Friday, November 11, 2016
For all you fellow mortgage finance lovers out there, Dale A Whitman (Missouri-Emeritus) has posted Transferring Nonnegotiable Mortgage Notes (Florida A&M Law Review) to SSRN. Per Dale, the article discusses not only what is known about the legal requirements for transferring nonnegotiable notes, it also discusses at length the following additional topics:
- The history and background of the Holder in Due Course doctrine.
- How to identify whether a note is negotiable (including notes secured by FHA and VA mortgages)
- How negotiable notes (and the mortgages securing them) must be transferred
- The impact of UCC Article 9 on transfers of both negotiable and nonnegotiable notes.
These topics were (and remain) super important as we continue to study the aftermath of the housing crisis and the ways in which financial institutions used the foreclosure system. The linkage between commercial law and property law is not often well-understood, but Dale does a great job showing the connection. Great work, Dale!
Wednesday, November 9, 2016
I know everyone has been paying close attention to the presidential race, but there was something else important happening yesterday: SCOTUS heard oral arguments on whether municipalities can bring claims under the Fair Housing Act (Title VIII of the Civil Rights Act of 1968).
The question originates from a lawsuit filed by the City of Miami against Bank of America that was consolidated with another case where the city sued Wells Fargo. In both cases the city argued that these financial institutions had engaged in a long and targeted practice of making risky loans to minority borrowers (loans that were 5x more likely to result in a default than loans made to white borrowers). Further, the city alleged that in the wake of the 2008 crisis the banks refused to allow these distressed homeowners to refinance or engage in a loan modification, even through they routinely offered such deals to similarly situated white borrowers.
The scope of who can serve as a party under a Fair Housing Act claim raises interesting policy issues. The city argues that it is within the "zone of interest" for standing purposes because the discriminatory loan practices created large numbers of defaults and foreclosures, which in turn resulted in the proliferation of abandoned and blighted properties that hit hard the bottom line of cities when they needed resources the most.
The suit was initially filed against BoA in July 2013 and against Wells Fargo in July 2014, but both were dismissed by the district court for lack of standing and on the basis that the city had failed to prove that the bank's behavior was the proximate cause of the harm alleged. In September 2015, the 11th circuit remanded both of these cases for further proceedings on the proximate cause determination and held that the city did indeed have standing under the Fair Housing Act.
Now it's up to the eight justices to decide. There are interesting arguments on both sides. The city asserts that local governments are in a unique position to guard against housing discrimination and that because of the collective interest that they represent cities should be allowed to use tools like the Fair Housing Act to police bad behavior. Incidentally, this is in line with a recent article by Kathleen Engel at Suffolk University regarding local government responses to the housing crisis. The financial institutions, on the other hand, argue that the city's position would take the scope of the Fair Housing Act too far and that the connection between the loss of property tax revenues and discriminatory lending practices is too attenuated and specultaitve in this case to provide relief to the city.
Stay to tuned to see what happens!
Monday, November 7, 2016
As Kate McKinnon (playing Hillary Clinton) said on Saturday Night Live last week, “We can’t tell you who to vote for, but on Tuesday, we all get a chance to choose what kind of country we want to live in.”
I, too, reflect what McKinnon said—vote for whomever you want, but by all means, go out and vote. And while you are voting, remember the history of voting rights and how voting rights historically have been tied to property ownership. Voting rights in the colonies before the American Revolution were extended only to “freeholders,” freeholders being white men who owned land worth a certain amount of money. After the American Revolution, most states continued to include a requirement that voters owned property, believing that a voter should have an “economic stake” in society before he could be trusted to vote. (Shout out to Vermont for being in 1791 the first state to eliminate all property ownership requirements for voting.) For an interesting history on how property ownership impacted voting rights, read now-Professor Jacob Katz Cogan’s (Cincinnati) student note, The Look Within: Property, Capacity, and Suffrage in Nineteenth-Century America, 107 Yale L.J. 473 (1997).
Today, whether you own property does not impact whether you can vote for Clinton or Trump, and that is a positive change for the country. So if you haven’t already, go exercise your right to vote today and be happy you don’t have to prove how much land you own in order to cast your ballot.
Happy Election Day! Go vote!
Saturday, November 5, 2016
I just received the sad news of the passing of Andre van der Walt. Andre was the South African Research Chair in Property Law and a Distinguished Professor of Law at Stellenbosch University in South Africa. A champion of progressive theories of property, Andre made major contributions to South African constitutional property rights law and educated many generations of lawyers and property scholars. His many excellent books, articles, chapters, and other contributions can be found here.
He will be deeply missed.
Friday, November 4, 2016
- Kathryn (“Kappy”) Allen, Graves Dougherty Hearon and Moody, Austin, TX
- Carl Circo, Ben J. Altheimer Professor of Legal Advocacy, University of Arkansas School of Law
- Beat Steiner, Holland & Hart LLP, Boulder, CO
- Wilson Freyermuth, John D. Lawson Professor of Law and Curators’ Distinguished Teaching Professor, University of Missouri School of Law
Sunday, October 30, 2016
Halloween is a big deal in New Orleans. Everyone dresses up, regardless of whether they are trick-or-treating with children. People deck out their yards with awesome decorations. Law firms shut down early so folks can get to parties. Like everything else in New Orleans, we treat Halloween as one massive party.
