) | TrackBack (0)

Monday, December 27, 2010

Loan Servicers and Modification: the Critical Flaw in Satisfying Our Self-Interest

Since I've been blogging incessantly about the grinding, often needless, sometimes unlawful, disaster that is the foreclosure wave, I was heartened to read in this week's New York Times an article by Gretchen Morgenson that acknowledged both the irrationality of some foreclosures and the severe external costs they impose on others.  But Morgenson's article does more: it pinpoints the flaw that is producing these disastrously irrational results.

Happily, the article describes the successful effort of a homeowner to modify their mortgage loan in order to keep their home -- an effort that became successful only after the New York Times contacted the borrowers' loan servicer.  But such modifications are exceedingly rare.

Morgenson accurately notes that "millions of Americans have been sucked into the foreclosure maelstrom that is ruining their finances and their lives."  The fundamental question about the foreclosure wave, according to Morgenson, is: "should homeowners simply [continue to] be foreclosed upon en masse, or should banks work with them to modify mortgages and reduce the loans to levels that homeowners can manage?"  Perhaps another, equally important question is, why should we care?

The answer is simple: it's in our self-interest to care very deeply that banks modify mortgage loans to prevent foreclosure.  That may seem counter-intuitive: why would it be in our self-interest to, in essence, reward borrowers who borrowed irresponsibly during the housing market madness of recent years?

Here's why: in Morgenson's words,

Foreclosures blight neighborhoods, put financial pressure on families and drive down local real estate values.  Investors who hold loans in securitization trusts are also hurt be foreclosures, because recoveries on these properties are low.  And consumers, made more cautious by a crippled housing market, spend less freely, curbing the economy's growth.

So, why, then are loan modifications exceedingly rare?  Because one group is profiting immensely from foreclosures: loan servicers.  The very same people that most borrowers first contact seeking loan modification.  As Morgenson says, "loan servicers can profit significantly by pushing borrowers into foreclosure."

In other words -- and this is absolutely critical to understanding the foreclosure wave -- loan modifications are in the self-interest of every actor affected by foreclosures except the one actor to whom borrowers first turn when seeking a modification: loan servicers.  Loan servicers have the opposite incentive: to refuse modification and force foreclosure.  Loan servicers are externalizing the costs of foreclosure onto the rest of us, and internalizing the benefits.  That, of course, is what they should do, as rational, profit-maximizing entities.

We need to change the rules of the game so that it is in loan servicers' self-interest (through carrot, stick, or a combination of both) to permit loan modification.  Until we do, loan modification will remain exceedingly rare and foreclosure will continue, catastrophically, en masse -- even though it is in nearly every party's interest that just the opposite is true.  

Mark A. Edwards

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December 27, 2010 in Home and Housing, Mortgage Crisis | Permalink | Comments (0) | TrackBack (0)