Wednesday, July 11, 2007

Carrillo on Adjustable Rate Mortgages and Class Action Rescission Claims the TLA

Professor Jo Carrillo of the University of California, Hastings has posted "Dangerous Loans: Adjustable Rate Mortgages and Class Action Rescission Claims Under the Truth in Lending Act" in the University of California, Berkeley's Center for the Study of Law and Society, Jurisprudence and Social Policy Program JSP/Center for the Study of Law and Society Faculty Working Papers series.

Here is Professor Carillo's abstract:

Housing prices do not always go up, interest rates do not always stay down,borrowers cannot always refinance, and physical shelter can be lost for not making mortgage payments. Were our cars as dangerous as the new mortgage products on the market, we might all be injured or dead. Still, lenders claim that innovative lending products enhance consumer access to credit. They believe that increased access to credit democratizes the housing market. And they insist – against a growing body of evidence – that option adjustable rate mortgages, though untested, are safe financial products.

But reality is setting in. Option ARMs can be dangerous to consumers, if not ruinous, in the perfect financial storm. When an option ARM product adjusts upward, what was once affordable can become unmanageably expensive. Imagine charging $331,200 – the median mortgage owed by buyers in default in California in April of 2007 – on an adjustable rate credit card charging 11% APR and rising. Now add your current credit card debt to that amount, and the ordinary expenses of living. For many consumers, the result is bankruptcy or rescission. Indeed, lawsuits are in the works as thousands upon thousands of consumers realize that the loan that lured them with promises of low monthly payments has left them even more mired in mortgage debt than before.

This article analyzes and places into market context three recent consumer class action lawsuits that were brought under section 1635 of the federal Truth in Lending Act (TILA). TILA allows for class action lawsuits for damages under section 1640, but TILA is silent on whether classwide rescission claims are permissible under section 1635. On the legal side, whether a class seeking rescission can be certified will depend on how courts interpret section 1635. On the economic side, it will depend on how access to credit issues are framed.

Alfred L. Brophy
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July 11, 2007 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Pesticides v. Organics in the Burbs

The W$J has a great article on growing conflicts between neighbors over pesticide use for lawncare.  Some excerpts:

As the organic lawn movement grows, so are tensions in some communities. The latest front is over whether lawn-care methods are the horticultural equivalent of secondhand smoke: a choice that affects the whole community. Neighborhood activists argue that using pesticides on one lawn exposes everyone nearby to the chemicals, including kids and pets. . . .

To try to make everyone happy, In Harmony Sustainable Landscapes in Bothell, Wash., offers three tiers of weed programs: "No Weeds," "Minimum Pesticides," and "Completely Organic." When new customers call up, co-owner Mark Gile says he subtly encourages the latter two programs.

Community peer pressure is one thing. It's another to mandate organic care by law. In 2001, Canada's Supreme Court ruled that the nation's communities can restrict cosmetic pesticide use on private as well as public property. To date, more than 129 have done so.

That ruling mobilized the U.S. pro-pesticide movement like never before both on a grassroots and legislative levels, says Allen James, president of the Responsible Industry for a Sound Environment, a trade group representing makers and suppliers of pesticides and fertilizers. "Canada was the warning shot for us," he says.

Partly due to RISE's efforts, today all but nine states currently forbid local lawmakers from enacting such residential bans, because it would pre-empt state laws.

As a result, organic activists to date have instead concentrated on getting pesticides banned in public properties where municipalities have control. Just last month, Connecticut extended a ban on lawn pesticides through the eighth grade. Currently at least 20 U.S. towns have pesticide-free parks and several hundred school districts have laws or policies designed to minimize kids' exposure to pesticides.

Such actions unnerve homeowners such as John Schmaltz in Cromwell, Conn., who fears private property could be next. He sees a hypocritical undercurrent to organic lawn enthusiasts' pleas. "People put on deodorant, perfume and cosmetics, and who's to say about those?"

Ben Barros

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July 11, 2007 in Land Use | Permalink | Comments (0) | TrackBack (0)

Pierre and Stephenson on Katrina and FEMA

John K. Pierre and Gail S. Stephenson (both of Southern University Law Center) have posted After Katrina: A Critical Look at FEMA's Failure to Provide Housing for Victims of Natural Disasters on SSRN.  Here's the abstract:

Disasters affect low-income victims more negatively than middle- or upper-class victims, and Hurricane Katrina was no exception. Hundred of thousands of people, many of them low-to-moderate income residents, were forced to evacuate their homes following Katrina. The Robert T. Stafford Disaster Relief and Emergency Assistance Act guarantees that disaster victims will receive help through the Federal Emergency Management Agency (FEMA). FEMA, however, failed to ensure that the disaster housing needs of Katrina's victims were met, just as it has failed to adequately meet the needs of disaster victims for the last two decades.

