Friday, May 20, 2011

Friday's Architecture Moment

Witold Rybczynski on Alvar Aalto's unpretentious houses.

Steve Clowney

May 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Pottow on Consumers' Ability to Pay Mortgage Loans

John Pottow (Michigan) has posted Ability to Pay on SSRN.  Here's the abstract:

The landmark Dodd-Frank Act of 2010 transforms the landscape of consumer credit in the United States. Many of the changes have been high-profile and accordingly attracted considerable media and scholarly attention, most notably the establishment of the Consumer Financial Protection Bureau (CFPB). But when the dust settled, one profoundly transformative innovation that did not garner the same outrage as CFPA did get into the law: imposing upon lenders a duty to assure borrowers’ ability to repay. Ensuring a borrower’s ability to repay is not an entirely unprecedented legal concept, to be sure, but its wholesale embrace by Dodd-Frank represents a sea change in U.S. consumer credit market regulation. This article does three things regarding this new duty to assess a consumer’s ability to pay mortgage loans. First, it tracks the multifaceted pedigree of this requirement, looking at fledgling strands in U.S. consumer law as well as other areas such as securities law; it compares too its more robust embrace in foreign systems. Second, it offers conjecture regarding just how this broadly stated principle might be put into practice by the federal regulators. Finally, it provides a brief normative comment, siding with the supporters of this new obligation on lenders.

Steve Clowney

May 20, 2011 in Mortgage Crisis, Real Estate Finance, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Thursday, May 19, 2011

Will Mortgage Scammers Never Cease

One of the eye-opening aspects of blogging here is this: often, if one of us puts up a post that contains the word "mortgage," we get spam in the comments box.  I would not be in the least surprised to find a comment on this post tomorrow that reads something like this:

This is a very interesting discussion of will mortgage scammers never cease.  I like to read about will mortgage scammers never cease.  Will mortgage scammers never cease is very important.


Refi-now [at] lowestrates [dot] com

Since these usually come in response to a post about the latest mortgage industry outrage, it (frankly) pisses me off.

And just tonight, during dinner, I got a call from someone in Newport, CA, claiming to be working for Fannie Mae.  He told me my mortgage had "crossed his desk" and he wanted me to know, as a public service, that I could get a much lower rate, and he was prepared to tell me how.  I told him . . . well, I suppose this is a family blog, but I told him that I did not think highly of him.

I was naive enough to think that the mortgage crisis would have put, if not an end, at least dampener on this type of despicable activity.  This is exactly how so many people's lives were ruined, and exactly why the mortgage industry became such a chaotic, undisciplined, unethical nightmare that lenders can't even produce the note for mortgage loans on which they intend to foreclose. 

But if it wasn't apparent before, it should be apparent now that the mortgage crisis -- that is, the crisis of the mortgage industry -- is in the past.  Its particpants either walked away before the scam collapsed, or got bailed out if they were left holding the cards.   

Now they're back in action.  Want proof?  The front page of the on-line version of today's New York Times has an ad for "Orange Home Loans As Low as 3.05% APR."  Click on the link, and you get an offer for a 5 year fixed rate mortgage loan at 2.99% if you can put 20% down, but with monthly payments set as if the loan were a 30 year fixed rate.  In other words, when 5 years have gone, and you need to re-finance, you'll have built up no new equity in the home because you've been paying as if you had 30 years to pay it off, not 5.  You'll essentially have to purchase the home again, at a much higher rate.  And this isn't some fly-by-night company.  At least they require 20% down.

So the crisis of the mortgage industry is over.  Instead, what we have now is a foreclosure crisis.  A crisis that is rendering families homeless, destroying equity in homes, and in some places (here's looking at you, Florida) undermining the rule of law.

Soon we'll have a restitution crisis. 

If we get any spam in response to this post, I'll post it as an addendum here.

Mark A. Edwards

[comments are held for approval (and now you know why), so there will be some delay in posting] 

May 19, 2011 in Home and Housing, Mortgage Crisis | Permalink | Comments (1) | TrackBack (0)

Human Hair Update

A little while back I had a post about the growing market for human hair.  Well, it turns out that property profs weren't the only one who noticed - thieves across the country have started to target salons for their stashes of human hair.  This from the New York Times:

During the past two months alone, robbers in quest of human hair have killed a beauty shop supplier in Michigan and carried out heists nationwide in which they have made off with tens of thousands of dollars of hair at a time.

