March 31, 2017
- Jordan Rappaport of the Federal Reserve of Kansas City in a paper titled Crowdedness, Centralized Employment, and Multifamily Home Construction, identifies several characteristics that account for a large share of the variation in multifamily construction across metropolitan areas during 2013-15. It was stronger in larger metros, as measured by population, and less crowded ones, as measured by median population density and the increase in density from the 50th percentile to the 95th percentile across tracts.
- Kelly D. Edmiston of the Federal Reserve of Kansas City in a paper titled, Residential Rent Affordability across US Metropolitan Areas examines recent trends in rent affordability for both low and middle income households and across metropolitan areas.
March 30, 2017
- Could the post-Great Recession drop in housing demand have been driven in part by an increase in mortgage credit spreads across borrowers? In a new Joint Center working paper that uses proprietary data on the spread of mortgage rates across borrowers with different credit, I find that mortgage demand does react to mortgage interest rates in economically and statistically significant ways.
- The HOME Coalition is organizing a national sign-on letter for state and local organizations, businesses and other stakeholders urging Congress to reject the Trump Administration’s proposal to eliminate the HOME Investment Partnerships (HOME) program and restore its funding to at least $1.2 billion in fiscal year 2018 (FY 18). Please sign onto the letter by the March 31 deadline.
- As part of a series of monthly columns on growth, housing, displacement and the future of neighborhoods in Nashville, The Tennessean looks at efforts to transform Nashville’s public housing complexes into mixed-income rental developments without displacing existing residents. According to this effort, which is already underway, Nashville’s public housing complexes will be redeveloped in phases and existing residents will be allowed to gradually move into their new units, in order to avoid displacement while construction is ongoing. Efforts to redevelop public housing into mixed-income developments will be completed by the end of this year, according to Jim Harbison, executive director of the Metropolitan Development and Housing Agency.
March 29, 2017
- This paper, titled Economic Policy and Systemic Risk: The Un-Constitutionality of Rent Control/Rent-Stabilization Statutes; Multiple Listing Systems; and the Licensing of ‘Real Estate Websites’, discusses how Multiple Listing Systems (MLS), Real Estate Website Laws (REWL), and Rent-Control and Rent-Stabilization statutes (RC-RS) are un-constitutional and affected the rapid changes in housing prices and housing demand which occurred in the US between 1995 and 2010.
- Bargaining and mortgage financing have been extensively studied in the literature. However, they have only been studied separately. This paper, titled Bargaining, Mortgage Financing and Housing Prices, is the first to embed financing into a bargaining model, and our model yields several new insights.
- The Housing and Mortgage Crisis at the turn of the 21st Century has overwhelmed traditional housing and neighborhood code enforcement policing in many neighborhoods in cities across the nation. This short paper, titled Code Compliance Enforcement in the Mortgage Crisis, suggests what needs to be done to make code enforcement more effective in both preventing and recovering from the damage done in hard hit communities. It lists 10 policies and practices that are being used to good effect.
- National data suggests that notwithstanding its placement in the firmament of modern landlord-tenant law, few tenants actually assert breach of the implied warranty of habitability, whether affirmatively or defensively. Even in housing markets fraught with substandard rental dwellings, the warranty is underutilized. This Article, titled The Implied Warranty of Habitability Lives: Making Real the Promise of Landlord Tenant Reform, endeavors to examine that lapse in the context of nonpayment of rent proceedings initiated by landlords in Essex County, New Jersey.
March 28, 2017
WNYC quoted me in Paul Manafort’s Puzzling New York Real Estate Purchases. The story opens,
Paul J. Manafort, the former Trump campaign manager facing multiple investigations for his political and financial ties to Russia, has engaged in a series of puzzling real estate deals in New York City over the past 11 years.
Real estate and law enforcement experts say some of these transactions fit a pattern used in money laundering; together, they raise questions about Manafort’s activities in the New York City property market while he also was consulting for business and political leaders in the former Soviet Union.
Between 2006 and 2013, Manafort bought three homes in New York City, paying the full amount each time, so there was no mortgage.
Then, between April 2015 and January 2017 – a time span that included his service with the Trump campaign – Manafort borrowed about $12 million against those three New York City homes: one in Trump Tower, one in Soho, and one in Carroll Gardens, Brooklyn.
Manafort’s New York City transactions follow a pattern: Using shell companies, he purchased the homes in all-cash deals, then transferred the properties into his own name for no money and then took out hefty mortgages against them, according to property records.
Buying properties using limited liability companies – LLCs – isn’t unusual in New York City, nor is borrowing against a home to extract money. And there’s no indication that Manafort’s New York real estate borrowing spree has come to the attention of investigators. In an emailed statement, Manafort said: “My investments in real estate are personal and all reflect arm’s-length transactions.”