This article reviews the impact of disasters on victims, particularly low-income victims whose homes are destroyed or rendered uninhabitable or inaccessible as a result of a disaster, when the federal government fails to carry out its statutorily mandated duty toward those victims. The article further analyzes the issues that may arise when lawyers attempt to seek legal redress against FEMA on behalf of those made homeless by disasters in the United States and suggests changes that could be implemented by the federal government to prevent a recurrence of such failures in the future.

Ben Barros

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July 11, 2007 in New Orleans, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Been et al. on the Impact of Supportive Housing

Vicki Been, Ingrid Gould Ellen, Michael Gedal, and Ioan Voicu (all of NYU) have posted The Impact of Supportive Housing on Surrounding Neighborhoods on SSRN.  Here's the abstract:

Communities across New York City and around the nation commonly oppose proposals to open supportive housing in their neighborhoods because of fear that the housing will decrease the quality of life in the neighborhood, and lead to reductions in property values. This study aims to give supportive housing providers and local government officials the objective, credible information they need to guide policy decisions and to respond to opponents' fears and arguments. Using a difference-in-difference regression model to isolate the effect of supportive housing from more general macro and micro market trends and neighborhood variations, this paper examines the impact that almost 14,000 units of supportive housing created in New York City over the past twenty five years have had on their host neighborhoods over time.

In a preliminary analysis, we find little evidence that supportive housing facilities diminish the value of surrounding properties. We find evidence that prices of properties surrounding supportive housing facilities are lower than comparable properties in the same neighborhood prior to the opening of the facility, and that this gap tends to narrow following the opening of a facility. Specifically, the preliminary analysis suggests that modestly-sized supportive housing developments (which are typical in New York City) may have small, positive impacts on neighboring property values, though these positive impacts decline as project size increases. Very large facilities may have negative impacts on the surrounding neighborhood.

Ben Barros

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July 11, 2007 in Land Use, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 4, 2007

The Landlord Game

Us000748626001Here's a light post for our nation's birthday.  Happy fourth of July!

Every once in a while we in Tuscaloosa play games, like name that professor's school.  Pretty amusing stuff.  It just so happens, though, that I was talking with some friends recently about the board game Monopoly and the lessons it teaches.  That led me to wonder about its history and--lo and behold, it's based on a an early twentieth century game, "The Landlord's Game," patented by a young Quaker, Lizzie Magie, in 1904 to teach the principles of Henry George.  So the game that now teaches the principles of capitalism had its origins in early twentieth century socialism (or what I think we'd now call socialism).  Wow.  We absolutely must talk about this at propertyprof at some point.

Thanks to my absolutely awesome colleague Alan Durham (author of Patent Law Essentials), who writes on exceedingly interesting and complex topics like the copyright aspects of randomness and authorship and other stuff, too, we have two pages of images (at right and below) from the 1904 patent.

Here's a link to the rules of the game, which come from the 1904 patent.  The game really sounds a lot like monopoly--with some quaint early twentieth century phrases.  Try these out:

Absolute necessities: These spaces, which are preferably blue, indicate absolute necessities -- each as bread, coal, shelter, and clothing -- and when a player stops upon any of these he must pay five dollars into the "Public treasury." (This represents indirect taxation.)
   No trespassing: Spaces marked "No trespassing" represent property held out of use, and when a player stops on one of these spaces he must go to jail and remain there until be throws a double or until he pays into the "Public treasury" a fine of fifty dollars. When he comes cut, he must count from the space immediately in front of the jail.
   Railroad: "R. R." represents transportation, and when a player stops upon one of these spaces he mast pay five dollars to the "R.R." If a player throws a double, he "Gets a pass" and has the privilege of jumping once from one railroad to another, provided he would in his ordinary moving pass a "R. R." If he stops upon it, however, he must pay five dollars.
Us000748626002    Luxuries: These spaces, preferably purple, represent the luxuries of life, and if a player stops on a "Luxury" he pays fifty dollars to the "Public treasury," receiving in return a luxury ticket, which counts him sixty dollars at the end of the game. The player may purchase the luxury or not, as he chooses or can afford; bit if he does not purchase it he loses his move.
   Franchises: These spaces, preferably yellow, indicate light franchise and water franchise and are public necessities. The first player who stops upon one of these franchises puts his charter upon it, and all though the game he has the privilege of taxing all the other players five dollars whenever they chance to stop upon it.  It cost him nothing and counts him nothing at the and of the game.
   Public park: A player may stop is the "Public park" without paying anything.
   Legacy: if a player stops on the Legacy," he gets one hundred dollars cash and a legacy-ticket.
   Mother Earth: Each time a player goes around the board he is supposed to have performed so much labor upon Mother Earth, for which after passing the beginning-point he receives his wages, one hundred dollars, and is checked upon the tally-sheet as having been around once.
   Poorhouse: If at any time a player has no money with which to meet expenses and has no property upon which he can borrow, he must go to the poorhouse and remain there until he makes such throws as will enable him to finish the round.
   Rent: When a player stops upon a lot owned by any of the players, he must pay the rent to the owner. If he stops upon one of his own lots, of course he pays nothing. If two players stop upon the same lot, the second must pay to the first one-half of the rent, (in case of an odd number giving to the first the benefit of the fraction.) If a third player's throw brings him on the same lot, he cannot occupy it, but must remain upon the space next to it, counting his throw one less. In case of lot 1 the player gets the whole rent.
   Borrowing: A player may borrow from the “Bank" in amounts of one hundred dollars, and for every one hundred dollars borrowed the " Bank" takes a mortgage on one or more of the borrower's lots, the total value of which must be at least ten dollars more than is borrowed. For every one hundred dollars borrowed from the "Bank" a bank mortgage is placed upon the property on which the loan is made, and the player puts his note in the "Bank," paying upon each note five dollars (interest) every time he receives his wages. One player may borrow from another, giving a mortgage on any property he may own and making the best bargain he can as to interest, terms of payments &c. The player loaning the money places his individual, mortgage on the top of the borrower's deed to show that he has a mortgage on that property, Should a loan be repaid before passing the beginning-point, the borrower saves the interest.

Now, perhaps Alberto Lopez, Kali Murray, and I need to include a copy of the board and the rules in Integrating Spaces, as a quaint reward to students for buying the book....  Or maybe we at propertyprof need to offer it as an incentive for visiting us....

UPDATE:  Been hearing from readers about this post and I thought you might enjoy a couple of other pieces of this story, including a story from the mid-1970s that a Parker Brothers executive testified in a lawsuit over whether another board game could be sold under the name Anti-Monopoly:

Barton met with Lizzie Magie, he testified, and asked her if she would accept changes in her game. According to Barton's recollection, she replied like this: "No. This is to teach the Henry George theory of single taxation, and I will not have my game changed in any way whatsoever." For John Droeger of San Francisco, the lawyer taking his deposition, Barton explained why in his opinion Lizzie Magie answered that way: "She was a rabid Henry George single tax advocate, a real evangelist; and these people never change."

In addition, here's a detailed chronology of the development of the game and an NPR story from 2002 and a series of pieces on the game.

Alfred Brophy
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July 4, 2007 | Permalink | Comments (0) | TrackBack (0)

Monday, July 2, 2007

Accessory Housing in the Burbs

Over at the Land Use Profs Blog, Paul Boudreaux has an interesting post on using accessory housing to increase population density in the suburbs.  As Paul explains, "accessory units can be a second housing unit in a suburban lot -- a basement apartment, a second story unit above the garage, or even a small studio with bath in the backyard."

Ben Barros

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July 2, 2007 in Land Use | Permalink | Comments (0) | TrackBack (0)

States v. Big Box Stores

The WSJ has an article on a Maine law placing restrictions on stores larger than 75,000 square feet:

Maine Gov. John Baldacci last week signed into law a measure requiring developers of retail stores exceeding 75,000 square feet to conduct studies gauging the project's impact on municipal services, the environment and local businesses. The proposed store can't be approved if the studies find it is likely to cause a quantifiable, "undue adverse impact" on more than one of those fronts and is expected to have a harmful effect on the community overall.

The Maine legislation is the first state law of its kind in the U.S., but similar measures have been proposed in six other states in the past two years. A bill made it through the California State Legislature last year but was vetoed by Gov. Arnold Schwarzenegger. Another measure is under review in New Jersey.

Ben Barros

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July 2, 2007 in Land Use | Permalink | Comments (0) | TrackBack (0)