This year, I am dressing up as the most property-related item I could think of: a house. And not just any house. I will be going as a house from the board game Monopoly. This goes along with our amazing Monopoly-themed family costume: our eight-year-old is the “In Jail / Just Visiting” space; my best friend is the race car; and my husband is Rich Uncle Moneybags (aka the Monopoly Man). Our costumes are complete with specialized trick-or-treat bags, too: a “get out of jail free card” bag for the munchkin, a series of property deeds for me, Monopoly money for my husband, and dice for the race car game piece. We are all in for a rockin’ and (dice) rollin’ good time this Halloween.
The theme for our family costume was inspired by the absurd amount my family plays Monopoly. In September, we had a month-long game going in which we played for 45 minutes before bed time e-v-e-r-y n-i-g-h-t. I had to make more money because the bank ran out. It was nuts.
Monopoly is a game filled with lessons about property and property law. (Obviously there are lessons about why we need antitrust law, too, but those are pretty apparent given that the name of the game is monopoly.) Some properties are more profitable to own than others, and the most profitable are not always the most expensive. Take Mediterranean and Baltic. Cheapest board spots to buy, but even if you get a hotel built on them, it will only cost $450. Or take Boardwalk or Park Place. Sure, they are the most expensive and it will cost $2,000 in rent once there’s a hotel on Boardwalk, which is almost always enough to knock someone out of the game. But it also costs $200 per house, which means you have to fork out $1,000 before you get a hotel and most people don’t have that type of dough laying around in the game.
No, the best properties to get are the pink (St. Charles, States, Virginia), orange (St. James, Tennessee, New York), red (Kentucky, Indiana, Illinois), and yellow (Atlantic, Ventnor, Marvin Gardens) properties. These are all affordable themselves, and putting houses on them won’t break the bank. But if someone lands on them once they are developed, it starts to seriously deplete your opponent’s cash supply. Hit them more than once and you are staring defeat in the eyes.
The same is true for real property (“real” as in actual property, not imaginary property). Buy the most expensive house on the block in the most expensive neighborhood and you may not see the return you want. Buy the cheapest house in the least expensive neighborhood and the same result may occur. Everyone wants to hit the sweet spot—the house that costs the least but had the most value to give back.
Monopoly also teaches about the value of developing property. Sure, it’s nice to own a bunch of random pieces of property around the board, but you don’t see serious cash flow until you start developing your properties with houses and hotels.
Remember the Community Chest and Chance cards? Those are filled with property lessons. We have explained the concept of taxes to our eight-year-old more times than I’m guessing most parents have, simply because she wants to know why she is being assessed $115 per hotel for street repairs. In a city like New Orleans where pot holes can swallow your car, it’s not that hard to convince the little one that street repairs are important, but how street repairs get funded was a dinner time conversation all because of Monopoly.
Sure, Monopoly pushes the capitalist ideology hard (and then pushes it a little more), so the Bernie Sanders’ followers may not enjoy the game quite as much. And, yes, Monopoly doesn’t exactly highlight the nuance of bankruptcy law. You either have money and win or you are bankrupt and lose; there’s no second chance or bankruptcy laws to take advantage of, so maybe it’s not played in Donald Trump’s house either. But it has helped our daughter understand some basic principles of buying and selling property, investing in property, developing property, etc. And it’s provided us with hours of family game time entertainment, not to mention, some pretty stellar, homemade Halloween costumes.
Alan C. Weinstein (Cleveland-Marshall) has posted Regulation of Religious Uses Under the Religious Land Use and Institutionalized Persons Act on SSRN. Here's the abstract:
This article examines how the courts have applied the Religious Land Use & Institutionalized Persons Act (RLUIPA) in the context of conflicts between religious "uses," such as churches, and local land use regulation. In RLUIPA, Congress has attempted to empower churches when they choose where and how they build a sanctuary or assemble for worship and to restrain local governments when they seek to apply zoning or landmark regulations to those churches. In this environment, local governments face a difficult task in seeking to avoid RLUIPA claims and in evaluating their likelihood of prevailing if challenged. After discussing how the courts have ruled on these conflicts, the article notes how local officials can take steps to lessen the likelihood of a potential claim, including: a comprehensive review of the treatment of religious institutions in its land use codes, both substantively and procedurally; training officials and employees to be sensitive to religious differences; and recognizing that land use applications from, and enforcement of regulations against, religious institutions must be handled with special care.
Jennifer Anglim Kreder (Northern Kentucky) has posted Analysis of the Holocaust Expropriated Art Recovery Act of 2016 (Chapman Law Review) on SSRN. Here's the abstract:
This article introduces readers to the problems facing Holocaust victims and their heirs today as they seek to recover art stolen during the Nazi era. It provides essential history beginning with Hitler’s rise to power so that readers can understand the Holocaust Expropriated Art Recovery Act (hereinafter the “HEAR Act”), a bipartisan piece of legislation currently under consideration by a Senate subcommittee. Part I provides the essential pre-war and WWII-era history. Part II informs readers about the essential decisions a plaintiff must make before filing suit. Part III analyzes the key cases and legal developments concerning Nazi-looted art recovery since 1998. Part IV analyzes the HEAR Act. Part V concludes that the HEAR Act is a positive development that would allow survivors and their heirs a fair chance at recovering their stolen art.
Wednesday, October 26, 2016
For me, being a spectator as the race for the White House comes to an end is akin to trying to find the exit of a casino. Even if you want to get out, there are distractions that keep you pulled in at every turn. If you can get past the distractions, the exit signs are never clearly marked. Once you actually find an exit, it’s never as simple as just walking out the door; there’s always another hallway or stairwell or lobby you have to get past before you can truly be finished with the casino.
I feel the same way about the presidential election. Based on my anecdotal evidence, I don’t think I’m alone.
