REFinBlog

Editor: David Reiss
Brooklyn Law School

February 2, 2016

Tuesday’s Regulatory & Legislative Roundup

By Shea Cunningham

  • The Federal Housing Administration has announced its new multifamily insurance rates, which show a reduction encouraging capital financing of affordable apartments.

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February 2, 2016 | Permalink | No Comments

February 1, 2016

Rigged Justice

By David Reiss

photo by Toby Hudson

The Office of Senator Elizabeth Warren has released Rigged Justice: 2016 How Weak Enforcement Lets Corporate Offenders Off Easy. The Executive Summary states,

When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims—all with no serious consequences.

The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.

Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct. This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies – and particularly the Department of Justice (DOJ) – rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability. (1)

I think the report’s central point is that the “contrast between the treatment of highly paid executives and everyone else couldn’t be sharper.” (1)

The report does not address some of the key issues that stand in the way of achieving substantive justice for financial wrongdoing. First, many of those accused of wrongdoing were well-represented by counsel who ensured that they did not violate any criminal laws, even if they engaged in rampant bad behavior. Second, contemporary jurisprudence of corporate criminal liability presents serious roadblocks to prosecutors who seek to pursue such wrongdoing. Third, many of these cases are incredibly resource heavy, even for federal prosecutors. This can incentivize them to go after other types of financial wrongdoing instead, such as insider trading.

It seems like it is too late to address much of the wrongdoing that arose from our most recent financial crisis. But if this report achieves one thing, I would hope that it gets Congress to focus on how corporations and their high-level executives could be held criminally accountable the next time around.

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February 1, 2016 | Permalink | No Comments

Monday’s Adjudication Roundup

By Shea Cunningham

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January 29, 2016

Outrage

By David Reiss

photo by Dmitry Kalinin

A federal judge has held that a mortgage servicer committed “the tort of outrage when it charged attorney’s fees and costs to plaintiff’s mortgage account and refused to explain the charges upon request.” (1) Lucero v. Cenlar FSB, No. C13-0602RSL (W.D. Wash. Jan. 28, 2016) (Lasnik, J.) The case has an all-too-typical story of servicer misbehavior — the repeated phone calls that went nowhere, the absence of any servicer representative with actual knowledge of why the servicer was acting the way that it was, the unjustified fees that just kept compounding into five-figure nightmares.

The Court found that under Washington law,

The elements of the tort of outrage are “(1) extreme and outrageous conduct, (2) intentional or reckless infliction of emotional distress, and (3) severe emotional distress on the part of plaintiff.” Rice v. Janovich, 109 Wn.2d 48, 61 (1987). Based on the evidence submitted at trial, plaintiff has raised a reasonable inference and the Court finds that Cenlar, annoyed that plaintiff had sued it after obtaining a loan modification and looking for leverage to force her to abandon this litigation, adopted a strained and unprincipled analysis of the to justify the imposition of unpredictable and enormous charges directly onto plaintiff’s mortgage statements as “Amounts Due.” Cenlar, having reviewed plaintiff’s financial situation less than a year before and being fully aware that plaintiff was paying late charges every month, had no reason to believe that she could cope with these charges. Cenlar reasonably should have known (and was likely counting on the fact) that these charges would cause immense emotional distress, which they did. Cenlar compounded the distress by denying plaintiff information about these charges or the justification therefore. The first notice of the charges stated that they were charged “in keeping with Washington law.” This assertion is wholly unsupported: Cenlar’s witness acknowledges that the letter was a form into which the reference to “Washington law” was inserted simply because the loan originated in Washington. No Washington case law, statute, or regulation has been identified that authorize the charges levied against plaintiff’s mortgage account. When plaintiff requested information regarding the charges, she was ignored for months. Eventually various contract provisions were identified, and Cenlar asserted that it was simply keeping track of charges it might eventually seek to recover from plaintiff. Regardless of whether Cenlar was demanding immediate payment or was simply threatening to collect them in the future, the message was clear: continue this litigation and we will take your home. Such conduct is beyond the bounds of decency and is utterly intolerable. (14-15, footnotes omitted)

Decisions like this tend to give us a warm feeling in our stomach — justice has been done! But the truth is that for every case like this, there are thousands of homeowners who were severely mistreated and had to just take it on the chin. Federal regulation of the housing finance system should get to the point where these situations are the rare, rare exception. We have a long way to go.