Steve Clowney

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Intellectuals Who Live on University Campuses

Newt Gingrich on land use stuff:

This whole problem of intellectuals who live on university campuses and take mass transit and then have no idea what the rest of the country is like. I mean, it’s nice to have a physicist as the Secretary of Energy, but maybe his experiences of real life on an everyday basis aren't the same as those of people who live in rural Georgia or people who live in north Georgia. I’m always reminded when people talk about Europe. I did my dissertation on Belgium. Belgium is one-third the size of South Carolina. So when you start talking about traveling in Europe, they’re not driving very far and they’re not driving cars that are very big. And that happens to be different than America on two grounds—we travel a long way and we like bigger vehicles. Now liberals don’t like us liking bigger vehicles, so they want to find a way to punish us economically. Hit our pocketbook, make us change, because they’d like all of us to live in big cities in high rises, taking mass transit. That’s their idealized utopia.

Oh no.  Gingrich finally has our number.  How does he know that when I'm at my country club, sipping organic tea and making fun of people who watch NCIS, I love plotting about how I can get all the Bubbas to live in one-a-them newfangled apartments and ride the trolley car.

More substantively, Gingrich has things completely backwards. He tries to argue that liberals are attempting to force everyone to live in dense urban areas.  In fact, zoning regulations -- championed by suburban homeowners -- have made it more or less impossible for these "liberals" to build new walkable  neighborhoods.  Gingrich's bluster is really dishonest and incredibly frustrating.  A supposed champion of free markets should be advocating a role-back of land use regulations so that high-density developments can compete on an level playing field with low-density suburbs, not demonizing intellectuals.  The "argument" he's making is all identity-politics nonsense.

Steve Clowney

(hat tip: Matt Yglesias)

May 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Riding the Bus to Work

Time magazine has posted a slideshow of the best cities for public transit and the worst:

[W]hich cities were best at getting their residents to their workplaces in a timely and cost-effective manner? By researching coverage, service frequency and percent of total employed residents who can use public transportation, the report aimed to rank cities based on the most convenient overall commute.

Steve Clowney

May 19, 2011 in Articles | Permalink | Comments (1) | TrackBack (0)

Mayer et al. on Mortgage Modification and Strategic Behavior

Christopher J. Mayer (Columbia Business), Edward R. Morrison (Columbia Law), Tomasz Piskorski (Columbia Business) and Arpit Gupta (Columbia Business) have posted Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide on SSRN.  Here's the abstract:

We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by U.S. state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers with subprime mortgages throughout the country. Using a difference-in-difference framework, we find that Countrywide's relative delinquency rate increased thirteen percent per month immediately after the program's announcement. The borrowers whose estimated default rates increased the most in response to the program were those who appear to have been the least likely to default otherwise, including those with substantial liquidity available through credit cards and relatively low combined loan-to-value ratios. These results suggest that strategic behavior should be an important consideration in designing mortgage modification programs.

Steve Clowney


May 19, 2011 in Home and Housing, Mortgage Crisis, Real Estate Finance, Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 18, 2011

Mulvaney on Proposed Exactions

Tim Mulvaney (Texas Wesleyan) has posted Proposed Exactions on SSRN.  Here's the abstract:

In the abstract, the site-specific ability to issue conditional approvals offers local governments the flexible option of permitting a development proposal while simultaneously requiring the applicant to offset the project’s external impacts. However, the U.S. Supreme Court curtailed the exercise of this option in Nollan and Dolan by establishing a constitutional takings framework unique to exaction disputes. This exaction takings construct has challenged legal scholars on several fronts for the better part of the past two decades. For one, Nollan and Dolan place a far greater burden on the government in justifying exactions it attaches to a development approval than it has placed on the government in justifying the underlying regulations by which such approval could be withheld. Moreover, there remain a series of unanswered questions regarding the scope and reach of exaction takings scrutiny that plague the development of a coherent body of law upon which both landowners and regulators can comfortably rely. This Article explores whether these problems are amplified where the exaction takings construct that is ordinarily applied when an exaction is imposed is also applicable at the point in time when an exaction is merely proposed. The piece seeks to move beyond the cursory analysis in the few reported decisions addressing this issue by identifying and exploring the competing normative justifications underlying it.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

May 18, 2011 in Land Use, Recent Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)

The Importance of Industrial Space

A story about the Vancouver metroplex's struggle to balance its citizen's need for more residential spaces with its politician's desire to preserve some land for industrial uses and create new jobs:

We have reaffirmed the city’s commitment to protect industrial land and to look at increasing job density on that land base in the years ahead,” said Vancouver Mayor Gregor Robertson, who believes developers and land speculators are holding on to industrial land in the hopes of getting it rezoned to residential under friendlier administrations. “Industrial lands are crucial for our economy and job creation. There is a need to maintain that land base and to prevent speculation that will result in turning that land into residential.”

