REFinBlog

Editor: David Reiss
Brooklyn Law School

November 23, 2017

Lincoln’s Last Thanksgiving Proclamation

By David Reiss

President Lincoln issued the following proclamation, his last, in 1864:

It has pleased Almighty God to prolong our national life another year, defending us with His guardian care against unfriendly designs from abroad and vouchsafing to us in His mercy many and signal victories over the enemy, who is of our own household. It has also pleased our Heavenly Father to favor as well our citizens in their homes as our soldiers in their camps and our sailors on the rivers and seas with unusual health. He has largely augmented our free population by emancipation and by immigration, while He has opened to us new sources of wealth and has crowned the labor of our workingmen in every department of industry with abundant rewards. Moreover, He has been pleased to animate and inspire our minds and hearts with fortitude, courage, and resolution sufficient for the great trial of civil war into which we have been brought by our adherence as a nation to the cause of freedom and humanity, and to afford to us reasonable hopes of an ultimate and happy deliverance from all our dangers and afflictions:

Now, therefore, I, Abraham Lincoln, President of the United States, do hereby appoint and set apart the last Thursday in November next as a day which I desire to be observed by all my fellow-citizens, wherever they may then be, as a day of thanksgiving and praise to Almighty God, the beneficent Creator and Ruler of the Universe. And I do further recommend to my fellow-citizens aforesaid that on that occasion they do reverently humble themselves in the dust and from thence offer up penitent and fervent prayers and supplications to the Great Disposer of Events for a return of the inestimable blessings of peace, union, and harmony throughout the land which it has pleased Him to assign as a dwelling place for ourselves and for our posterity throughout all generations.

November 23, 2017 | Permalink | No Comments

November 21, 2017

Housing Problems and Federal Assistance

By David Reiss

Family living in a one-room tenement. New York, NY, USA (1890) by Jacob Riis. This version was colorized by Kelly Short.

The Urban Institute’s G. Thomas Kingsley has posted a brief, Trends in Housing Problems and Federal Housing Assistance. It opens,

In the 1930s, many American families lived in seriously deficient housing. To address that challenge, the federal government began building subsidized housing, and in the decades that followed, a complex array of federal programs evolved to tackle the continuing housing problems of low-income renters. Almost 10 years ago, the Urban Institute prepared a “primer”to assess this evolution. This brief is an update of major sections of that report, focusing on trends in national housing problems and federal housing assistance over the past decade. It shows that renter housing needs have grown substantially—almost totally because of unaffordably high rents rather than physical deficiencies—and federal housing assistance is not keeping up. The number of low-income renters that actually receive federal housing assistance has dropped notably as a fraction of the low-income households that need it. Evidence indicates that this gap will worsen.

. . . this brief explains the basics of US housing assistance to those unfamiliar with the field. After a summary, it (1) reviews recent changes in the number of US households by tenure and the nature of the housing problems renters face, (2) identifies the nation’s major federal housing assistance programs and explains how they work, (3) examines changes in the scale and spatial patterns of federal housing assistance and the characteristics of assisted households, and (4) identifies recent policy shifts and issues affecting future directions for these programs and pointing out literature offering fuller explanations. (1)

Its main findings include,

  • Household formation has slowed, and the renter share has significantly increased (mostly among the lowest-income groups).
  • Physical housing problems decline as the affordability challenge increases.
  • There are many more households with housing needs.
  • Since 2007, the number of households receiving HUD project-based assistance (in public housing or in privately owned subsidized projects) remained stable, while the number receiving housing vouchers increased.
  • But the modest increase in HUD deep-subsidy assistance has been overshadowed by growth in the need; the housing assistance gap has widened significantly.
  • The beneficiaries served by HUD programs is shifting away from families with children and toward the elderly and disabled.
  • The Low-Income Housing Tax Credit has been the fastest-growing US housing program over the past two decades. It does not necessarily add to the number of households receiving assistance, but it allows deep-subsidy resources to be spread among more households than would be possible without it.
  • Given forces at play, the housing assistance gap will likely worsen. (2-3)

There’s a lot more in the brief for those who want an overview of where we are with housing in the early 21st century.

