Friday, February 7, 2014
Joseph Singer (Harvard) has posted Foreclosure and the Failures of Formality, or Subprime Mortgage Conundrums and How to Fix Them (UConn). Here's the abstract:
The subprime mortgage crisis was not only an economic disaster but posed challenges to traditional rules of property law. Banks helped create the crisis by marketing mortgages through unfair and deceptive practices. They induced many consumers to take out high-priced loans they could not afford and then passed the risk to investors who were fooled into thinking these were safe investments. These practices violate traditional norms underlying both consumer protection and securities regulation statutes. In addition, U.S. banks greased the wheels of the mortgage securitization process by creating a privatized mortgage registration system that has undermined the clarity and publicity of property titles. Because of securitization procedures and the lax record-keeping practices, the banks have undermined the property recording system; we no longer have clear public titles to real property in the United States. To fix the mess they left us, we must adopt norms to govern the mortgage market that will protect both homeowners and investors from predatory loans while promoting legitimate property transactions. We also need to fix the mortgage registration system so we have a legal infrastructure for property that both works well and reflects the norms of a free and democratic society.
Thursday, February 6, 2014
Examing some of New York’s quickly gentrifying neighborhoods, Justin Davidson notes that the “link between a neighborhood’s economic fortunes and the number of people being forced to move away, while anecdotally obvious, is difficult to document”:
In 2005, Lance Freeman, a professor of urban planning at Columbia, examined national housing statistics to see whether low-income residents move more often once their neighborhoods start to gentrify. His conclusion was that they don’t. Mobility, he suggested, is a fact of American life, and he could find no evidence to suggest that gentrification intensifies it. Instead, it appears that many low-income renters stay put even as their rents go up. … [Freeman] doesn’t doubt that displacement occurs, but he describes it as an inevitable consequence of capitalism. “If we are going to allow housing to be a market commodity, then we have to live with the downsides, even though we can blunt the negative effects to some extent. It’s pretty hard to get around that.”
That infuriates the British scholar Tom Slater, who sees Freeman’s data studies as largely irrelevant because, he has written, they “cannot capture the struggles low-income and working-class people endure to remain where they are.” Freeman waves away the binary rhetoric. “You can’t boil gentrification down to good-guy-versus-bad-guy. That makes a good morality play, but life is a lot messier than that.”
(HT: Andrew Sullivan)
Daniel Kelly (Notre Dame Law School) has posted Restricting Testamentary Freedom: Ex Ante Versus Ex Post Justifications (Fordham Law Review) on SSRN. Here's the abstract:
The organizing principle of American succession law—testamentary freedom—gives decedents a nearly unrestricted right to dispose of property. After surveying the justifications for testamentary freedom, I examine the circumstances in which it may be socially beneficial for courts to alter wills, trusts, and other gratuitous transfers at death: imperfect information, negative externalities, and intergenerational equity. These justifications correspond with many existing limitations on the freedom of testation. Yet, disregarding donor intent to maximize the donees’ ex post interests, an increasingly common justification for intervention, is socially undesirable. Doing so ignores important ex ante considerations, including a donor’s happiness, a donor’s incentive to work, save, and invest, and the structure and timing of a donor’s gifts. If donors believe courts may not facilitate their intent, donors may be less happy, accumulate less property, and alter gifts during life. Moreover, because the law often affects donor behavior, ignoring donative intent to benefit particular donees may harm not only the donors but also donees as a class. Thus, the living may themselves benefit if the law allows a certain degree of “dead hand” control.
Wednesday, February 5, 2014
A quick Q&A with Benny Kass of the Chicago Tribune:
Q: I refinanced a two-year adjustable-rate mortgage into a 30-year fixed loan. Does that equal a new note or does the original note of the prior mortgage continue on to the new bank or servicer?
A: When you obtain a mortgage loan, there are two important legal documents you will sign: a promissory note (IOU the money) and a deed of trust (some states still use mortgages). The mortgage document is recorded among the land records in the jurisdiction where your property is located. Why? This puts the world on notice that there is a lien (a cloud) on your title, so that the lender's interest is secured.
When you sell that property, the loan is paid off and the lien is released by recording a formal document on land records. The promissory note should be returned to you, marked "paid and canceled."
Basically, when you refinanced, it's the same as a new loan. The original adjustable-rate mortgage will be released from land records, the new mortgage document will be recorded and you will sign a new promissory note.
