July 29, 2020
The American Bar Association selected my short article, Insuring Sustainable Homeownership, as part of “The Best of ABA Sections”–a compilation of some of the best articles published by the ABA’s sections, forums, and divisions. It was published in the ABA’s journal, GPSolo and it is drawn from Insuring Sustainable Homeownership, published in 20 (March/April 2018). It opens,
The Federal Housing Administration (FHA) has suffered from many of the same unrealistic underwriting assumptions that did in so many lenders during the 2000s. It, too, was harmed by a housing market as bad as any seen since the Great Depression. As a result, the federal government announced in 2013 that the FHA would require the first bailout in its history. At the same time that it faced these financial challenges, the FHA came under attack for poor execution of some of its policies attempting to expand homeownership opportunities. This article examines the criticism that has been leveled at FHA and the goals the agency should pursue.
May 28, 2020
In many ways, COVID-19 has changed the way we live for both the immediate future and long-term. Brooklyn Law School Dean Michael Cahill has been sitting down with members of the Brooklyn Law School faculty to discuss the legal ramifications of our response to COVID-19 and what a post-pandemic world may look like. Here is the link to our discussion of the effect of the pandemic on the real estate market and beyond: https://youtu.be/j9DFBOsU3qw.
February 20, 2020
I just finished reading Money and Government by Robert Skidelsky (2018). It is a bit tough in parts for non-economists, but it is a great read for those trying to understand the appropriate relationship between economic theory and government policy. While that may sound dry indeed, it is of key importance to the design of a post-Financial Crisis world regulatory order.
The book delves into the the “Mysteries of Money,” providing a short history of a deceptively simple topic that I continue to find to be difficult to wrap my head around: what exactly is money and what can you do with it? The book then goes into some inside baseball analysis of the history of economic thought. I skimmed this section because it related some pretty technical debates among early economists to set up its more accessible discussion of Keynesian economics and its challenger, Milton Friedman-led Monetarism. The book then takes a look at how economic theory impacted governments’ responses to the Financial Crisis, for good and for ill.
I think readers of this blog would be most interested by Skidelsky’s insights in the final section, where he tries to sketch “A New Macroeconomics.” He asks and answers the question, “What Should Governments Do and Why?” He wants to make banking safe and address inequality.
Readers of this blog will be particularly interested in his analysis and recommendations for the mortgage market. He argues that the “main theoretical mistake behind securitization was the assumption that securities are always liquid: they can always be sold quickly and without (much) loss.” (328) The Financial Crisis demonstrated in spades that this was not true. He argues that “[c]ompelling banks to hold mortgages for a period of years” is the solution to this particular problem. (363) I do not think that I agree with this solution, but as he argues his point at a high level of generality, it probably is best to say that the devil will be in the details for any reform program in this sphere.
I found his analysis of populism compelling. He argues that the “political divide between right and left . . . is increasingly overshadowed by one between nationalism and globalism.” (372) I won’t go into the details here, but he has a very trenchant analysis of how the economist’s theoretical Homo economicus fails to account for important aspects of our humanity as individuals, as members of groups and as citizens of nation-states. He warns that we do that at our peril: citizens of democracies will punish their leaders for failing to take into account their complex need to flourish in all of those ways that economists can reduce down to one-dimensional units of measurement, such as “utility.”
Yale University Press says that the book is out of print, but Amazon has paperback copies available if you dig a bit on the book’s web page (and, of course, there are Kindle versions available for those so inclined). I recommend that you get yourself a copy.
February 19, 2020
I was quoted in The Ledger (Florida) in Seeking Progress, City Upended Lives in Eliminating Moorehead Community. It opens,
After selecting Moorehead as the site of a new auditorium, Lakeland officials began efforts 50 years ago to inform residents, assess properties, make offers to owners and assist residents in finding new places to live.
Dividing the predominantly black neighborhood roughly in half, the city planned to acquire all of the eastern section north of Lime Street by 1971 and the remainder in 1972.
The campaign, which displaced 122 families, fit into a decades-long national phenomenon in which cities partially or completely removed minority neighborhoods for projects aimed at fostering urban renewal.
The American Housing Act of 1949, part of President Harry Truman’s “Fair Deal,” established the power of governments to seize private property for projects categorized as urban renewal. It also made federal funds available for such projects.
Though intended to replace substandard housing with better options, the Act spurred a flurry of activity that wound up displacing minorities, said David Reiss, a professor at Brooklyn Law School and academic program director of The Center for Urban Business Entrepreneurship. Cities used the program’s Title I funding to engage in what was sometimes called “Negro removal” or “slum clearance.”
Before the federal program was halted in 1974, some 2,500 urban renewal projects displaced about 1 million people nationwide, Reiss said.
“Two-thirds of those people were African-American, and if you think about African-Americans being 12 percent of the population, they were being displaced at a multiple, maybe at five times the rate of other Americans and particularly white Americans,” Reiss said. “So urban renewal really reshapes the urban fabric across the country.”
Property in minority communities tended to be cheaper to acquire, especially during the peak period of urban renewal, and Reiss said minorities also were less equipped to challenge authorities.
“It was structural racism on one level, where the majority would find it much easier to displace a black community than they would to displace a white community, although displacement wasn’t only in black communities — but as we see it’s overwhelmingly in black communities,” he said. “Because black communities were often poor, that would be another reason — being in a poor community would give you less political power to fight something like this.”
January 29, 2020
LendingTree quoted me in Deed of Trust vs. Mortgage: Key Differences. It reads, in part,
Each type of security instrument leads to a different type of foreclosure process. Deed of trust states typically have a non-judicial foreclosure process. “The trustee has the power under the terms of the deed of trust to actually sell the property,” said David Reiss, professor of law at Brooklyn Law School and real estate expert. “That can happen in some jurisdictions in a matter of weeks or a matter of a few months.”
A deed of trust foreclosure doesn’t involve going to court. In mortgage states, though, the lender must get a court order to foreclose on a home. This is called a judicial foreclosure. “In many jurisdictions, particularly in New York and New Jersey, [a judicial foreclosure] could take years to actually do,” Reiss said. “From a lender perspective, that’s not so great.”
Your state’s laws will determine which security instrument you use and which type of foreclosure process lenders are required to follow. Some states allow both types of foreclosures, but non-judicial foreclosures are more common than judicial foreclosures. The states that primarily use a non-judicial foreclosure process are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wyoming and the District of Columbia.
October 16, 2019
Some readers may be interested in a free upcoming program on how to teach real estate securitization. The program is co-sponsored by the AALS Real Estate Transactions Section and the New York City Bar Association’s Structured Finance Committee.
You can attend by live stream webcast or in person. You can attend as much of the program as you have time to attend, and feel free to pop in and out of the webcast.
Law professors and leading practitioners will serve as panelist instructors. I will be moderating a panel on Servicing & Its Discontents. It should be a great program for those who teach in this area.