While drowning myself in news articles about the election but trying to think about something, anything, else, I wondered, what property does the President get to take when he (or, perhaps very soon, she) leave office? Obama has received tons of gifts since he was elected in 2008—a parking pass for all future Chicago Blackhawk games, a ping pong table, Mexican tequila, a lot of clothes, rugs, paintings, etc. He’s gotten some good loot. But query, does he get to keep all of it?
Gifts to politicians are something I have dealt with in a previous life. Before going to law school, I worked for then-U.S. Senator Mary L. Landrieu, and at one point in my Senate staffer career, helped the Senator with the Labor, HHS, Education Appropriations bill. This was in the days before earmark reform, so each member had a pot of money to use for projects in his own state or district. Despite some very public reports about the abuse of such earmarks—remember the bridge to nowhere?—earmarks were pretty small potatoes. In 2006, which happens to be the last year I worked in the Senate, earmarks cost $29 billion. The 2006 federal budget was $2.82 trillion. The costs of earmarks was not even a full drop in the bucket. Regardless, earmarks were seen as pork and pork was seen as bad. The House banned earmarks and now all project funding has to run through the executive branch instead of the legislative branch.
Back before the ban, constituents would come to Washington with write ups on the project(s) they wanted funded and, if they were from Louisiana and had a project related to health care or education, they got to meet with me. What lucky ducks they were to meet with a then 22-year old recent college graduate who had studied a lot about political theory but who knew very little about politics in practice.
The one thing I and my colleagues did know, however, were the gift rules. Because we were meeting with people who wanted the Senator to appropriate to their project $100,000, or $250,000, or $500,000, it was not unusual for the constituents to bring in a gift or want to take us out for a fancy dinner. Giving a member of the Senate or her staffer something while asking for money in return raises at least the appearance of impropriety, so the Senate has strict gift rules. Under Senate rule 35.1(a)(2)(A), you cannot accept an individual gift of more than $50, and you cannot accept gifts from one person that add up to more than $100 in a year. If someone tried to give you something worth more, rule 35.1(c)(1)(A) requires you to promptly return the gift. The Senate gift rule has a lot of other nuances to it, but the bottom line was always never take anything that costs more than $50 and if you weren’t sure, it’s better to be safe than sorry.
Now I am not a hockey aficionado—remember, I live in Louisiana . . . we don’t do hockey—but I am a football fan and, as a regular attendee of college and professional football games, I know that parking spots to sporting events are outrageously expensive! Heck, a parking pass at Tulane is outrageously expensive! So, does Obama get to keep all the gifts, including the lifetime parking pass to the Blackhawk games, he has received or is there an Executive Branch rule 35?
Turns out there is a lot more than an Executive Branch rule 35. Under Article I, Section 9, clause 8 of the Constitution, the President is not allowed to accept any present from any “King, Prince, or foreign State” without Congressional approval. Given the gridlock in Congress today, it seems hard to imagine Congress approving any gift given to Obama, but fortunately in 1966 the Foreign Gifts and Declarations Act was passed which provided, among other things, that Congress consented to the President receiving “a gift of minimal value tendered and received as a souvenir or mark of courtesy.” 5 U.S. Code § 7342(c)(1)(A). Currently “minimal value” is defined as $375, but that figure is re-evaluated every three years and will be up for re-evaluation in 2017. Anything given to the President by a foreign state that costs more than $375 is immediately turned over to the National Archives, a practice that can produce interesting results. When George W. Bush was in the White House, for instance, he received a Bulgarian sheepdog, Balkan, from the President of Bulgaria. Pure bred dogs ain’t cheap; a Bulgarian sheepdog costs between $1,000 and $1,500. So President Bush couldn’t keep the dog, but the National Archives didn’t exactly want a puppy running around either. Solution: President Bush bought the dog (he couldn’t keep the dog as a gift, but he could pay face value for the dog, i.e. removing the dog from the “gift” category and into the “things bought by POTUS” category) and gave Balkan to a friend in Maryland. Executive re-gifting at its finest.
That covers gifts from foreign dignitaries, but what about gifts from U.S. citizens? Under the Ethics Reform Act of 1989, no federal officer, including the President, can accept any gift from someone who is seeking action from, doing business with, or is regulated by one’s agency, or whose interests may be substantially affected by the performance or nonperformance of one’s official duties. 5 U.S.C. § 7353(a). There are some caveats to that broad rule for federal officers other than the President. For example, other federal officers can accept gifts of less than $20 in value, assuming the gift is not being given as a quid pro quo. 5 C.F.R. § 2635.204(a). And the other federal officers can accept gifts based on family relations or friendship. 5 C.F.R. § 2635.2014(b).
Because of his position and the number of gifts given to the President on a daily basis, the Office of Government Ethics has found that it would be impractical, if not impossible, to make a value analysis on every gift given to the President. 5 C.F.R. § 2635.204(j). Thus, the President can keep gifts from U.S. citizens intended to be given to the President personally. If a gift was intended for the White House (think an antique furnishing), then the gift stays with the White House. But gifts intended for President Obama can, if he chooses, travel with him to his new residence. The only restriction is that the President cannot accept anything of value “in return for being influenced” in the performance of his official duties. 18 U.S.C. § 201(b)(2). To maintain a level of transparency, any gift received by the President that is valued over $350 must be reported.
What does all this mean? Obama now has free parking at the Blackhawk games which makes him actually a lucky guy.