Bottom line: When you pay off a mortgage loan with a refinance, make sure it is released from land records. Most commercial lenders will file it themselves on the appropriate land records. But some lenders do not release but send you the note marked paid and canceled and put the burden of preparing and filing the release on you. Often, the clerks at the recorder of deeds office can be helpful.
And, if your seller took back financing — or you obtained a mortgage loan from a private party — you must make sure you get the note back and arrange for a release. My suggestion: have the release prepared, and you should personally give the final payment to your lender and at the same time have him/her sign the release, get it notarized and get back a copy of the note marked "paid and canceled."
In situations where you cannot personally deal with the lender, have the final payment sent to your attorney with instructions that it will be released to the lender only when the release and the note have been returned.
James Ely (Vanderbilt) has posted Government Forbearance: Myth or Reality? (Brigham-Hanner Property Rights Conference J.) on SSRN. Here's the abstract:
This paper examines the thesis advanced by Thomas M. Merrill and Henry W. Smith in Property (2010) that various factors, including the political process, induce governments to forbear from unduly interfering with the rights of property owners. Expressing confidence in government, the authors prefer minimal judicial oversight of private property. This paper argues that legislators are more responsive to perceived political imperatives than to constitutional limits that dictate restraint. It concludes that the political process is unlikely to afford much protection to individual owners in the context of eminent domain or land use regulation. Moreover, any protection provided by the political system is likely to be skewed in favor of the wealthy and politically well-connected, and not assist the most vulnerable. Nor can federalism be seen as an effective deterrent to government abuse of property rights. Exit strategies are irrelevant to fixed assets, such as land, which cannot leave a jurisdiction to escape onerous taxes and regulations. Finally, the paper challenges constitutional doctrines which marginalize the rights of property owners while providing greater judicial solicitude for other claims of individual rights. Rejecting the government forbearance thesis, it finds no excuse for judicial abdication in enforcing the property clauses of the Constitution.
Tuesday, February 4, 2014
Obesity is a serious problem. It makes to invest in programs that reduce the health and social costs related to the nation's bulging waistlines. Many activists think cities should focus on ensuring that all citizens--especially those in low income areas--have easy access to fresh fruits and vegetables. One (very) small-scale study out of Philadelphia suggests this may not be the most efficient expenditure. The gist:
Researchers at the London School of Hygiene & Tropical Medicine and Penn State University report that an initial pilot study, which focused on the results from one of these grocery stores on the surrounding community, shows little effect. Without more research, they say, it’s difficult to know if these interventions are going to have any impact on obesity rates at all.
While the study only observed one store, checking in on local residents six months after its opening, the results are compelling. Only 27% of surveyed residents in the intervention area made the new supermarket their main store, and just over half of them used it for any shopping at all. And while residents perceived a greater availability of fresh fruits and vegetables, there was no significant increase in their daily intake of these foods, nor did the researchers see a significant decrease in body mass index (BMI).
Huihua Nie (Renmin University of China) has posted Hold-Up, Property Rights, and Reputation on SSRN. Here's the abstract:
By introducing asymmetric information of investors’ abilities and finitely repeated games into the classic hold-up model, this paper revisits the relationship between property rights and reputation under incomplete contracting environment and obtains some different insights. First, even facing holdup agents can make efficient investments due to the reputation effect in some periods of relationship, which is sharply contrary to existing research. Second, although reputation is an incentive tool for agents, property rights are complementary or even necessary for reputation, and reputation itself is not enough to motivate agents to make first-best investments without ownership. Third, this paper explains underinvestment, efficient investment, and overinvestment in a unified dynamic model of property rights.
Monday, February 3, 2014
The NY Times has a long story about how the shift from rural to urban modes of living has disrupted traditional Chinese culture:
In 2000, China had 3.7 million villages, according to research by Tianjin University. By 2010, that figure had dropped to 2.6 million, a loss of about 300 villages a day. [...]
But in recent years, Chinese scholars have begun to recognize the countryside’s vast cultural heritage. A mammoth government project has cataloged roughly 9,700 examples nationwide of “intangible cultural heritage,” fragile traditions like songs, dances, rituals, martial arts, cuisines and theater. About 80 percent of them are rural.