November 21, 2017 | Permalink | No Comments

Tuesday’s Regulatory & Legislative Roundup

By Jamila Moore

  • Janet Yellen, chair of the Federal Reserve Board resigned. Obama appointed Yellen during his term which many anticipated to end in 2024. Yellen served on the board in some capacity for approximately thirty years; however, her role as chair will end on February 3, 2018.Whether Yellen will continue as a member of the Fed board in some capacity is still unknown. Jerome Powell is expected to assume the role after Yellen. He currently awaits confirmation.
  • Like the House of Representatives tax bill, the Senate’s tax reform bill is moving towards a similar path. The Senate  Finance Committee passed its own tax reform bill. Members of the committee believe the bill is “the most comprehensive tax bill in a generation.” While both bodies of legislation presented their own versions of a tax reform bill, President Trump elected to encourage the Senate’s cooperation by stating, he looks forward to signing the bill into law by the end of the year.

November 21, 2017 | Permalink | No Comments

November 20, 2017

FHA Annual Check-up

By David Reiss

The Department of Housing and Urban Development released its Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund. The MMIF fund is the FHA’s main vehicle for insuring mortgages. As we saw last week, FHA reverse mortgage (formally known as “Home Equity Conversion Mortgage” or “HECM”) portfolio is not doing so well. FHA standard (sometimes referred to as “forward”) mortgages are doing better, although their performance is also slipping.

The MMIF declined from its 2.35 percent FY 2016 Capital Ratio to 2.09 percent. This still exceeds its statutorily-required level of 2.00 percent.  The Economic Net Worth of the MMIF was $25.6 billion while the MMIF Insurance-in-Force was approximately $1.23 trillion at the end of FY 2017. The decline was driven by the negative Economic Net Worth of the reverse mortgage portfolio, as the capital ratio for the forward mortgage portfolio on its own was 3.33%.

The report contains a multitude of useful tables and charts about the FHA’s mortgage portfolio. The FHA has an 18 percent share of the mortgage market, which is pretty high. (Table A-2) Indeed, it is in the same range of its market share during the financial crisis years (2008-2010). The FHA remains a strong force in the first-time homebuyer market, with an 82.2 percent share. (Table B-2)

The FHA’s objectives for FY 2018 are worth reviewing:

Play a Significant Role in Disaster Recovery. In the wake of Hurricanes Irma, Harvey, and Maria, and wildfires in California, in FY 2017 and the first part of FY 2018, FHA has played a significant role in relief and recovery efforts in affected areas, while taking immediate actions to protect its Single Family assets and financial exposure. (78)

Make Necessary Changes to the Home Equity Conversion Program (HECM). During FY 2017, FHA revised the HECM initial and annual Mortgage Insurance Premiums (MIPs), and Principal Limit Factors (PLFs). These revisions were necessary to enable FHA to continue to endorse HECM loans in FY 2018, protect the program for seniors, and balance serving FHA’s mission with taxpayer protection. (79)

No less important than these objectives is the FHA’s second-to-last one, Technology Modernization:

FHA is working to update its systems over the coming years to allow the Agency to work more effectively with lenders participating in the program, while operating FHA with greater efficiency and control. The technology systems that support FHA’s Single Family business have an average age of more than 18 years, with the Computerized Homes Underwriting Management System (CHUMS) exceeding 40 years. Similarly, the systems supporting the servicing, default, claims and REO areas have an average age of 14 years. FHA’s systems have been maintained, modified and enhanced over the years, but it has become fundamentally difficult and exceedingly expensive to maintain systems beyond their usable life. FHA’s outdated systems make it more difficult to work with lenders and to collect and manage important data. FHA remains a largely paper-processing entity while the rest of the industry has increasingly migrated to digital processes. FHA needs systems that can capture and effectively process the extensive volumes of data now in use, with enhanced storage and processing capabilities to handle the migration from paper forms to digital ones. Additionally, FHA requires the ability to analyze and manage insured loans comprehensively over the many phases of the mortgage life cycle. (80)

When you stop and think about how bad the state of the FHA’s technology is, you think that maybe this should be their top priority.

November 20, 2017 | Permalink | No Comments

Monday’s Adjudication Roundup

By Jamila Moore

  • Sunwood Condominium Association’s filed a summary judgment motion in a Washington federal court against National Surety Co. and St. Paul Fire & Marine Insurance Co. The condo association urged the Court to find the insurance companies liable for the $2.8 million dollars for 30 years of flood damage.
  • Katy Perry’s land dispute with a local developer, seemingly is over. A Los Angeles jury recently awarded $1.57 million to the world star regarding a developer’s intentional interference with her bid to purchase a convent from two nuns.
  • The city of Philadelphia were named defendants in two lawsuits. The city attempted to raise $118 million by taxing properties. To accomplish their goal, the city planned to revaluate the properties; however, Philadelphia homeowners would like the state courts to weigh in on the legality of the city’s new rule.