Monday, October 24, 2016
Nancy Leong (Denver) has posted The First Amendment and Fair Housing in the Sharing Economy (Ohio State Law Journal) on SSRN. Here's the abstract:
The sharing economy — a marketplace made up of businesses that profit by connecting providers of goods and services with users of those goods and services — challenges us to reevaluate our anti-discrimination laws. This Essay considers one such challenge: how should public accommodation laws such as Title II of the Civil Rights Act of 1964 and the Fair Housing Act apply to the housing sector of the sharing economy? Such laws, the Essay explains, should apply in full to the housing sector. Moreover, legislators should act to remove the current statutory exemption for landlords who rent a small number of housing units and live on the premises from which they rent. While some might raise concerns that closing the exception will infringe upon small-scale landlords’ First Amendment right to free association, such concerns have no doctrinal basis. Moreover, closing the exception will in fact have the effect of advancing interests related to both freedom of speech and of association, particularly with respect to the people of color whom public accommodation laws were originally designed to protect.
Tuesday, October 18, 2016
Debt is property, and, because of this, property law has a lot to say about how debts are resolved. Indeed, property law is deeply woven into the fabric of the bankruptcy process — a fact that has been woefully neglected by many scholars. The ability to provide debtors with relief and the ability of creditors to demand protections from discharge or diminished payments are both concepts that are intimately tied to property law. However, despite the doctrinal workings of property law in this context, from a theoretical standpoint property law has been underutilized. This is particularly true, as this Article asserts, in the public insolvency context — when governments go broke. Instead of being relegated to a mere mechanical (and normatively side-lined) status, I argue that property theory, particularly that arising out of the progressive property movement, has much to say about public debt crises and the resolution of the different interests at play between debtors and creditors. In order to contextualize this argument, I use the Puerto Rican debt crisis as a lens through which to understand how progressive property theory should be used to reform the way property law has been interpreted in the context of public debt emergencies.
Sunday, October 16, 2016
Paul T. Babie (Adelaide) has posted Magna Carta and the Forest Charter: Two Stories of Property - What Will You Be Doing in 2017? (North Carolina Law Review) on SSRN. Here's the abstract:
The legacy of Magna Carta contains so much more than merely the protection of property in the hands of the individual or individual freedom at the expense of the freedom of others. Indeed, one of the great themes emerging from Magna Carta, when one clears away its uses in American law, is the recognition of the community and obligation towards others as a balance to the protection of the individual and individual rights. But the process of clearing away the use of Magna Carta in American law requires a reunion of Magna Carta with its historical partner, the Forest Charter. In four Parts, this Article seeks to reunite these two great partners through the telling of two stories — one, the well-known story of Magna Carta’s place in how we understand property and the other, the entirely forgotten story of the Forest Charter’s balancing of Magna Carta’s first story of property. While we commemorate the first story in 2015, the other lies hidden in the mists of time.
Kelo v. City of New London was in line with precedent, and within the “mainstream” of legal thought. But that is not enough to justify it. Like many of the Supreme Court’s worst decisions, it highlights the ways in which the mainstream can go disastrously wrong. Going forward, the best way to rectify Kelo’s errors is to overrule it completely, rather than rely on half-measures, such as building on Justice Anthony Kennedy’s hard to interpret concurring opinion.
Saturday, October 8, 2016
On Friday, October 7, Tulane University Law School and the Tulane Murphy Institute hosted its second annual Property Roundtable on the regulation of public and private property rights. This year, the Property Roundtable enjoyed scholarship presentations on three different themes. The first theme covered intellectual property, technology, and sharing. Under this heading, Sonia Katyal (UC, Berkeley) presented her work on the marriage of technology and cultural heritage, and how their relationship impacts the modern museum. James Stern (William and Mary) also discussed his scholarship which questions whether intellectual property is really as non-rivalrous as many claim it to be.
The second theme of the day was public-private property, with work presented by Nestor Davidson (Fordham) and Sarah Schindler (Maine). Davidson discussed how big data might be used to help provide affordable housing and the potential problems in doing so. Schindler examined privately-owned public open spaces, why they are created, the difficulties they create, and how cities might remedy those difficulties.
The last theme for the day was the rights and duties of owners. During this section, Seth Davis (UC, Irvine) discussed whether fiduciary law might apply to owners, while Sally Richardson (Tulane) talked about what privacy rights apply to spouses in community property jurisdictions.
The Property Roundtable sparked interesting conversations regarding property law involving the presenters and other Roundtable participants, including Mark Davis (Tulane), John Lovett (Loyola), and Marc Roark (Savannah). A big thanks to my dean, Dave Meyer, and the Director for the Tulane Murphy Institute, Steve Sheffrin, for continuing to fund such an excellent forum for discussing property rights.
Sunday, October 2, 2016
(Source: Habitat for Humanity)
As we continue to think about the aftermath of the 2008 housing crisis (particularly as we approach its 10-year anniversary) it's important to understand how the housing credit market has changed and who it's currently serving. The Home Mortgage Disclosure Act (HMDA), enacted in 1975, requires that mortgage lenders report to the federal government information about the loans they make and the characteristics of the borrowers who receive credit. The latest annual data collected through this law tells an interesting story about homeownership in America and what populations are being served (and which are not) by mortgage credit markets.