Three Purchases, Lots of Questions
Manafort’s 2006 purchase of a Trump Tower apartment for all cash coincided with his firm’s signing of a $10 million contract with a pro-Putin Russian oligarch, Oleg Deripaska, that was revealed last week in an investigative report by The Associated Press.
For the Carroll Gardens home, a brownstone on Union Street, Manafort recently borrowed nearly $7 million on a house that was purchased four years ago for just $3 million. The loans – dated January 17, three days before President Trump’s inauguration – were made by a Chicago-based bank run by Steve Calk, a Trump fundraiser and economic advisor.
Nine current and former law enforcement and real estate experts told WNYC that Manafort’s deals merit scrutiny. Some said the purchases follow a pattern used by money launderers: buying properties with all cash through shell companies, then using the properties to obtain “clean” money through bank loans. In addition, given that Manafort is already under investigation for his foreign financial and political ties, his New York property transactions should also be reviewed, multiple experts said.
One federal agent not connected with the probes, but with experience in complex financial investigations, said after reviewing the real estate documents that this pattern of purchases was “worth looking into.” The agent did not want to speak for attribution. There are active investigations of Manafort’s Russian entanglements by the FBI, Treasury, and House and Senate Select Committees on Intelligence. Manafort has denied wrongdoing and has called some of the allegations “innuendo.”
Debra LaPrevotte, a former FBI agent, said the purchases could be entirely legitimate if the money used to acquire the properties was “clean” money. But, she added, “If the source of the money to buy properties was derived from criminal conduct, then you could look at the exact same conduct and say, ‘Oh, this could be a means of laundering ill-gotten gains.’”
Last spring, the Obama Treasury Department was so alarmed by the growing flow of hard-to-trace foreign capital being used to purchase real estate through shell companies that it launched a special program to examine the practice within its Financial Crimes Enforcement Network, or FinCen. The General Targeting Order, or GTO, required that limited liability company disclose the identity of the true buyer, or “beneficial owner,” in property transactions.
In February, FinCen reported initial results from its monitoring program: “about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report,” it said. The Trump Treasury Department said it would continue the monitoring program.
Friends and Business Partners
According to reports, Manafort was first introduced to Donald Trump in the 1970s by Roy Cohn, the former aide to Senator Joseph McCarthy who went on to become a prominent and controversial New York attorney.
Long active in GOP politics, Manafort also worked as a lobbyist for clients who wanted something from the politicians he helped elect. His former firm – Black, Manafort, Stone and Kelly – represented dictators like Ferdinand Marcos of the Philippines and Mobuto Sese Seko of Zaire.
In the 2000s, Manafort created a new firm with partner Rick Davis. According to the recent investigative report by The Associated Press, Manafort and Davis began pursuing work in 2005 with Oleg Deripaska, one of the richest businessmen in Russia. Manafort and Davis pitched a plan to influence U.S. politics and news coverage in a pro-Putin direction, The AP said.
“We are now of the belief that this model can greatly benefit the Putin government if employed at the correct levels with the appropriate commitment to success,” Manafort wrote in a confidential strategy memo obtained by The AP.
In 2006, Manafort and Davis signed a contract to work with Deripaska worth $10 million a year, The AP reported.
Also that year, a shell company called “John Hannah LLC” purchased apartment 43-G in Trump Tower, about 20 stories down from Donald Trump’s own triplex penthouse. Manafort confirmed that “John Hannah” is a combination of Manafort’s and Davis’s respective middle names.
The LLC was set up in Virginia at the same address as Davis Manafort and of a Delaware corporation, LOAV, Ltd., for which there are virtually no public records. It was LOAV that signed the contract with Deripaska – not the “public-facing consulting firm Davis Manafort,” as the AP put it.
A lawyer for John Hannah LLC signed the deed on apartment 43-G for $3.675 million in November of 2006. But Manafort’s name did not become associated formally with the Trump Tower apartment until March of 2015, three months before Trump announced he was entering the presidential race in the lobby 40 stories down. On March 5, John Hannah LLC transferred the apartment for $0 to Manafort. A month later, he borrowed $3 million against the condo, according to New York City public records.
A year later, Manafort was working on Trump’s campaign, first as a delegate wrangler, then as campaign manager. Trump’s friend and neighbor had become a top advisor.
In a text message that was hacked and later obtained by Politico, Manafort’s adult daughter, Jessica Manafort, wrote last April: “Dad and Trump are literally living in the same building and mom says they go up and down all day long hanging and plotting together.”
In August 2016, The New York Times published a lengthy investigation of Manafort, alleging he’d accepted $12.7 million in undisclosed cash payments from a pro-Putin, Ukrainian political party between 2007 and 2012. Manafort resigned as campaign manager, but according to multiple reports, didn’t break off ties with Trump, who remained his upstairs neighbor.
The White House press secretary, Sean Spicer, said last week that Manafort “played a very limited role for a very limited period of time” in the Trump campaign.