 

HT Steve Morberg

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January 29, 2016 | Permalink | No Comments

Friday’s Government Reports Roundup

By Shea Cunningham

  • The U.S. Conference of Mayors released its “Hunger and Homelessness Survey” in 22 cities. Even though the economy is improving, these is still many issues with hunger and homelessness.
  • The Federal Housing Finance Agency (FHFA) released its “Foreclosure Prevention Report” finding that Fannie Mae and Freddie Mac have prevented approximately 3.61 million foreclosures from September 2008 until October 2015.
  • The National Housing Conference (NHC) released report “How Investing in Housing Can Save on Health Care.” The report states that providing housing to the homeless would significantly reduce public healthcare expenditures.

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January 29, 2016 | Permalink | No Comments

January 28, 2016

Race, Poverty and Housing Policy

By David Reiss

Signing of the Housing and Urban Development Act

Signing of the Housing and Urban Development Act of 1965

Ingrid Gould Ellen and Jessica Yager of NYU’s Furman Center contributed a chapter on Race, Poverty, and Federal Rental Housing Policy to the HUD at 50 volume I have been blogging about. It opens,

For the last 50 years, HUD has been tasked with the complex, at times contradictory, goals of creating and preserving high-quality affordable rental housing, spurring community development, facilitating access to opportunity, combating racial discrimination, and furthering integration through federal housing and urban development policy. This chapter shows that, over HUD’s first 5 decades, statutes and rules related to rental housing (for example, rules governing which tenants get priority to live in assisted housing and where assisted housing should be developed) have vacillated, reflecting shifting views about the relative benefits of these sometimes-competing objectives and the best approach to addressing racial and economic disparities. Also, HUD’s mixed success in fair housing enforcement—another core part of its mission—likely reflects a range of challenges including the limits of the legal tools available to the agency, resource limitations, and the difficulty of balancing the agency’s multiple roles in the housing market. This exploration of HUD’s history in these areas uncovers five key tensions that run through HUD’s work.

The first tension emerges from the fact that housing markets are local in nature. HUD has to balance this variation, and the need for local jurisdictions to tailor programs and policies to address their particular market conditions, with the need to establish and enforce consistent rules with respect to fair housing and the use of federal subsidy dollars.

The second tension is between serving the neediest households and achieving economic integration. In the case of place-based housing, if local housing authorities choose to serve the very poorest households in their developments, then those developments risk becoming islands of concentrated poverty. Further, by serving only the poorest households, HUD likely narrows political support for its programs.

The third tension is between serving as many households as possible and supporting housing in high-opportunity neighborhoods. Unfortunately, in many metropolitan areas, land—and consequently housing construction—is significantly more expensive in the higher-income neighborhoods that typically offer safer streets, more extensive job networks and opportunities, and higher-performing schools. As a result, a given level of resources can typically house fewer families in higher-income areas than in lower-income ones.

The fourth tension is between revitalizing communities and facilitating access to high-opportunity neighborhoods. Research shows that, in some circumstances, investments in subsidized housing can help revitalize distressed communities and attract private investment. Yet, in other circumstances, such investments do not trigger broader revitalization and instead may simply constrain families and children in subsidized housing to live in areas that offer limited opportunities.

The final apparent tension is between facilitating integration and combating racial discrimination. Despite the Fair Housing Act’s (FHA’s) integration goal, legal decisions, which are discussed further in this chapter, have determined that the act’s prohibition on discrimination limits the use of some race-conscious approaches to maintaining integrated neighborhoods.

To be sure, these tensions are not always insurmountable. But addressing all of them at once requires a careful balancing act. The bulk of this chapter reviews how HUD programs and policies have struck this balance in the area of rental housing during the agency’s first 50 years. The chapter ends with a look to the challenges HUD is likely to face in its next 50 years. (103-104, citation omitted)

The chapter does a great job of outlining the tensions inherent in HUD’s broad mandate. It made me wonder, though, whether HUD would benefit from narrowing its mission for the next 50 years. If it focused on assisting more low-income households with their housing expenses (for example, by dramatically expanding the Section 8 housing voucher program and scaling back other programs), it might do that one thing well rather than doing many things less well.

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January 28, 2016 | Permalink | No Comments

Thursday’s Advocacy and Think Tank Roundup

By Shea Cunningham

  • Harvard’s Joint Center for Housing Perspectives found that the “surge in new rental construction fails to meet need for low-cost housing” in its recent report, “America’s Rental Housing report.”

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January 28, 2016 | Permalink | No Comments