Steve Clowney

May 18, 2011 in Land Use | Permalink | Comments (0) | TrackBack (0)

Dagan on the Judge's Role in the Development of Property Law

Dagan Hanoch Dagan (Tel Aviv) has posted Judges and Property (Book Chapter) on SSRN.  Here's the abstract:

This Essay considers the question of whether judges should refrain from engaging in the development of property law and leave the field to the legislatures. Like previous studies, I address both the expected performance of the judiciary in property matters and its democratic legitimacy, considering the features characteristic of property. But while others have advocated judicial passivity in the creation and modification of property rights, I argue that, subject to a few exceptions dealing with general limitations of judge-made law, judges should not be excluded from the drama of property law. Indeed, the unique features of adjudication, at least in the “Grand Style” of the common law tradition, make it an important source for the ongoing critical and constructive process of reshaping property institutions by challenging the desirability of their normative underpinnings, their responsiveness to the social context in which they are situated, and their effectiveness in promoting their contextually examined normative goals.

Steve Clowney

May 18, 2011 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 17, 2011

Towns in the Floodway

In case you've been living in a cave for the last few months, it's been raining a lot in the middle of the country.  Here in Lexington, we've got lots of wet basements and leaky roofs; But along the Mississippi River, the consequences of too much water are far more serious.  In 1927, for example, the river flooded 27,000 square miles, displaced 600,000 people, killed 250, and caused $400 million in property damage.

As water levels of the Mississippi near record levels, the Army Corps of Engineers is taking steps to ensure that there isn't a repeat of 1927.  This weekend, the corp opened the Morganza Spillway for the first time in 40 years.  The Morgnaza is a huge flood control system that can divert water out of the Mississippi and away from New Orleans and Baton Rougue.  Unfortunately, the water has to go somewhere else.  The water that flows out of the Morganza will pour across farmland and destroy homes before heading into the Gulf of Mexico.

The property question is, what happens to the towns and farmland in the floodway?  Why can the government flood homes here to save property there?  Does the flooding caused by the Corp amount to a taking?

It seems that it does not.  According to Tulane University geographer Richard Campanella, the federal government purchased flow easements from the property owners in the 1950s that allows it to store water on the land. The Corp also sends residents yearly written notices to remind them of the possibility of opening the floodway.  Despite the threat of flooding, a number of folks took the calculated risk to invest in the flood plain.

Steve Clowney

May 17, 2011 in Servitudes, Takings | Permalink | Comments (2) | TrackBack (0)

Waldeck on the Inheritance of Heirlooms

Waldeck_sarah_lg1 Sarah Waldeck (Seton Hall) has posted Rethinking the Intersection of Inheritance and the Law of Tenancy in Common (Notre Dame Law Review) on SSRN.  Here's the abstract:

The Article is about "identity property," which it defines as property that is strongly linked to one’s sense of self and family and is valued by its holder primarily for what it represents. Identity property is often jointly inherited by siblings or other relatives, who take as tenants in common. Standard doctrine relies on familial bonds and the unilateral right of partition to mitigate the problem of bilateral monopoly and to foster cooperation in the management of the tenants’ common resource. The Article argues that, in the context of identity property, this standard account is wrong. Rather, because the law favors partition by sale, the exit of one tenant often means that the remaining co-tenants will be forced to sell the identity property. Because the remaining tenants perceive the property as non-fungible, the threat of exit is powerful enough to exacerbate the bilateral monopoly and decrease the likelihood of cooperation. The Article relies on the example of the family cottage to elucidate the meaning of "identity property" and examines the formal agreements that relatives who jointly own cottages make when they decide to opt out of the tenancy in common default rules. These formal agreements reveal a willingness to sacrifice the right of exit in order to increase the odds that co-tenants will continue to own the identity property. The Article argues that the law should heed the message of these formal agreements and adopt a more flexible approach to the inheritance of identity property, including the possibilities of temporal partition and facilitated agreement.

Steve Clowney

May 17, 2011 in Gifts, Personal Property, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, May 16, 2011

It's Alive! The Rule Against Perpetuities in the News

Will The Rule Against Perpetuities has come to Lexington, KY.  The RAP has finally ended a local girl's lengthy wait to get a share of a family fortune that's long been tied up in trust. Christina Alexander Cameron, the great-great-great-granddaughter of lumber baron Wellington R. Burt, is one of 12 heirs set to split Burt's $100 million estate -- 92 years after his death. Burt included a clause in his will that prevented his family from collecting any money until 21 years after the death of his youngest grandchild in existence when he died.