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Robin Kundis Craig (Utah)
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Roger Bernhardt (Golden Gate)
6. [65 downloads] Zombie Mortgages, Real Estate, and the Fallout for the Survivors
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9. [56 downloads] Community Knowledge and Its Collapse: History of an Early American Property Regime
Maureen E. Brady (Yale – Ph.D. candidate)
Thursday, January 30, 2014
The housing finance market is very different up north:
The standard mortgage in Canada isn't the 30-year fixed, as it is in the U.S., but a five-year mortgage amortized over 25 years. That means the loan balance has to be refinanced at the end of five years, exposing the borrower to any increase in rates that has occurred in the interim. Prepayment penalties for borrowers hoping to exploit a decline in rates, on the other hand, are very steep.
This looks as if it's a clear win for banks, which are minimally exposed to increased rates and protected from prepayments. But Canadian mortgages are also portable -- if you move before the five-year term is up you can apply your old mortgage to your new home. (If it's a more expensive home, you take out a new loan for the excess.) That restores some of the balance in the borrower's favor.
More important, observed Canadian economists Arthur Donner and Douglas Peters in a 2012 report for the Pew Charitable Trusts, the short term of Canadian mortgages allowed them to be funded from local short-term bank deposits at retail bank branches. The mortgage-lending system in Canada to this day resembles the American banking system up to the 1970s, when deregulation took hold and placed fancy, risky and careless lending at the center of the business model. (By the way, mortgage interest isn't tax-deductible in Canada, so there's no incentive to over-borrow.)
From the Wall Street Journal: China’s largest search engine on Sunday launched “Baidu Migrate,” a map that displays Lunar New Year travel routes in China and their popularity over a rolling eight-hour period. The Lunar New Year, or Spring Festival, holiday in China is considered the world’s largest seasonal migration of people as hundreds of millions of people flock home to reunite with their families.
Most of the popular routes in China are in line with recent migration patterns from rural to urban areas. The most popular route Monday afternoon, for example, was from Shanghai to the city of Chuzhou in eastern Anhui province, an inland province where many of China’s migrant workers come from. The next most popular route was from Beijing to Chengdu in central Sichuan province — another inland province known for its outflow of migrant workers.
Amnon Lehavi (Interdisciplinary Center Herzliyah - Israel) has posted Can the Resale Housing Market Be Split to Facilitate Long-Term Affordability? on SSRN. Here's the abstract:
This paper argues that a comprehensive affordable housing policy requires the formal splitting of the homeownership market into (at least) two distinct segments: one designated for the general public and following a conventional market pricing mechanism, and the other designated for eligible households and controlling both initial supply and subsequent sales of housing units through regulated affordability-oriented pricing mechanisms. To facilitate the systematic design of an affordable housing segment that remains intact upon household turnover, the paper introduces two alternative cap-on-resale mechanisms: “Mixed Indexed Cap” (MIC) and “Pure Indexed Cap” (PIC). It explains how such models could promote long-term social mobility, allowing multiple low- and modest-income households to engage in capital building by sequentially enjoying increments of appreciation of properties in the affordable housing segment.
Wednesday, January 29, 2014
Shinzo Abe, prime minister of Japan, has an interest in land use. Zoning restrictions featured prominently in a list of changes Abe promised will sweep the country in the coming months:
Soon, our deregulation package will be set in motion. Over the next two years, in designated areas, no vested interests will remain impervious. For example, in Japanese cities aspiring to world-class status, limits on floor space will become a thing of the past. We will soon see high-quality housing, business complexes, and zero-emissions towns appearing, one after another.
Matt Yglesias provides a brief analysis:
Japan already has very dense cities and a falling population, so this reform is probably less necessary than in a country like the United States or France or the United Kingdom. That said, I believe the typical Japanese dwelling is quite small so upzoning could do a lot to improve quality of life.
Elmien Du Plessis ( North West University) & Gino Frantz (Johannesburg) African Customary Land Rights in a Private Ownership Paradigm on SSRN. Here's the abstract:
With the advent of constitutionalism in South Africa, customary law is elevated to a position where it now is recognized alongside legislation and the common law as one of the sources of law.
This is a major shift from the previous position, where customary law was only recognized in as far as it was easily ascertainable with sufficient certainty or codified, and then only applied when it was not in conflict with the common law.
Despite the constitutional imperatives for the recognition of customary law, and interpretation that is in conformity with the constitution (that includes the recognition of customary law), the courts seem reluctant to do so.
This paper will look at the South African courts’ interpretation of ownership of land held in terms of customary law, and will aim at providing alternative interpretations to “ownership” of customary land.
