Thursday, April 21, 2011
David Reiss (Brooklyn) has posted Fannie Mae, Freddie Mac, and the Future of Federal Housing Finance Policy: A Study of Regulatory Privilege (Alabama Law Review) on SSRN. Here's the abstract:
The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit-driven, but as government-sponsored enterprises they also have a government-mandated mission to provide liquidity and stability to the United States mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy.
While the American taxpayer will be required to fund a bailout of the two companies that will be measured in the hundreds of billions of dollars, the current state of affairs presents an opportunity to reform the two companies and the manner in which the residential mortgage market is structured. Few scholars, however, have provided a framework in which to conceptualize the possibilities for reform.
This Article employs regulatory theory to construct such a framework. A critical insight of this body of literature is that regulatory privilege should be presumed to be inconsistent with a competitive market, unless proven otherwise. The federal government's special treatment of Fannie and Freddie is an extraordinary regulatory privilege in terms of its absolute value, its impact on its competitors and its cost to the federal government. Regulatory theory thereby clarifies how Fannie and Freddie have relied upon their hybrid public/private structure to obtain and protect economic rents at the expense of taxpayers as well as Fannie and Freddie's competitors.
Once analyzed in the context of regulatory theory, Fannie and Freddie's future seems clear. They should be privatized so that they can compete on an even playing field with other financial institutions and their public functions should be assumed by pure government actors. While this is a radical solution and one that would have been considered politically naive until the recent credit crisis, it is now a serious option that should garner additional attention once its rationale is set forth.
Wednesday, April 20, 2011
For those of you that don't follow Glenn Beck, you may have missed this address on federally owned property. Although Beck's outburst is filled with a few a million nutty conspiracy theories, I think he's asking a pretty important question: Why is so much land in the West owned by the federal government? Check out the following maps - the first shows all federally owned land (including Indian reservations) and the second shows federal land as a percentage of total state land area:
If we really believe in the power of private ownership to incentivize useful activity, why isn't there more of a push to auction off some (a lot?) of this land? Currently, driving across much of the West is like driving across the moon - it's wasted, desolate space. Why not turn that over to private entrepreneurs? Maybe we'd get fewer moon craters and more Las Vegases.
Tuesday, April 19, 2011
If you ever happen to find yourself in Worcester (England) make sure you stop by the Cathedral to visit the tomb of Thomas de Littleton. Check it out:
Littleton, a judge and legal scholar authored Treatise on Tenures (1481), a book widely regarded the first property textbook (Here's the Wikipedia entry). Famously, Littleton's work was the first attempt to scientifically classify rights in land. The Tenures remained a cornerstone of legal education for almost 350 years and is still an important window into the world of feudal real estate law. If any of you are looking to get me a present this year, Abe Books has a 1594 version going for $3500.
Monday, April 18, 2011
There's a debate raging in Pennsylvania about whether the state's building code has gone too far in the pursuit of safety. Specifically, the legislature is arguing about a law that requires sprinkler systems in all newly built single-family homes. Only California and Pennsylvania have such a measure.
On one side of the debate, public-safety advocates and firefighters argue that the sprinklers save lives and reduce property damage when fires spark to life. Opponents don't dispute these benefits. They argue, instead, that the negatives outweigh the positives. Sprinkler systems significantly increase building costs, inspection costs, & maintenance costs, and only generate a relatively small amount of added safety protection.
Before coming to a firm conclusion on the merits of the policy, I'd like to see more data on how much this costs on per-life-saved basis. I'm also curious to see if the $5000 in added cost per home will do anything to constrain the ever-growing size of the American home.
Keith Hirokawa (Albany) has posted Three Stories About Nature: Property, the Environment, and Ecosystem Services (Mercer Law Review) on SSRN. Here's the abstract:
The relationship between our understanding of nature and how we allocate rights to property is a necessary but indeterminate one. This article explores three different approaches to this understanding – Property, Environment, and Ecosystem Services – to illustrate different resolutions to an otherwise basic controversy over competing claims to property in natural things. Ultimately, this analysis reveals the conceptual commitments and legal consequences involved in ‘ecosystem services,’ and how the ecosystem services story attempts to converge economics and ecology in property. Ecosystem services casts the character of nature as ecosystem functionality, the value of nature as economic value in goods and services, and the use of nature’s goods and services as a benefit to human well-being.
