November 25, 2014
The Urban Institute has posted its November Housing Finance At A Glance. This is a really valuable resource. The introduction provides a nice overview of recent developments in the area:
November 24, 2014
MaintStreet quoted me in How to Avoid War Between Homeowner Associations and Residents. It reads in part,
When Robert Stern moved into the Sedgefield retirement community in Ocean Isle Beach, N.C. four years ago, all he could see was four golf courses, a pool and club house on multiple wooded acres.
“Our home is on the 14th hole of Lion’s Paw golf course where there is beautiful water lining the green,” Stern told MainStreet. “It is common to see egrets, herons, geese, turtles and other wildlife coming in and out of the area.”
But lurking under the beautiful scenery was the Homeowners Association, which Stern discovered when he left for six months to live in his Nevada retirement home. Stern is among the 63 million Americans living in communities across the country under the jurisdiction of an HOA, according to the Community Association Institute.
“Our property was being neglected and is currently a mess and the dysfunctional Sedgefield Committee won’t take responsibility for not having performed contractual compliance inspections,” said Stern.
“An HOA is a double edged sword,” said David Reiss, professor of real estate with the Brooklyn Law School. “HOAs allow residents to have a lot of sway over their environments but they also make decisions that individual residents don’t like. If you don’t agree with the decision, whether it be over a big or small issue, it can grate no matter what the decision is.”
How to Resolve Disputes
Resolving a dispute with an HOA can involve litigation or joining the club.
“When it comes to the tyranny of the board, we have met the enemy and it is us,” Reiss told MainStreet. “A very effective technique to contest a decision with which you disagree is to run for the board.”
Under most HOAs, boards are elected by residents.
“Those who are willing to do the work end up calling the shots,” Reiss said.
November 20, 2014
GlobeSt.com quoted me in Waiting to Say Goodbye to the GSEs. It reads in part,
US HUD Secretary Julian Castro added another “to do” item to the lame duck Congress’ list of things they should get done before they adjourn on Dec. 11: pass the bipartisan Johnson-Crapo Senate bill introduced earlier this year that would wind down the GSEs.
“This could be, I believe, a good victory in the lame duck session or next term of Congress for housing finance reform,” he said in an interview with Bloomberg Television earlier this week. The crux of the plan – doing away with Fannie Mae and Freddie Mac, creating a backstop for these loans and removing tax payer risk – are all supported by the Obama Administration, he said.
“Housing finance reform will continue to be a priority for the Obama Administration,” Castro said.
The multifamily finance industry has been expecting GSE reform for years now; certainly there have been calls for their dismantlement when they were placed in conservatorship in 2008 during the depth of the financial crisis. Many in the industry, in fact, would welcome their sunset, in the expectation that the private sector could fully and more efficiently and more cheaply provide the same level of funding.
That is not the unanimous sentiment though. In fact, opinions about the subject in commercial real estate range, widely, across the board from “it is about time” to “the politics are too strident for it to happen” to “maybe it will happen but it is difficult to believe the GSEs could entirely be replaced by the private sector.”
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David Reiss, a professor of Law and Research Director, Center for Urban Business Entrepreneurship (CUBE) at Brooklyn Law School, has been calling for the privatization of Fannie and Freddie for some time and is dismissive of the “Chicken Little claims” that the sector will collapse if the government reduces its footprint in multifamily and single-family housing finance.
“With a carefully planned transition, it is eminently reasonable to believe that we can put private capital in a first loss position for multifamily housing so long as the government retains a role in subsidizing affordable housing and acting as a lender of last resort when necessary,” he tells GlobeSt.com.
November 19, 2014
Bloomberg interviewed me for Lawsky Leaving After $3 Billion in Fines Makes a Mark. The article reads in part,
When Ocwen Financial Corp. (OCN) shares soared on the news that regulator Benjamin Lawsky, who’s probing the company, will step down, Bill Miller shrugged.
The next head of New York’s Department of Financial Services will probably be as aggressive as Lawsky, continuing the uncertainty for Ocwen, said Miller, who runs the $2.2 billion Legg Mason Opportunity Trust. (LMOPX) Lawsky’s investigations of nonbank mortgage servicers such as Ocwen have caused their shares to plunge.