Davis did not return WNYC’s calls for comment, but in an email exchange with The AP, he disavowed any connection with the effort to burnish Putin’s image. “My name was on every piece of stationery used by the company and in every memo prior to 2006. It does not mean I had anything to do with the memo described,” Davis said.
Buy. Borrow. Repeat.
Trump Tower 43-G was not Manafort’s only New York property.
In 2012, another shell company linked to Manafort, “MC Soho Holdings LLC,” purchased a fourth floor loft in a former industrial building on Howard Street, on the border of Soho and Chinatown, for $2.85 million. In April 2016, just as he was ascending to become Trump’s campaign manager, Manafort transferred the unit into his own name and borrowed $3.4 million against it, according to publicly available property records.
The following year, yet another Manafort-linked shell company, “MC Brooklyn Holdings,” purchased a townhouse at 377 Union Street in Carroll Gardens for $2,995,000. This transaction followed the same pattern: the home was paid for in full at the time of purchase, with no mortgage. And on February 9, 2016, just after Trump won decisive victories in Michigan and Mississippi, Manafort took out $5.3 million of loans on the property. (Some of these transactions were first reported by the blog Pardon Me For Asking, and by two citizen journalists at 377union.com.)
Though the deals could ultimately be traced to Manafort, his connection to the shell companies would not likely have emerged had Manafort not become entangled in multiple investigations.
Public records dated just days before Trump was sworn in as President show that Manafort transferred the Carroll Gardens brownstone from MC Brooklyn Holdings to his own name and refinanced the loans with The Federal Savings Bank, in the process taking on more debt. He now has $6.8 million in loans on a building he bought for $3 million, records show.
David Reiss, a professor of real estate law at Brooklyn [Law School], initially expressed bafflement when asked about the transactions. Reiss then looked up the home’s value on Zillow, a popular source for estimating real estate values. The home’s “zestimate” is $4.5 to $5 million.
Reiss said unless there is another source of collateral, it is extremely unusual for a home loan to exceed the value of the property. “I do think that transaction raises yellow flags that are worth investigating,” he said.
- The Consumer Financial Protection Bureau on Friday proposed a rule change that would give mortgage lenders more flexibility in collecting information about the ethnicity and race of potential borrowers, potentially making it easier for lenders to comply with a key fair lending law.
- Fannie Mae and Freddie Mac are scheduled to send their latest dividend payment to the Department of the Treasury later this month, but if a consortium of community groups and lenders has their way, that money will stay with the government-sponsored enterprises to help rebuild their dwindling capital base. In a letter sent Thursday to Treasury Secretary Steven Mnuchin and Mel Watt, the director of the Federal Housing Finance Agency, a group that includes the Community Home Lenders Association, the Community Mortgage Lenders of America, and the NAACP asked the government to suspend the GSEs’ upcoming dividend payment to avoid the future need for another GSE bailout.
- The Consumer Financial Protection Bureau announced it is reassessing the Equal Credit Opportunity Act in order to provide lenders with additional flexibility when collecting consumer ethnicity and race information. The bureau’s proposed amendments are intended to give lenders needed clarity on their obligations under the law, while promoting compliance with rules intended to ensure consumers are treated fairly.
March 27, 2017
- A group of investors can’t revive a lawsuit accusing two companies of hiding costs from a real estate investment marketed as a way to avoid capital gains taxes, a California state appeals court ruled Thursday, ruling the claims were brought too late.
- The CEO of a New York mortgage bank will spend the next 150 months in prison after being convicted of a $100 million mortgage fraud scheme that cost financial institutions $30 million. According to the U.S. Attorney’s Office for the Eastern District of New York, Aaron Wider is the former owner and CEO of HTFC Corporation, a mortgage bank located in Garden City, New York. Wider ran the company from 2003 to 2008.
- Royal Park Investments SA/NV lost its bid for class certification in a suit against Deutsche Bank National Trust Co. over $3.1 billion in residential mortgage-backed securities losses on Tuesday when a New York federal judge told the investors they needed to better define their proposed class.
March 24, 2017
- The United States Department of Housing and Urban Development (HUD) has released its new guidelines for the Section 108 loan of the Community Development Block Grant (CDBG) Program. The CDBG is a grant that provides financial resourcexs for large-scale real estate development projects, housing needs, and “financing for economic development.”
- Freddie Mac mortgage rates decreased despite a vote for a mortgage rate increase by the federal government. This is the greatest fall in mortgage rates within the past 60 days. The Freddie Mac rate is 4.23% which is down from the 4.31% rate of last month. Despite the decrease, the low rate of 3.71% at the end of the Obama administration has not been matched.
- Freddie Mac is helping borrowers without a credit score gain access to home loans. “The mortgage giant” will allow borrowers to use payment references and rent payment records to prove their history of timely payments.