Recently the Center for Responsible Lending (CRL) released an analysis of the 2015 HMDA data and shared some interesting observations. While credit is certainly flowing, it's not flowing in all directions:
Black and Hispanic families, as well as families with low- to moderate-incomes are struggling to obtain mortgage loans. CRL notes in its commentary that although large banks and financial institutions continue to benefit from cheap and easy access to U.S. Treasury funds, the vast majority of the already meager amount of credit flowing to these underserved groups has mostly come in the form of government-backed loans. Conventional loans (i.e., those not backed by the FHA or some other government program) seem to be mostly going toward servicing the needs of white borrowers. Further, consumers from communities of color and low- to moderate-income families are paying more on the whole for mortgage credit. And interesting, half of all new mortgage loans (both purchase money and to refinance) have been originated by non-depository intuitions (i.e., insurance companies, mutual funds, investment trusts etc. - rather than traditional community or even national banks) Cribbing from the report, here are some high points:
Highlights from the 2015 HMDA data include:
- The share of loans made to African-American and Hispanic borrowers in 2015 rose modestly, but remained well below the population share they compose. In 2015, African-Americans received 5.5 percent of loans up from 5.2 percent in 2014; Hispanic borrowers received 8.3 percent up from 7.9 percent in 2014. These percentages fall far short of the share of the U.S populations that these groups represent. African-Americans compose 13.3% and Hispanics 17.6% of the total national population.
- The share of loans made to low and moderate-income borrowers rose slightly in 2015 to 28 percent from 27.1 percent. Although modestly higher than the share in 2014 the 2015 share was lower than it was from 2009 to 2013.
- Most home purchase loans made to African-American and Hispanic borrowers continued to be through government insured programs (including FHA, VA and others) and reliance on these programs continued to increase. In 2015, 70.2 percent of loans to African-American borrowers and 62.6 percent of loans to Hispanic borrowers were government backed. These shares compare to just 36.0 percent of loans made to non-Hispanic white borrowers.
- In keeping with recent trends, a very small share of conventional home-purchase loans were made to African-American and Hispanic borrowers. In 2015, just 2.7 percent of conventional home-purchase loans were made to African-American borrowers and just 5.1 percent of these loans were made to Hispanic borrowers. These percentages are virtually unchanged from the levels in 2014.
- The share of African-American and Hispanic borrowers that received “higher-cost” loans fell dramatically from 25.6 and 28.4 percent respectively in 2014 to 16.2 and 18.5 percent respectively in 2015. This is a result of changes in the cost structure of government-insured loans (including FHA). The shares, however, remained well above the share of non-Hispanic white borrowers that received higher-costs loans, just 6.2 percent in 2015
- The share of both home-purchase and refinance loans made by non-depository lenders continued to increase. In 2015, 50 percent of all first-lien owner-occupied home-purchase loans were made by non-depository mortgage lenders. This share has been increasing in recent years and is the highest level since 1995.
In looking at this data, one question that comes to my mind is whether the new underwriting standards imposed by the Dodd-Frank Act might have anything to do with the credit squeeze on low- to moderate-income families. And, in turn, might that have anything to do with the disparity in lending to communities of color. For the uninitiated, the Dodd-Frank Act imposed upon all originators of mortgage credit (whether banks, brokers, financial institutions...whoever) an obligation to ascertain a borrower's "Ability-to-Pay" prior to making a loan. The law (and accompanying regulations which are part of Regulation Z of the Truth in Lending Act) provide a number of factors that an originator must use to make that determination (current or expected income and assets, current employment status, projected monthly mortgage payments, other property related monthly expenses, debts and competing financial obligations, credit history and monthly debt-to-income ratio). As long as the originator makes a "good faith" determination that the borrower can afford the loan, then its obligation to assess the "Ability-to-Repay" has been met.
But, true to form, lenders do not like risk. The chance of being found to have failed to make a good faith, ability-to-repay determination looms large (especially since such a finding can have severe consequences). Because of this, most all lenders are opting instead to make loans that meet the Dodd-Frank Act's safe-harbor. These are loans that, because they must meet such strict underwriting/low-risk guidelines, are deemed to meet the good faith ability-to-repay requirement (the safe-harbor comes in non-rebuttable and rebuttable flavors--depending on the risk tolerance of the bank, although both are pretty low-risk overall). For more on the requirements for these loans, you can check out my article The Unfinished Business of Dodd-Frank: Reforming the Mortgage Contract forthcoming in the SMU Law Review here. These loans are called "qualified mortgages" and, unsurprisingly, mortgage lenders have embraced them in a big way. Data from the National Association of Realtors quarterly survey of mortgage originators reveals that over 90 percent of all mortgage loans in the second quarter of 2016 were qualified mortgages. The chart below indicates that, with some small variance, this trend has been consistent since the first quarter of 2014. Compare this to the share of non-qualified mortgage loans (i.e., those that do not meet the safe harbor, but rather merely meet the good faith ability-to-repay requirement): less than one percent and declining.
So, with that bit of (or too much) background, how might these heightened underwriting guidelines (and mortgage originators' love for the qualified mortgage) help explain the 2015 HMDA data above? Well, one of the big requirements for a loan to be a "qualified mortgage" is that it cannot result in the borrower's debt-to-income ratio going above 43 percent (i.e., all monthly debt obligations, including the mortgage payment itself, cannot eat up more than 43 percent of the borrower's income in a year). On the one hand, that means that the debt will likely be more manageable and a default less likely. On the other hand, it doesn't allow for a person to borrow very much money to buy a home. When you think about student loans, auto loans for a two-car family, and various other expenses that form part of the slings and arrows of everyday life for low- to moderate-income American families, it's pretty easy to get to 43 percent (to say nothing of the lack of affordable housing in this country). So, in order to make the math work the borrower obviously has to have more income to drive the ratio down. That's a problem for low to moderate-wealth families. That's where race and ethnicity come into play. The typical black household has a mere 6 percent of the average wealth of a white household, and Hispanic families do just a little better at 8 percent. To put some hard numbers on that, take a look at the Census Bureau chart below, showing household incomes by race and ethnicity over the period from 1967 to 2014.