“Ocwen has been rallying on the view that with him gone that will lift the burden, but I would be surprised if the next person didn’t at least follow through in the way Lawsky was going to,” said Miller, whose fund, which invests in Nationstar Mortgage Holdings Inc., has gained an annual 38 percent since 2011.
In three years as New York’s financial watchdog, Lawsky extracted more than $3 billion in fines from global banks, called for the firing of executives and questioned whether the lightly regulated nonbank servicers are properly handling modifications and defaults. As the department’s first superintendent, Lawsky hired experienced lawyers from the New York Attorney General’s office, creating a strong enforcement culture that will continue after he’s gone, said Kathryn Judge, an associate professor focusing on financial institutions at Columbia University Law School.
“Similar to what we saw Eliot Spitzer doing as attorney general, being in New York allowed Lawsky to step in where federal regulators hadn’t,” Judge said. “By stepping into this role at a formative stage for the regulator, he created a footprint. That legacy will survive.”
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The superintendent’s work has reflected favorably on the governor, said David Reiss, a professor who specializes in real estate and consumer protection at Brooklyn Law School. That will encourage Cuomo to select a successor who’s equally dynamic, Reiss said.
Cuomo will want to build on Lawsky’s record of protecting homeowners from improper foreclosures and holding mortgage servicers accountable, said Reiss.
Chief of staff Anthony Albanese, general counsel Daniel Alter, and capital markets division head Maria Filipakis are among the top people that Lawsky brought to the department. One of them may be in a position to replace him, according to a lawyer who has had extensive dealings with the superintendent. The lawyer asked not to be named because he’s not authorized to speak publicly about the matter.
The successor will have to focus more on regulation and finding answers to the issues the department uncovered with nonbank servicers and insurers, said Eric Dinallo, who served as New York’s superintendent of insurance from 2007 to 2009.
“Each superintendent or commissioner wants to put their unique stamp on the agency,” he said.
November 18, 2014
I was on an interesting panel today on the state of the Fannie/Freddie shareholder litigation. Judge Lamberth’s ruling in Perry Capital LLC v. Lew et al. was bad news for the plaintiffs in all of the shareholder suits. The panel was hosted by Michael Kim, CRT Capital Managing Director & Senior Research Analyst, and featured
- John Carney – Wall Street Journal
- Richard Epstein – NYU Law School
- Jonathan Macey – Yale Law School
- David Reiss – Brooklyn Law School
The agenda for the panel included
- an overview of the litigation timeline for the cases in Iowa District Court, the Court of Federal Claims and the U.S. Court of Appeals for the District of Columbia
- a detailed analysis of Judge Lamberth’s Ruling and
- a review of legal strategies and the outlook going forward
The more of these panels I am on, the more I am struck by the passionate intensity of those representing the shareholders. They are convinced that they are not only right, but also that the judiciary will see it their way. I lack this conviction.
It is not that I am so sure that the shareholders will ultimately lose (although that is a good possibility). Rather, it is that the facts and the law are extraordinarily complex in these cases. Because of this complexity, I find it hard to predict how the judges assigned to hear these cases will choose to frame them.
Judge Lamberth and other judges deciding cases arising from government action during the financial crisis often frame their decisions with a narrative of extraordinary government intervention during a period of great uncertainty. As a result, those judges have granted the government as much deference as they can.
Many of the shareholder advocates analogize from precedents drawn from more pedestrian situations and believe that courts will hew closely to them. I am quite skeptical of that approach. Judges lived through the crisis too and are all too aware of the precipice we were on. I think they will think twice before second guessing those who had to call the shots with such severely limited information, and did so while under unrelenting pressure to get it right when the stakes were so high.
November 17, 2014
HUD has released the Annual Report to Congress Regarding the Financial Status of the Mutual Mortgage Insurance Fund Fiscal Year 2014. It appears that things are looking up for the FHA, particularly after last year’s mandatory appropriation from the Treasury, the first in the FHA’s 80 year history. For those of you who are not housing finance nerds, the Mutual Mortgage Insurance Fund (MMIF) is the financial backbone of the FHA’s single-family mortgage insurance program. When it is in bad shape, the FHA is in bad shape.
As Secretary Castro notes in his forward to the report,