Tuesday, January 28, 2014
Over at the Local Government Law Blog, Paul Diller has an extensive post on the recent fracking decision of the Pennsylvania Supreme Court. Diller writes:
I commend to your attention the Pennsylvania Supreme Court’s decision in Robinson Township v. Pennsylvania, which invalidated the state law – “Act 13” – that controversially sought to facilitate hydraulic fracturing, or “fracking,” for natural gas throughout the state. Act 13 preempted much, if not all, of local control over land use with respect to fracking, and even made local governments liable for money damages if they obstructed the fracking permitting process. [...]
In a majority opinion written by Chief Justice Castille, the majority held that Act 13 conflicted irreconcilably with the Environmental Rights Amendment (ERA) to the Pennsylvania Constitution. In other states with environmental clauses in their constitutions, the courts have generally shied away from reading them as more than hortatory. Alternatively, courts have interpreted them as merely imploring the legislature to protect the environment, while leaving it to the legislature to decide whether to act. Robinson Twp. breathes new life into the judicial enforceability of at least one state’s ERA and, within Pennsylvania, the enterprise of independent state constitutional interpretation more generally.
The whole post is definitely worth a read.
This short piece, to be published in a special issue of Property Law Review, aims to provoke interest in thinking about the spatial dimensions of property (particularly in land). This reflects the burgeoning interest in the geographies of law more generally. While there are many ways in which one can "think spatially", it is important to begin by noting that "space" itself is capable of at least two meanings. An "absolute" view regards space as a priori and asocial, and thus calculable and geometric. A relational view, conversely, regards space as meaningful only in relation to human practices. Both these views of space, I suggest, can be discerned when thinking about property. Indeed, they often collide in important ways.
Monday, January 27, 2014
The N.Y. Times has a realy thorough piece on the history of 12204 Backus Drive in Bowie, Maryland. Built in 1990, the home incapsulates all the highs and lows of American real estate over the last 25 years:
But by 2002, prices had been rising for roughly a decade — and Roberto Ramos and Chong Kim, owners of a seafood takeout counter, bought 12204 Backus Drive for $299,000. They put 10 percent down and took out a fixed-rate mortgage.
Like so many houses at the time, this one quickly became a source of cash. Mr. Ramos and Ms. Kim refinanced twice, which allowed them to siphon out $175,000. In retrospect, such behavior may seem reckless; hundreds of thousands of people wouldn’t have lost their homes in the crash if they hadn’t depleted their equity during the boom. But for those with good timing, like Mr. Ramos and Ms. Kim, the system worked: In April 2006, they sold the house for $540,000, more than enough to pay off their loans. The value of 12204 Backus Drive had risen 80 percent in four years.
Even at that price tag, the house struck Leslie Johnson as a good deal. Rising prices had taken on an aura of inevitability, and the whole country seemed to believe that they would never fall. [...] The $540,000 price of the Backus Drive house seemed beyond her reach. But after providing documentation of her income (which she declined to disclose publicly), she was told that she had been preapproved. “They told me to go ahead and buy and just refinance later on to a more manageable mortgage payment,” she said.
Xiaobo Zhao (Shanghai University) has posted Contaminated Land Legislation in China: Status Quo and Challenges (J. of Envtl Management & Tourism) on SSRN. Here's the abstract:
China is experiencing increased land contamination in recent years. A number of social and economic problems have developed and must be dealt with, in some cases, as a matter of urgency. Those problems have been neglected for years and so far there is no nationwide specific legislation to address the contaminated land issue. However, numerous relevant provisions on addressing soil or land protections can be found under the current legal system, particularly in the context of environmental regulatory system. Those provisions address broad issues which include soil quality protection, land reclamation, land use planning and relevant liabilities. This paper explores the regulatory frameworks for addressing contaminated land issues. It concludes that the current regulatory framework in China can not fully address contaminated land problems, thus a specific legislation at the national level is imminently required.
Friday, January 24, 2014
From the LA Times:
A couple of manifestations stand out. One is the prevalence of measles in Europe -- especially Britain -- and the U.S. Measles is endemic in the underdeveloped world because of the unavailability of the MMR (measles, mumps and rubella) vaccine.
But in the developed world it's an artifact of the anti-vaccination movement, which has associated the vaccine with autism. That connection, promoted by the discredited British physician Andrew Wakefield and the starlet Jenny McCarthy, has been thoroughly debunked. But its effects live on, as the map shows. Vaccine panic also plays a role in the shocking incidence in the U.S. of whooping cough, also beatable by a common vaccine.