By looking at the ways the ecosystem services approach diverges from other descriptions of nature, this article also explores how property may react and adapt to the values embodied in ecosystem services. The ecosystem services approach provides an articulation of property value’s dependence on ecosystem influences, and as a result, deflates the importance of property boundaries; challenges to ecosystem services will invariably arise where property value is contingent on ecosystems processes occurring on another’s property. This article argues that the ecosystem services approach results in property without boundaries, in which boundaries become less relevant not just for the process of identifying nature, but also for identifying property interests.
Saturday, April 16, 2011
Over at Credit Slips, Adam Levitin has yet another spot-on analysis related to the mortgage and foreclosure crisis. This time he rips apart a study, bought and paid for by mortgage servicers, that purports to reveal the costs they'll reluctantly have to pass on to borrowers if they are forced by states to act lawfully. It's well worth reading.
Mark A. Edwards
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I had the great good fortune of having my colleague Ken Port, Director of William Mitchell's Intellectual Property Institute and Japanese law scholar-extraordinaire, visit my Comparative Property Rights seminar this week. Besides some very interesting historical information regarding Japan's adoption and adaptation of the German civil law system in the 19th century, we focused on some unique features of Japanese property law that may make recovery and rebuilding in Japan more difficult than it would be otherwise.
One impediment arises from the Japanese version of concurrent estates. Japanese law recognizes one version of co-ownership of property, which is without precise parallel to any of the estates recognized in the Anglo-American common law. Each co-tenant has the right to use the property in proportion to her share, but no co-tenant can alter the property without the permission of the other co-tenants. Moreover, there is no right of survivorship among co-tenants; the deceased tenant's share passes by will or through intestacy.
The problem with this form of co-ownership in post-tsunami Japan should be immediately apparent. Co-owned property cannot be altered without the agreement of all of the co-tenants. Therefore, rebuilding cannot take place until the co-tenants reach agreement. In the tsunami stricken regions, even if the property itself can be identified without boundary markers and in a land physically altered by the tsunami, locating all co-tenants is likely to be extremely difficult if not impossible. Many co-tenants are, unfortunately, likely dead; their interests must be distributed through will (often destroyed with the home) or through intestacy. Locating heirs may be difficult if not impossible, since many heirs may also be dead, and their heirs must be located. After that nearly impossible task has been completed, all of the interest holders must reach agreement on whether, and how, to rebuild or attempt to sell.
In the United States, governments faced with insurmountable coordination problems and transaction costs might cut through them by exercising the power of eminent domain. Although Article 29 of the Japanese Constitution authorizes the government to take private property in return for just compensation, the ability of the government to exercise that power is severely limited compared to the United States, both legally and normatively. It is limited legally because civil courts in Japan lack the contempt power, so they lack a means of enforcing their rulings. Therefore, unlike in the United States, in Japan courts cannot send armed agents of the state to enforce an eviction order.
More importantly, normatively, there is deep opposition to the exercise of the eminent domain power in Japan -- much deeper than in the U.S. Consider, for example, what happened when the Japanese government tried to build Narita, the main airport serving Tokyo, by using eminent domain to expel inhabitants of a small village. The plan met with widespread, and sometimes violent opposition, not only from those displaced but from those the airport was intended to serve. I quote from Ken's book to describe the level of opposition :
The airport was supposed to open on March 30, 1978. . . . Hurling Molotov cocktails and driving a flaming vehicle through the perimeter of the airport, [protesters] briefly occupied the completed control tower. They proceeded to destroy most of the air traffic control equipment and delayed the opening of the airport for two months. . . . . Until the early 1990's, Narita Airport appeared to be under armed siege. The entire airport was surrounded by unclimbable fences, lookout towers and armed police in full riot gear.
During the decades of protests, 3 policemen and several protestors were killed.
In other words, the exercise of the eminent domain power in Japan is legal, but often socially unacceptable. Therefore, to rebuild after the tsunami, Japan may have to undergo something much more difficult and more fundamental than just changes in law; it may have to undergo a change in norms as well.
Mark A. Edwards
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Friday, April 15, 2011
This weekend, I made a pilgrimage from my home in Lexington to the IKEA in Cincinnati. Five hours, five-hundred dollars, and five unintended purchases later, I was back home. I really love IKEA. L-O-V-E. I want to die by being buried alive under a pile of Ritvas, Bomulls, and Erslevs. Occasionally, however, I'm hesitant to venture into the store because I always spend more money than I intend.
It seems I'm not the only one who has this problem. Professor Alan Penn of the Bartlett School of Architecture recently gave a lecture that describes how architects use space to sell us things. Penn argues that IKEA has mastered the age-old art of getting customers to buy things that aren't on their shopping lists. The full lecture is below. All of it is interesting - but if you're only intrigued by the IKEA stuff then watch the first 50 seconds, and then from 24:20 to 32:40.