November 20, 2017 | Permalink | No Comments

November 17, 2017

Eminent Domain and Trump’s Wall

By David Reiss

photo by Sandeesledmere

Sucamore Gap on Hadrian’s Wall

Mashable quoted me in Sorry, Cards Against Humanity Can’t Stop Trump’s Wall. It opens,

As much as we may want to believe it, a card game company probably can’t save our country.

This week, owners of the irreverent (and kind of obnoxious, imo) Cards Against Humanity game unveiled their annual PR stunt and it has higher aspirations than last year’s pointless hole.

As part of the Cards Against Humanity Saves America campaign, it announced the purchase of “acres of land” on the U.S.-Mexico border and promised not to build a wall on it.

Going further, the company said that it had retained the services of legal representation specializing in property rights, “to make it as time-consuming and expensive as possible for the wall to get built.”

Sounds good, right? Guess there won’t be a wall!

Not so fast, patriots.

The government has a big ace up its sleeve when it comes to taking land from property owners. It’s called “eminent domain” and it’s right there in the constitution’s Fifth Amendment, below the part that people always talk about on lawyer shows. The Fifth Amendment states the government can’t take “private property be taken for public use, without just compensation.”

But it can still take land for public use, and it almost always does.

Government is mightier than the card game

The several law professors we talked to all came to the same forgone conclusion: the government will ultimately take that land from Cards Against Humanity.

“The power of eminent domain is considered to be a fundamental power of any government to use,” Professor of Law David Reiss at Brooklyn Law school said. And in this case, given the limited facts that were available to him, “ultimately the government would succeed.”

Over the past several decades, the judicial definition of eminent domain has expanded broadly. Historically, governmental use of eminent domain would fall under the umbrella of public use by using the acquired land to build a road or build a hospital. That’s changed in recent years, as the blanket phrase of “public use” has been used in eminent domain cases to include razing blighted urban areas or if the land could be seen as encouraging economic development.

Richard Epstein, Professor of Law at NYU, emphatically agreed that Cards Against Humanity would not stand much of a chance. Legally speaking, he saw, “the wall [will be seen] as a public good. There’s nothing you could do to resist them taking the land.”

Lynn E. Blais, Real Property Law Professor at the University of Texas at Austin, also thought that the government would easily win, but acknowledged how Cards Against Humanity could make an impact.

“They can’t stop the border wall for sure,” Blais said. Legally speaking, “it’s clearly for public use [but] they can challenge the process at every step if they want. That could take a long long time.”

And just as the company mentions in its announcement, it hopes to get in the way and meddle up Trump’s plans to build a wall, at least in that one plot of land it purchased. That delay tactic might prove exceptionally effective.

“They may not be looking to stop it, but merely to delay it. Delay can be very powerful. Sometimes delay can be as effective as winning the case,” Reiss said. “With enough money, it can be delayed for years.”

Did CAH fall down at the starting line? 

A few of the legal experts we talked to were adamant that Cards Against Humanity, in openly alluding to the fact that they hoped to make the wall construction “as time-consuming and expensive as possible,” invariably hurt their chances to gain favor with a judge. Basically, in flipping Trump off through a land buy, they exposed their bias and they might not receive a full case because of it.

“I wonder if they shot themselves in the foot if they admitted this was a delay tactic. Some judges might few that negatively,” Reiss said. “Judges wouldn’t look kindly on admitting delay.”

Epstein was very certain that the company’s promotion would hurt their chances of winning any case the federal government might bring against it.

“They are tacitly admitting that the goal is to block the president,” he said. “It’s one one of the dumber ideas I’ve heard of.”

He was certain that it would only invalidate any defense Cards Against Humanity tried to bring up, seeing as how the company already showed its actual intent. Still, he thought of it as a sign of the times, saying, “One of the consequences from the president acting like a crackpot means you get crackpot solutions.”

Blaise, however, believed the opposite side of this argument, and thought that land owners can do whatever they damn well please.

I don’t think it matters why you don’t want the government to take your land. As a property owner, you get to be as irrational as you want,” she said.

So you’re saying there’s a public use chance…

Even though a prospective case doesn’t look too promising for Cards Against Humanity, it still has avenues it can take to launch a defense of their new land. According to the legal experts we talked to, the most promising defense would be on whether the wall is really for public use. This is given that “public use” in the Fifth Amendment is not terribly defined and that arguments could readily be made that a border wall with Mexico might be more harmful than good.

“Public use is now often an incredibly broad term,” Reiss said. And, should the case go to federal court, the government’s potential case would invoke border security or immigration policy, which Reiss thought a judge would probably find compelling evidence.

November 17, 2017 | Permalink | No Comments