So if there is any correlation (or even causation) between the 2015 HMDA data and the way mortgage originators are dealing with Dodd Frank's mandatory underwriting requirements, the next questions becomes what to do about it. In essence this is a natural tension - one between access to credit on the one hand and safety and soundness on the other. Government regulators are concerned that lending institutions need to be more robust in their underwriting to make sure individuals are not taking out loans for which they can never hope to repay. On the other hand, homeownership is still an obsession in the United States and policy makers generously reward those who obtain it - therefore making it very important for individuals to be able to acquire a home (in other words, have access to mortgage credit). Reconciling this tension and striking the right balance is something that housing finance reformers have yet to truly tackle (see, e.g., the perpetual receivership of Fannie Mae and Freddie Mac). And there's also the real and ever-present role that lending discrimination plays in the housing finance market (a role that has been well-documented over the years).
In any case, the first step in addressing some or all of these issues is to see the problem and begin to discuss what might be causing or contributing to it. Unfortunately, neither of the candidates have made housing policy reform (prior DNC and RNC commentary provided) much of a tangible issue in this presidential campaign. We'll see if that changes when one of them gets to the White House.
Monday, September 26, 2016
(From left, Ed Mullins, commissioner for the South Carolina delegation of the Uniform Law Commission, Thomas Mitchell, Gov. Nikki Haley, and South Carolina Rep. James E. Smith, Jr., primary sponsor of the UPHPA in the South Carolina House of Representatives, for the ceremonial signing of the legislation)
Here at the Property Law Prof Blog we love to highlight the great work of our fellow property law scholars. Today's post focuses on Thomas Mitchell (Texas A&M) and his work in the area of heirship property.
Thomas served as the reporter and head of a Uniform Law Commission (ULC) project of some years ago to create a Uniform Partition of Heirship Property Act (UPHPA). Prior to that he served on the American Bar Association’s Property Preservation Task Force that developed the proposal requesting the ULC to form a committee to draft an act addressing partition of property. The goal of the UPHPA is to preserve family wealth (in the form of real property) passed along from generation to generation. While wealthy families often engage in sophisticated estate planning to deal with issues of generational wealth transfer, those with smaller estates often use a basic will or die intestate.
Thomas' work has particularly focused on partition issues in the context of lower- and middle-income families where often the majority of the value of the estate is comprised of real property. Under state law, when an owner of real property dies intestate the property is transferred to his heirs as tenants-in-common. These new owners often find themselves in a vulnerable position due to the fact that any one of them can force a partition of the property. Real estate speculators often seize upon this opportunity by acquiring a small share of the property from one of the heirs in order to then be able to file a partition action and force a sale. In doing so, the investor can acquire the entire parcel for a price well below its fair market value. This often has the effect of depleting the family’s inherited wealth in the process.
The UPHPA seeks to address this issue by providing a series of simple due process protections: notice, appraisal, right of first refusal, and if the other co-tenants choose not to exercise their right and a sale is required, a commercially reasonable sale supervised by the court to ensure all parties receive their fair share of the proceeds. At this point eight states have enacted the UPHPA into law: Alabama, Arkansas, Connecticut, Georgia, Hawaii, Montana, Nevada, and (most recently) South Carolina. It is impressive to note that 4 of the 8 states that have enacted it are in the South, the region where it’s generally accepted that partition abuses have been the greatest as well as the region most people believed would be most resistant to enacting the legislation. Pictured above is Thomas was Governor Nikki Haley at the bill signing last week. The bill has been officially renamed the Clementa C. Pinckney Uniform Partition of Heirs’ Property Act in honor of the late pastor and Senator Clementa Pinckney, who was killed in the 2015 Emanuel African Methodist Episcopal Church shooting in Charleston.
At this time, Thomas and his supporters believe they are likely to get introductions in 2017 in the New Mexico and West Virginia legislatures and are the cusp of securing commitments to introduce it in Mississippi and Texas as well.
In an effort to get the UPHPA enacted into law, Thomas has testified before many state legislatures, published numerous law review and other articles on the topic (check out his Alabama Law Review article titled Reforming Property Law to Address Devastating Land Loss discussing the issue) made presentations to legal organizations and community groups, and more. He is just the second African-American ever to serve as a reporter for the ULC in its 124-year history, a period of time in which the ULC has drafted more than 350 uniform acts.
Great work, Thomas!
Thursday, September 22, 2016
Although my body is in desperate need of some reasoning skills, my brain is several hundred miles away, thinking about a criminal trial in Portland, Oregon. In that Oregon courtroom, seven people face the consequences of their forty-day occupation of the Malheur Wildlife Refuge. Their primary complaint was that the federal government lacks the authority to own or manage the nation’s public lands, and that those lands should instead be transferred to local governments or private interests. It is not entirely inappropriate for me to be thinking about the Malheur trial, as I am sitting in an inflatable kayak on Idaho’s Selway River in the Selway-Bitterroot Wilderness, trying to navigate a series of rocky rapids that are well beyond my limited paddling skills. But my thoughts are in Portland because the arguments of the Malheur militants threaten what I am now trying to experience, and I fear that we are collectively forgetting about the value of wild and lonely places, and thus unnecessarily risking the future of our public lands.
When he signed the Wild and Scenic Rivers Act in 1968, President Johnson noted that although we had been slow to learn how “to prize and protect God’s precious gifts,” we had finally recognized the value of wild and natural places, and ensured that “our own children and grandchildren will come to know and come to love the great forests and the wild rivers that we have protected and left to them.” The Selway is one of those places, one of eight river systems originally protected by the Wild and Scenic Rivers Act.