Thursday, April 14, 2011
Today I particularly love being a law professor. Why? Because the Senate Permanent Subcommittee on Investigations released its 635-page final report on the Financial Crisis yesterday and gosh darn it, I'm going to read the whole thing.
According to the press release, it should be an interesting read: "The report catalogs conflicts of interest, heedless risk-taking and failures of federal oversight that helped push the country into the deepest recession since the Great Depression." The committee reviewed nearly 6,000 pages of documents, including e-mails and internal memos from Washington Mutual, Deutsche Bank, Goldman Sachs, and other parties deeply involved in the residential mortgage bubble.
Here is a link to the press release, and at the bottom of the press release you can click through to download the full report.
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We covered non-conforming uses in class today, specifically the AVR, Inc. v. City of St. Louis Park case. My students, having read Lucas in Constitutional Law a few weeks ago, posited that a rezoning would not constitute a regulatory taking. I disagreed. My argument (and please consider that I have not studied Constitutional Law since 1999) is that if: (1) a municipality changes the zoning of an improved parcel of land (for example, rezones land occupied by a ready cement plant as residential); (2) the re-zoning diminishes the value of the underlying real estate; and (3) the municipality forces a change in use; then a compensable regulatory taking has occurred.
Based on approximately 20 minutes of research, I can't find any cases where this has occurred. I posit that this is because states either: (1) protect lawful nonconforming uses, thus preventing the above scenario from occuring frequently enough for me to easily locate a case; or (2) have adopted amortization periods, which are predicated on the idea that the value of the use will fully amortize over a certain period of time, so that when the prior lawful use is brought to an end, there is no loss to be compensated.
I think that my conclusion is consistent with Penn Central. If there is a lawful nonconforming use, then the owner had an investment-backed expectations in that use. If the government cuts short that use, then there is a compensable taking.
I am sure someone has written a brilliant article on this topic that I have not yet found. Any references to said article or other feedback would be much appreciated.
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Wednesday, April 13, 2011
Last August, Tanya wrote a great post that asked,"What would you save if your house were on fire?" For many families in Japan it appears that the question has become all too real. The LA Times ran a heartbreaking story today about people who are making mad dashes into the radiation hot zone around the Fukushima Daiichi nuclear plant in order to save a few family treasures. The paper reports:
On the drive to town, swaddled in clothing to protect them from nuclear fallout, [the Nikaidos] entertained a difficult question: How do you reduce a lifetime of memories and possessions into one mad-dash snatch and scramble? "I'm going to get some dishes, clothes and my computer: everyday things I can use to start a new life," said Seiko, who along with her mother has relocated to just outside Tokyo. "We can come back to collect the rest, the memories; that is, if they ever let us return here again."
Avihay Dorfman (Tel Aviv) has posted Private Property and the Demands of Respectful Recognition on SSRN. Here's the abstract:
This article explores the normative implications of an analytical mismatch between two ideas of freedom that arise in connection with private ownership. First, within limits, owners enjoy the freedom to deploy their objects as they see fit. And second, modern liberal societies sustain freedom-to by protecting property owners’ freedom from the interference of others. The mismatch arises because freedom-from is not an analytic feature of freedom-to. This article seeks to show that, rather than morally arbitrary, this mismatch is in fact a defining feature of the distinctively social form that private ownership takes.
Tuesday, April 12, 2011
Bernard Arnault, the man who runs the Louis Vuitton fashion house, finds himself in a bit of a donnybrook with a local nighborhood association over the construction of a museum to house his art collection. Arnault has begun construction of his art palace in the middle of the Bois de Boulogne Park, upon land donated by the City of Paris. According to the NY Times, local neighbors object to this intrusion and make a simple argument: "the park is intended for the public, the museum is next to a children’s playground, and the building itself violates the rules governing the park by blocking a paved roadway that should be open to the public." This reasoning carried the day in a recent court battle. A judge annulled the building permit with construction on the museum half-finished.
Arnault and his powerful friends frame the issue differently. They argue that the neighbors “show a blind and pernicious individualism that goes against the general interest. They oppose any change for the sake of it. In their tight little suits, they want to put Paris in formaldehyde. It’s quite pathetic.”
The Times concludes that "this being France, and Mr. Arnault being a sort of Ozymandias, he is likely to get his pyramid anyway" - the French Parliament is in the process of overriding the court's decision and granting the museum a special waiver.
