- The Dynamics of Subprime Adjustable-Rate Mortgage Default: A Structural Estimation, Hanming Fang, You Jin Kim & Wenli Li, FRB of Philadelphia Working Paper No. 16-2.
- The Federal Home Loan Bank System and U.S. Housing Finance, W. Scott Frame, FRB Atlanta Working Paper No. 2016-2.
- Examination of Potential Misrepresentation in CMBS, Ruoyu Shao.
- Does Zoning Help or Hinder Transit-Oriented (Re)Development?, Jenny Schuetz, G. Giuliano & Eun Jin Shin.
- A Simple Model of Subprime Borrowers and Credit Growth, Alejandro Justiniano, Giorgio E. Primiceri & Andrea Tambalotti, CEPR Discussion Paper No. CP11083 (Paid Access).
- Enhancing the Urban Environment Through Green Infrastructure, John R. Nolon, Environmental Law Reporter, Vol. 46, No. 1, 2016.
- Spillover Effects of Continuous Forbearance Mortgages, Kadiri Karamon, Douglas A. McManus & Elias Yannopoulos.
- Hobby Lobby as a Land Use Case: Charting For-Profit RLUIPA Claims, Ross Campbell, NYU Journal of Law & Liberty, Vol. 10, No. 2, 2016, Forthcoming.
- A Forced Labor Theory of Property and Taxation, Theodore P. Seto, The Philosophy of Tax Law (Oxford University Press 2016), Forthcoming; Loyola Law School, Los Angeles Legal Studies Research Paper No. 2016-04.
February 23, 2016
I was interviewed on PBS’ Nightly Business Report (produced by CNBC) about the near-term future of the sharing economy in the wake of the horrible shootings in Kalamazoo, allegedly by an Uber driver while he was working for the service. You can find the interview here (my segment appears right after the 22nd minute). A transcript of the interview follows:
SUE HERERA: So, will the tragic Uber shooting spree over the weekend change the way that people feel about the sharing economy?
Let’s turn to David Reiss for his thoughts. He’s professor of law at Brooklyn’s Law School Center for Urban Business Entrepreneurs.
Nice to have you here, David. Welcome back.
DAVID REISS, BROOKLYN LAW SCHOOL PROF. OF LAW: Thank you.
HERERA: I guess that is the question. Do you think it will change the way people feel about the sharing economy, this case in particular?
REISS: I think we have to look at the short term and long term. In the short term, we’ll see people will think twice about it. But in the long term, and as I think people think about their experience with sharing economy services and seeing how frequently terrible and tragic incidents like this occur, I think we’re going to see a return to probably some growth in that area as people put this into perspective.
BILL GRIFFETH: Are you surprised as our reporter Kate Rogers pointing out here that in their conference call just now, they seem to be digging in their heels on not changing their background check policies here. Why not, as I said, do that if only for PR reasons just to reassure the public? I mean, this is a PR problem for them right now, isn’t it?
REISS: It is. And I think they’re probably in crisis response mode. They’re probably not wanting to make big promises about big changes to acknowledge that their business model is intrinsically flawed and they will probably want to make changes on their own time.
HERERA: There have been more calls for more regulation of the sharing economy, specifically by those who are impacted in a negative way by the sharing economy. We have to put that out there. But do you think it opens the door a little bit wider for regulation?
REISS: I certainly do. I think there’s been this attitude of it’s better to ask forgiveness than to ask permission and an incident like this and all of its tragic consequences raise the argument that maybe that’s not the right way to go, that getting it right the first time is better than kind of seeing how it unfolds.
GRIFFETH: Growing pains in the sharing economy or is this a real dent? What do you think?
REISS: I think it’s growing pains. I think the sharing economy has been growing so rapidly with so many innovations. But I think it’s here to stay. I think people are voting with their feet in terms of using the services and government is trying to figure out how to adapt and how to regulate and what’s the appropriate level of regulation.
HERERA: Does it change, though, their liability? Do they have to change some of their policies, all of their policies because there’s a liability issue? And the weekend’s horrible events really point that out.
REISS: I think businesses react to lawsuits and to large judgments, and if courts and juries find that this behavior was negligent or reckless, they will get a clear message and they will change to adapt. I think that regulators are going to look carefully at them. So, I think a lot of this is in flux and I’m sure there’s going to be changes. I don’t know what they will be.