For a few moments, my brain returns from its Portland wanderings and allows me to focus on the place and experience that cradles me. At its September low-water clarity, I can pick out individual granitic crystals as I watch the cutthroat swim between the rocks twenty feet below my boat. The canyon walls are from two different worlds, with dry, open Ponderosa pine forests on the south-facing slopes opposite dense cedars and ferns on the north-facing—the desert and rainforest connected by waters they imperfectly share. We paddle through boulders with driftwood logs four feet in diameter balanced a dozen feet above the water’s surface, hinting of demons that must lurk these waters in other seasons. And in the interludes between the hoots and hollers of the rapids, we find ourselves quietly transfixed by our surroundings, unable to find any words except the occasional and reverential, “this is so cool.”
Although the rapids and deep pools, cliff walls and cedar trees, and hundreds of friendly trout demand my attention, I continue to return to that Portland court room. While the specific arguments presented there are not likely to succeed in the policy realm, they are but the extreme end of a real problem. Because although the Bundys and their followers do not represent Western values, nor the desires of an overwhelming majority of the people who regularly work on, recreate in, and know and love the public lands, there are a number of no less frightening proposals cloaked in more reasonable-looking raiment seeking the same ends. Idaho’s U.S. Representative Raul Labrador continues to push a bill—against the wishes of many of his constituents—that would transfer large portions of Idaho’s public lands to a cash-strapped and industry-captured legislature. The Republican Party’s platform calls for Congress to “immediately pass universal legislation providing for a timely and orderly mechanism requiring the federal government to convey certain federally controlled public lands to states.” And the state of Utah is spending millions of taxpayer dollars preparing a lawsuit to challenge the authority of the federal government to own and manage any of the public lands.
This is why, despite somewhat more pressing needs, and being surrounded by one of the Earth’s most pristine landscapes, I can’t get my brain out of Portland.
But still the river draws me in. Even if unknown to many, the Selway represents a quintessential Idaho—and public lands—experience. Although the backcountry airstrip that marked the beginning of the river stretch of our adventure already had three airplanes on the ground when we landed, and two of our pilots left immediately to return with a group of bear hunters from Norway, we were soon alone on the river and would see no other people for days.
We are eight good friends, both old and new, here to celebrate forty years of a good life. A couple of professors, five employee-owners of the local whitewater products company, and a Sacramento police officer happily ignoring our stories of youthful, and not so youthful, indiscretions, we all share a love of wild places even as we express it in different ways. Like any other group of men our age, we carry our skeletons—our bouts with depression and alcohol, our fears and inadequacies, and our hopes that the children we are raising and worlds we are creating turn out better than we did. So we are here in celebration, but also for healing, for temporary escape, and in search of memories of beauty to carry us through our ugly times. Each night as we sit around the campfire, alone in hundreds of miles of forest with our own private river, living an experience that will forever connect us and this place, I can feel the scars soften, and the residual angers and fears fade and flow down into the river, which carries them away.
Unfortunately, this one crucial thing gets lost in the chaos of the Bundys and Malheur, and Utah’s New Orleans lawyers polishing off discredited legal arguments—the power of the land. Their focus on federalism, State’s rights, obscure and perhaps misinterpreted Constitutional provisions, and willful ignorance of Supreme Court precedent takes us away from the qualities that most and best connect people to the public lands and wild rivers.
The public lands are not a mere legal construct, nor are they simply a resource to be extracted and commodified. At their best, they are personal, emotional, and subtly primeval, connecting us to a wildness and beauty that can quiet and calm us, and dissolve the scar tissue of ancient wounds—real and imagined, physical and emotional. The August crowd at Old Faithful in Yellowstone—or even the hundreds of more obscure public lands recreation sites across the West and country—speaks, with some irony, to a need for wild, natural, and lonely places. And although not all of us can fly a small plane into the Selway’s backcountry airstrips, or even visit Yellowstone, America’s public lands landscape extends throughout the interstices of Western life. Even the West’s largest cities are only short journeys from quiet mountain streams, lonely forests, or empty sagebrush prairies. For many people, these small spaces are a Yellowstone or Yosemite, places of refuge in a complicated life. And they are public spaces, inherently democratic, welcoming anyone seeking peace, solitude, adventure, beauty, or wisdom.
So it is this that is most troubling about Malheur, the Bundys, Utah’s legislature, and Representative Labrador. As Wallace Stegner argued, the West is the native home of hope. Much more than angry, scofflaw ranchers, industrial timber harvesting, or massive dams, the West is about wildness, loneliness, adventure, freedom to explore and be reborn, and space to reconnect with our own wildness. Our public lands and wild rivers can be healing, unifying spaces, both individually and collectively. They are not elitist spaces reserved for the few or the favored; they are spaces for everyone to find their own beauty.
Eventually, all adventures must end, and I do manage to focus enough on the water in front of me to safely arrive at our take out, and the fried chicken and cold beer that is waiting for us there. In the last slow miles on our final day, as we quietly paddle the deep pools and easy rapids, I find myself consistently turning to face upstream. I do so not just because I do not want this trip to end, but because I fear for what I’m leaving behind. In enacting the Wilderness Act, we chose, collectively, to secure forever “the benefits of an enduring resource of wilderness.” And with the Wild and Scenic Rivers Act, we determined that some rivers should remain always in their natural, free-flowing, and wild condition.
Just as we once made that collective choice to protect the wild and natural, and to preserve beautiful landscapes of all types, we are also capable of making the alternative choice: to prefer use over solitude, dams over rapids, timber harvests over wildlife habitat, private benefits over public spaces, the tame over the wild.