Other than the RAP angle, this story has a number of delicious twists and turns.  First, by all accounts, settling the estate has been an absolute nightmare.  The Probate Judge has noted that the case involved negotiations among 20 attorneys - the affair has become "one of the most complicated research projects" to blow through the legal community in Saginaw.  In addition to the many legal questions, the probate judge has been tasked completing some serious genealogical research.  Initially, 30 people claimed to be direct descendents of Burt. Public records, however, proved that only a dozen from that group are the fruit of Burt's family tree.

Second, the drama surrounding the estate appears to have torn the family apart and brought much havoc in the lives of Burt's descendants. According to one account, "Within a year of Burt’s death, some of his children attempted to break the trust in court, claiming the old man wasn’t in his right mind when dictating that last testament. Fighting the lumber baron’s trustees legally became a tradition for generations of Burts."  Cameron herself describes the money as something of a "curse" that's been a central obsession for generations of her family.

Finally, it seems like the trustee of Burt's fortune did a rather poor job managing the corpus.  When Burt died in 1917 his wealth was estimated at somewhere between $40 million to $90 million, and yet the trust is currently worth only $100 million.  If these estimates prove true, the trustee could find itself hit with a lawsuit for breaching the duty of prudence or care.

Steve Clowney

(Pic:  Burt's actual will.  It's handwritten!)

May 16, 2011 | Permalink | Comments (1) | TrackBack (0)

The Happiness of Staying in Place

As someone with a strong sense of place (I love love love my hometown) I was happy to see this article in the New York Times.  Constance Rosenblum discusses the joys (and some of the frustrations) of staying put in one home and one city for decades. 

People stay in one place for many reasons. Often the explanation is financial. In a city of ever-pricier housing, giving up even the tiniest rent-stabilized space can seem insane. If a personal or professional life doesn’t change much, there may be no incentive to move, and even if a life evolves, a space may be elastic enough to accommodate shifting needs. Sometimes it’s simply easier to stay than to go.

Steve Clowney

May 16, 2011 in Home and Housing | Permalink | Comments (0) | TrackBack (0)

Sunday, May 15, 2011

Washington Post Publishes Investigation of HUD, and it's not pretty

The Washington Post today published what appears to be the first in a series of investigative reports on wasteful spending by HUD, and the consequences of that waste for the poor.  According to the Post, it "analyzed a database of 5,100 open construction and renovation projects funded at $50,000 or more under the U.S Department and Housing and Urban Development’s HOME program."  It looked for projects that were:

launched more than five years ago that are still incomplete, projects that had not drawn money against their HUD accounts in at least 18 months or projects with other verified delays.

Overall, the newspaper identified an estimated 700 projects that were awarded $400 million; nearly 450 were launched in 2006 or earlier. In some cases, construction was completed, but the units are sitting vacant because housing agencies have not sold or leased them to a low-income family.

The Post also identified nearly 600 other projects that have never drawn any money despite being earmarked for a year or more, leaving $250 million languishing. HUD has begun canceling those projects.

Given that Congress is looking for areas to budget-cut, I suspect this series could be a game-changer for HUD.  That's unfortunate, because the need for affordable housing in the United States is enormous.  No doubt there is waste at HUD.  But I suspect that the committed and well-intentioned people at HUD are trapped by in a downward spiral: they aren't given enough resources to adequately oversee the projects they fund; with inadequate oversight, some of the projects they fund turn wasteful; when the waste is discovered, their resources are cut. 

The Post also has an interactive map of projects that are wasteful under its criteria.

It's investigative reporter, Debbie Cenziper, will answer questions from readers during a live chat at 1 p.m. Eastern, Monday May 16th.  You can post questions now.

It's well worth your time exploring the series.

Mark A. Edwards

{Comments are held for approval, so there will be some delay in posting]

May 15, 2011 in Home and Housing | Permalink | Comments (1) | TrackBack (0)

Friday, May 13, 2011

Friday's Architecture Moment

Witold Rybczynski on the death of the McMansion.

Steve Clowney

May 13, 2011 | Permalink | Comments (1) | TrackBack (0)

Thursday, May 12, 2011

Tattoos & Copyright

Tyson&helm Mike Tyson is famous for a lot of things: his boxing, his pigeon racing, his taste for human flesh.  In the tattoo world, however, he's best known for his truly awesome face tattoo. 

In a strange turn of events, the artist that inked Tyson's face is suing Warner Brothers to stop the distribution of The Hangover II.  A character in that movie wakes up in Bangkok (after a long night of drinking) and finds his face mysteriously covered with a tattoo that looks very similar to Tyson's (If I had a nickel...).  The artist, S. Victor Whitmill, claims that Warner Bros. has illegally reappropriated his work and infringed on his copyright. 