GRIFFETH: Have you used Uber and will you think twice, if not?
REISS: I’ve used Lyft, and I would continue to do.
HERERA: All right. On that note, David, good to see you again. Thanks for joining us.
David Reiss with Brooklyn Law School’s Center for Urban Business Entrepreneurs.
- Governor Cuomo announced a new program to investigate discrimination in housing rentals and sales, which uses undercover trained testers to act as potential home purchasers and renters.
February 22, 2016
The Consumer Financial Protection Bureau issued a Final Policy Statement on No-Action Letters. According to the press release, the policy is intended to facilitate consumer access to financial products and services that promise substantial benefit to consumers.” More specifically, according to the Final Policy Statement itself,
Under the Policy, Bureau staff would, in its discretion, issue no-action letters (NALs) to specific applicants in instances involving innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes implemented or regulations issued by the Bureau would be applied (for example if, because of intervening technological developments, the application of statutes and regulations to a new product is novel and complicated). The Policy is also designed to enhance compliance with applicable federal consumer financial laws. A NAL would advise the recipient that, subject to its stated limitations, the staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester with respect to a specified matter. NALs would be subject to modification or revocation at any time at the discretion of the staff, and may be conditioned on particular undertakings by the applicant with respect to product or service usage and data-sharing with the Bureau. Issued NALs generally would be publicly disclosed. NALs would be nonbinding on the Bureau, and would not bind courts or other actors who might challenge a NAL recipient’s product or service, such as other regulators or parties in litigation. The Bureau believes that there may be significant opportunities to facilitate innovation and access, and otherwise substantially enhance consumer benefits, through the Policy. (1-2)
Colleagues and I had commented on this policy when it was first proposed, arguing that it should incorporate metrics to ensure that it is achieving its stated goals. It does not seem that the CFPB agreed with our comments. So, while I think the final policy is a step in the right direction, I am not sure if we can really measure how good of a step it is.
- Goldman Sachs Group Inc. settles for $27.5 million in an investor class action over toxic collateralized debt obligations. A New York federal judge has preliminarily approved the settlement.
- In Chapter 13 Bankruptcy, the plans must prioritize condominium liens, which the district court determined addresses not only payment, but also security, “and therefore doesn’t elevate the collateral of the lien.”
- NY Attorney General, Eric Schneiderman, states that Morgan Stanley will pay $3.2 billion to settle claims of misleading investors about the quality of the mortgage-backed securities it packaged prior to the financial crisis.
- Borrowers have filed suit against Bank of America NA for intentionally and systematically failing to release mortgage liens on their property when they repaid everything, creating affected property titles.
February 19, 2016
Arthur Acolin, Jess Bricker, Paul Calem and Susan Wachter have posted a short paper on Borrowing Constraints and Homeownership to SSRN. The abstract reads,
This paper identifies the impact of borrowing constraints on home ownership in the U.S. in the aftermath of the 2008 financial crisis. The existence of credit rationing in the U.S. mortgage market means that some households for whom it would be optimal to choose to be homeowners may not be able to do so. Borrowers with certain wealth, income and credit characteristics are unable to obtain a loan even if they are willing to pay a higher cost of credit (Linneman and Wachter 1989). The Stiglitz and Weiss (1981) canonical model sets up the rationale for this credit rationing. Using data from the 2001, 2004-2007 and 2010-2013 Surveys of Consumer Finance (SCF), this paper measures the impact of changes in the income, wealth and credit constraints on the probability of home ownership. Credit supply eased and then became considerably more restricted in the wake of the Great Recession. The loosening of borrowing constraints was accompanied by an increase in home ownership from the late 1990s until the start of the housing crisis. In this paper we estimate the role the tightening of credit has had on the probability of individual households to become homeowners and the decline in the aggregate home ownership rate following the crisis. The home ownership rate in 2010-2013 is predicted to be 5.2 percentage points lower than it would be if the constraints were at the 2004-2007 level and 2.3 percentage points lower than if the constraints were set at the 2001 level.
This paper builds on some of the other work of the authors (see here for instance) on the homeownership rate. The paper makes a valuable contribution by estimating the impact of credit rationing on the homeownership rate. To the extent we can identify an optimal amount of credit supply, it should help us to determine a target homeownership rate to guide policymakers.