But I believe we remain better than that. We remain capable of understanding beauty. More important, we remain capable of deserving beauty.
If we care about ensuring future generations the same wildness we have enjoyed, our path cannot be to ridicule the Bundys, to trust that Labrador’s bill will not get past the Senate or President, or to believe that the Supreme Court will honor precedent in any Utah lawsuit seeking control of the public lands. It was not legal argument that first gave us National Parks and Wilderness, protected free-flowing rivers, or reserved our forests for future generations. It was instead the stories of adventure, the paintings and photographs carried thousands of miles back to Congress, and the willingness to recognize the spiritual as well as the commercial. It was the green fire, and the power of wild rivers and wild landscapes. So our path must be to remember the value of wildness, to tell our stories, show our photos, and share our experiences, to be willing to talk about beauty and healing and grace, to share our special places with our neighbors, and to love our public lands. It is time for the prophets and evangelists to return, for the storytellers to again climb the trees and ride the whirlwind, and for us all to love and live the wild again.
Daniel Schaffzin (Memphis) has posted (B)Light at the End of the Tunnel? How a City's Need to Fight Vacant and Abandoned Properties Gave Rise to a Law School Clinic Like No Other (Washington University Journal of Law & Policy) on SSRN. Here's the abstract:
Over the course of the last two decades, intensified by the mortgage foreclosure crisis of the late 2000s, an epidemic of vacant and abandoned properties has inflicted devastation on people, neighborhoods, and cities across the United States. Though surely coincidental, the same time period has seen the emergence of experiential learning coursework, long operating at the periphery of legal education, as a centerpiece of the law school curriculum. In Memphis, the temporal convergence of these two phenomena has acted as a catalyst for the creation of a law school clinical course in which students learn and work under direct faculty supervision to abate the public nuisance presented by neglected properties. This Clinic is distinctive for a number of reasons, not the least of which is its singular client: the City of Memphis itself.
In this article, the University of Memphis School of Law’s Director of Experiential Learning, one of the two founders and codirectors of the Neighborhood Preservation Clinic, asserts the efficacy of the Clinic’s role in training future lawyers and providing zealous legal representation to the City in lawsuits against the owners of blighted properties. For context, the article first considers the rise and devastating effects of the nationwide vacant and abandoned property epidemic, the statutory authority available in Tennessee to pursue recourse against the owners of such property, and the broader blight-fighting strategy being employed by the City within which the decision to launch the Clinic was made. The article then examines the Clinic’s multilayered design and articulates the benefits that the Clinic has conferred upon its students, the Law School and the City of Memphis. The article concludes that the Neighborhood Preservation Clinic offers a government representation model for in-house law school clinics that stays true to traditional clinical pedagogy while honoring clinical legal education’s two-pillared historical mission to effectively prepare students for practice and to work in advancement of social justice and public interest outcomes.
Saturday, September 17, 2016
What if animals could own property? This Article presents a thought experiment of extending our anthropocentric property regime to animals. This exercise yields new insights into property law, including what appear to be biological underpinnings to what is widely assumed to be the distinctly human system of property. It also reveals that government and private actors alike have created a vast network of functional property rights for animals. The effects of a property rights regime for animals extends beyond property law: it would serve to improve the plight of animals, especially wildlife, by counting historic exclusion of animals from property allocations.
Property law may be a human codification of ingrained biological principles, common among species. Human governance of land, partially reflected by property law and observation of social attitudes to property, may, in fact, better theorized as animal in nature. Scientific findings suggesting that animals engage behavior mirroring that which establishes property ownership among humans. Species ranging from bees to jaguars undertake actions to acquire and protect land, which, when undertaken by people, forms the legal basis of property ownership.
Initial entitlements of American land excluded customary animal users, then afforded subsequent human landowners with the right to develop and exclude, which produced profoundly negative effects on species conservation. In response, a variety of governance strategies have emerged to protect wildlife, most federal statutes weakening property rights. In fact, law has already partially accommodated the idea of animals as property owners. Examining a variety of Constitutional, statutory, and common law doctrines suggests that animals already hold a variety of functional property rights, including ownership of hundreds of millions acres of land.
This Article is the first to analyze a property-rights approach to animal welfare and species conservation. Benefits of this approach, relative to existing efforts to imbue animals with human rights, include its bipartisan nature and foreseeable endpoint. Animal property rights would not require a massive shift in societal norms or uncompensated property redistributions. Indeed, this approach would likely improve animal welfare while also strengthening existing property rights, lessening the need for statutory controls on land uses, and updating law to harmonize with prevailing norms regarding animals’ place in society.
Jess R. Phelps (USDA) posted Reevaluating he Role of Acquisition-Based Strategies in the Greater Historic Preservation Movement (Virginia Environmental Law Journal) on SSRN. Here's the abstract:
Historic preservation and land conservation advocates have traditionally had similar goals, organizational structures, and even somewhat comingled histories when it comes to their efforts to protect the built and natural environment. Despite these striking similarities, a meaningful gap in practice has developed as to how the disciplines approach their respective resource challenges. Land conservation groups largely default to acquisition-based strategies in order to ensure the perpetual protection of targeted conservation tracts – most commonly through the use of conservation easements. Historic preservation advocates, however, are much less likely to rely on acquisition – relying instead on regulatory controls, site-specific advocacy, and incentive payments. This Article explores the explanations for this divergence – institutional, structural, and financial. Ultimately, understanding the roots of how the land conservation and historic preservation movements have come to approach their work so differently can provide meaningful insight into both fields and provide a lens for exploring, in particular, the comparatively limited role that affirmative resource protection efforts play in modern preservation practice.