Whitmill might have a good case;  He has a signed release from Tyson granting him ownership of the work, and the tattoo has a very prominent place in both the movie and the promotional materials.  Moreover, there's both scholarship (Christopher A. Harkins,Tattoos and Copyright Infringement: Celebrities, Marketers, and Business Beware of the Ink, 10 Lewis & Clark L. Rev. 313 (2006)) and caselaw (Gonzales v. Kid Zone, Ltd. and Transfer Technologies, Inc.) that suggests tattoos are fully copyrightable.

A couple of points here.  First, Whitmill's suit seems to violate a pretty strong social norm in the tattoo world.  As Pat Fish, a Santa Barbara artist notes, "Attempting to bring lawyers in always makes things worse.  They are Harpies, they shit on everything they feed on.  No one in their right mind would ever try to bring lawers into the tattoo world . . ."

Second, if you extend the reasoning here, could Whitmill keep Tyson from appearing in movies?  How does the tattoo copyright interact with Tyson's right of publicity?  Does Tyson have some kind of implied license to, ugh... use his face. 

Steve Clowney

May 12, 2011 in Intellectual Property | Permalink | Comments (1) | TrackBack (0)

Real Estate Organizations

Over at the Conglomerate, David Zaring is trying to get to the bottom of a mystery.  Why are Real Estate Companies called organizations?

New York City alone has the Durst Organization, the Brodsky Organization, the Trump Organization, &c.  Why are these called organizations?  It's not that they aren't also limited liability companies as well.  And it is the case that many non real estate firms will set up internal "real estate organizations" to manage their property.  But my quick search on Westlaw and through the websites of these companies didn't reveal the reason for the fashion for the "organization" moniker.  The question isn't easy to resolve via text searching ("organization" isn't very unique).  So I thought I might crowd-source the question.  Do our readers know the answer?

Steve Clowney

May 12, 2011 in Real Estate Transactions | Permalink | Comments (3) | TrackBack (0)

Wednesday, May 11, 2011

The Best Cities for Jobs in 2011

Joel Kotkin and Michael Shires of New Geography rank the best small, medium, and large-sized cities for job growth.  The take home point:

[N]o place displayed more vibrancy than Texas. The Lone Star State dominated the three size categories, with the No. 1 mid-sized city, El Paso (No. 3 overall, up 22 places from last year) and No.1 large metropolitan area Austin (No. 6 overall), joining Killeen-Temple-Fort Hood (the No. 1 small city) atop their respective lists. Texas also produced three other of the top 10 smallest regions, including energy-dominated No. 4 Midland, which gained 41 places overall, and No. 10 Odessa, whose economy jumped a remarkable 57 places. It also added two other mid-size cities to its belt: No. 2 Corpus Christi and No. 4 McAllen-Edinburgh-Mission.

Steve Clowney

May 11, 2011 | Permalink | Comments (1) | TrackBack (0)

Hirokawa on Sustaining Ecosystem Services Through Local Environmental Law

Hirokawa Keith Hirokawa (Albany) has posted Sustaining Ecosystem Services Through Local Environmental Law (Pace Environmental Law Review) on SSRN.  Here's the abstract:

In the early decades of modern environmental law, local governments retained their prerogative over community design and other essentially local matters, but were largely excluded from the debate on national environmental policy. More recently, environmental lawyers have reignited the question of how and where the local government regulation of land use impacts intersects with environmental quality. It is interesting to note that as the national dialogue has turned to the important role of local governments in achieving our environmental quality goals, there has been a corresponding emergence of an "ecosystem services" approach to understanding nature. It is more interesting to note how many of the stories of ecosystem services – successes, explanations, and illustrations – take place in local governments and in community decision making. Perhaps by coincidence, but likely due to design, local environmental law and ecosystem services have evolved in a complementary manner.

This article looks at the recent trends in recognizing and regulating ecosystem services at the local level. Local governments are adopting regulations aimed at capturing the benefits of functioning ecosystems by transcending aesthetic values of local nature and focusing on ecological processes and the services they provide. Section II introduces the topic by arguing that because of the manner in which local governments regulate environmental impacts, the value embedded in ecosystem services is commensurable with local regulation. Section III illustrates the relationship between local governance and ecosystem services, as well as the opportunities presented by this relationship, by examining some of the ways that local environmental law has embraced the advantages of an ecosystem services perspective. This article concludes that local governments are leaders in the implementation of ecosystems services-based regulation, that communities are the direct beneficiaries of such action, and that this is exactly as it should be.

Steve Clowney

May 11, 2011 in Land Use, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)