Stephanie Stern (Chicago-Kent) has posted Reassessing the Citizen Virtues of Homeownership (Columbia Law Review) on SSRN. Here's the abstract:
The assumption that homeownership creates more politically and civically engaged citizens who contribute to local communities (as well as national democracy) dominates property law. This belief underlies influential theories of property and land use and justifies housing policies promoting homeownership and expanding homeownership’s reach. This Essay challenges the “citizenship virtues” of homeownership and contends that the evidence reveals a far more modest, and particularized, picture of citizenship effects than commonly assumed. I explore psychological, historical, and economic factors that may underlie the variable citizenship effects from homeownership. Some of these factors elucidate not only why owners and tenants perform similarly in certain citizenship measures but, by the same token, why it is not universally true that fear of increased rents constrains local contribution by tenants. I consider the implications of this analysis for legal theory and note potential applications to housing policy.
Monday, April 11, 2011
What tiara will the Queen select for Kate Middleton? Will the Queen offer a sparkler from the family treasury (some pieces haven’t been seen in public in recent memory), or will they fashion a new diadem for the special day? The British Press insist that the choice says something about the relationship between Kate and the Queen how Kate sees her role in the family. Many rumors are swirling There’s the spectacular "Oriental" tiara, made for Queen Victoria that contains 2,678 diamonds and takes its name from the Indian rubies set into it. Then there’s the beautiful diamond and silver "Girls of Great Britain and Ireland" tiara, a wedding present for Princess Mary of Teck (later Queen Mary), bought with money raised by a committee by Lady Eve Greville. My favorite is the old-timey Strathmore Rose:
The L.A. Times does some digging. The short answer: "To encourage volunteerism, [California law] provides that an officer or director is protected from personal liability when certain other conditions are met, including not receiving any salary and carrying the required insurance. Without a board, the entire membership is subject to liability should" soemthing happen.
Friday, April 8, 2011
In a year-long test conducted by the Fair Housing Partnership of Greater Pittsburgh, researchers found 28 percent of landlords contacted by deaf people either hung up the phone, gave false information or used some other illegal means to deny the deaf person a place to live.
Test reviewers found 11 violations were so severe they filed complaints against the landlords with the U.S. Department of Housing and Urban Development, and the Pennsylvania Human Relations Commission. Seven of those cases have been settled and those landlords have undergone training in fair housing law. The other cases are pending.
The Huffington Post has a slideshow about the most segregated places in the country.
Using 2010 Census data, professors John Logan of Brown University and Brian Stults of Florida State examined the racial make-up of America's cities. The researchers found that progress toward integration has been uneven. In some large metro areas integration has improved dramatically; Kansas City experienced a 7.4 percent decrease in residential segregation over the last decade. In contrast, New York declined only 1.7 percent, and in Miami segregation actually got worse.
Dawn Bennett-Alexander (Georgia Business School) has posted The Changing Standard of Care Owed Licensees, Invitees and Trespassers: Mounsey v. Ellard (Howard Law Journal) on SSRN. Here's the abstract:
The courts had previously followed a strict regiment of analyzing what the status of a visitor to property was when determining the duty owed for injuries sustained there. Changing circumstances moved court to re-think this approach and use a more realistic one, such that someone like a firefighter responding to a fire on a premises who was injured could recover even though he may not fit the traditional status of an invitee.
Thursday, April 7, 2011
Well, this is a new one. We've seen robo-signing, we've seen lost documents and notes, we've even seen foreclosures on the wrong houses. But to my knowledge, this is the first time we've seen a mortgage servicer's counsel adding new pages to affidavits and then re-attaching the signature page.
From the Chicago Tribune comes the story of how 1,700 foreclosure proceedings were halted, due the practices of mortgage servicers' attorneys:
The admission to the court by Fisher and Shapiro does not involve rubber-stamping of documents but rather removing the signature page, altering the affidavit's content and reattaching the signature page, the court said.
The changed contents included the addition of attorneys' fees, insurance costs, preservation costs, inspection costs and taxes on the property, costs that may have been incurred before or after the servicer signed the original affidavit, [Judge] Jacobius said in his order dated March 2.
The firm's admission signals a note of caution to purchasers of distressed homes, which represent about 50 percent of local home sales, because of potential lingering legal issues if the title transfer process was faulty.
I believe that last sentence is what we call a 'buried lede.' Or at least one heck of an understatement.
Big hat tip to the blogging savants at Credit Slips for linking to the article first. It's impossible to keep up with those people.
Mark A. Edwards
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