February 11, 2015
- Banking Integration and House Price Comovement, by Augustin Landier, David Alexandre Sraer & David Thesmar, CEPR Discussion Paper No. DP10295.
- Second-Liens and the Leverage Option, by Adam J. Levitin & Susan M. Wachter, U of Penn. Inst. for Law & Econ Research Paper.
- Regulating Against Bubbles: How Mortgage Regulation Can Keep Main Street and Wall Street Safe – From Themselves, by Ryan Bubb & Prasad Krishnamurthy, University of Pennsylvania Law Review, Vol. 163, Forthcoming NYU Law and Economics Research Paper No. 15-03.
- Who Wins Residential Property Tax Appeals?, by Randall K. Johnson, Columbia Journal of Tax Law, Forthcoming Mississippi College School of Law Research Paper No. 2015-01.
- The Theft of Affordable Housing: How Rent Stabilized Apartments are Disappearing from Fraudulent Individual Apartment Improvements and What Can Be Done to Save Them, by Justin R. La Mort, New York University Review of Law & Social Change, Forthcoming.
February 10, 2015
The Consumer Financial Protection Bureau released a report, Snapshot of Reverse Mortgage Complaints: December 2011-December 2014. By way of background,
Reverse mortgages differ from other types of home loans in a few important ways. First, unlike traditional “forward” mortgages, reverse mortgages do not require borrower(s) to make monthly mortgage payments (though they must continue paying property taxes and homeowners’ insurance). Prospective reverse mortgage borrowers are required to undergo mandatory housing counseling before they sign for the loan. The loan proceeds are generally provided to the borrowers as lump-sum payouts, annuity-like monthly payments, or as lines of credit. The interest and fees on the mortgage are added to the loan balance each month. The total loan balance becomes due upon the death of the borrower(s), the sale of the home, or if the borrower(s) permanently move from the home. In addition, a payment deferral period may be available to some non-borrowing spouses following the borrowing spouse’s death. (3, footnotes omitted)
The CFPB concludes that
borrowers and their non-borrowing spouses who obtained reverse mortgages prior to August 4, 2014 may likely encounter difficulties in upcoming years similar to those described in this Snapshot, i.e., non-borrowing spouses seeking to retain ownership of their homes after the borrowing spouse dies. As a result, many of these consumers may need notification of and assistance in averting impending possible displacement should the non-borrowing spouse outlive his or her borrowing spouse.
- Consumer Financial Protection Bureau: Final Rule: Amendments to the 2013 Integrated Mortgage Disclosures Rule under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) and the 2013 Loan Originator Rule under the Truth in Lending Act (Regulation Z)
- Federal Housing Administration: Guidelines for Notice to Delinquent Borrowers of Availability of Housing Counseling
February 9, 2015
GlobeSt.com quoted me in About that $191B Profit from the GSEs. It opens,
Last week when the White House released its budget for fiscal year
2016, it included one eyebrow-raising line item: it assumed that Fannie Mae and Freddie Mac could return $191.2 billion in profits to the US Treasury over the next decade if they continue operating under federal conservatorship.
The item gave the commercial real estate industry pause for a few reasons. This number 1) assumes the GSEs will remain under federal conservatorship 2) it assumes that the lawsuits filed by GSE shareholders disgruntled by the government’s decision to sweep all profits from the GSEs back to the US Treasury will go nowhere 3) it assumes the GSEs will continue to bring in record profits.
Of all of these, the latter supposition is the least controversial.
The two GSEs have paid back more than what their received in federal aid; Fannie Mae has sent back the government $134.5 billion in payments compared to $116.1 billion it received, while Freddie Mac has sent $91 billion compared to $72.3 billion it received in rescue funds.
This cash flow is one reason why some in the industry quietly speculate that the government has little intention of cutting the GSEs loose to be privatized—despite the stated intention of the Obama Administration to do so.
Also, consider that the government can basically set the GSEs’ profit levels, David Reiss, professor of Law and research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School, tells GlobeSt.com.
“Their regulator, the Federal Housing Finance Agency, sets the amount of their guarantee fee. If the FHFA raises it, it tends to raise profits for the two companies,” he notes.
The FHFA also sets, within limits, the types of mortgages the GSEs can buy, thereby increasing the size of the total market and the market share of the two entities, Reiss continues. “For instance, the FHFA recently lowered the down payment requirements for Fannie/Freddie loans. This action will increase the total number of loans made and will also increase Fannie and Freddie’s market share because they can now operate in a part of the market that had been off limits.”
A New York bankruptcy judge denied several mortgage originators’ motions to dismiss for Residential Capital LLC’s claims that they sold billions of dollars in defective loans.
A few weeks after settling with the SEC for $58 million for fraudulent ratings on commercial mortgage-backed securities, Standards & Poor settles with the U.S. Department of Justice for $1.38 billion for the same fraudulent ratings.
- After dismissing a suit against Royal Bank of Scotland, Deutsche Bank and others in 2011 over mortgage-backed securities and the Second Circuit Court of Appeals nixed her dismissal, U.S. District Court Judge Deborah A. Batts has permitted New Jersey Carpenters Health Fund to file a third amended complaint to revive the suit. This could end up costing the banks $7.7 billion if the suit is successful.
- Bank of America has defeated Prudential’s claims that it sold $2 billion of fraudulent residential mortgage-backed securities.
February 6, 2015
HUD has published an interim rule in the Federal Register to governing the Housing Trust Fund (HTF). The HTF could generate about a half a billion dollars a year for affordable housing initiatives, so this is a big deal. The purpose “of the HTF is to provide grants to State governments to increase and preserve the supply of rental housing for extremely low- and very low-income families, including homeless families, and to increase homeownership for extremely low- and very low-income families.” (80 F.R. 5200) HUD intends to “open this interim rule for public comment to solicit comments once funding is available and the grantees gain experience administering the HTF program.” (80 F.R. 5200)
The HTF’s main focus is rental housing, which often gets short shrift in federal housing policy
States and State-designated entities are eligible grantees for HTF. Annual formula grants will be made, of which at least 80 percent must be used for rental housing; up to 10 percent for homeownership; and up to 10 percent for the grantee’s reasonable administrative and planning costs. HTF funds may be used for the production or preservation of affordable housing through the acquisition, new construction, reconstruction, and/or rehabilitation of nonluxury housing with suitable amenities. (80 F.R. 5200)
Many aspects of federal housing policy are effectively redistributions of income to upper income households. The largest of these redistributions is the mortgage interest deduction. Households earning over $100,000 per year receive more than three quarters of the benefits of that deduction while those earning less than $50,000 receive close to none of them.
So, the HTF is a double win for a rational federal housing policy because it focuses on (i) rental housing for (ii) extremely low- and very low-income households.
While not wanting to be a downer about such a victory for affordable housing, I will note that Glaeser and Gyourko have demonstrated how local land use policies can run counter to federal affordable housing policy. Might be worth it for federal housing policy makers to pay more attention to that dynamic . . ..
- United States Tax Court holds that properties acquired in tax lien sale by an LLC are not subject to capital gains rates, but rather income tax rates, because the properties are held primarily for sale.
- Real Taxes on Virtual Currencies: What Does the IRS Say?, by Nika Antonikova, Virginia Tax Review, Vol. 34, No. 3, 2014.
- Counterintuitive Tax Revenue Effect of REIT Spinoffs, by Bradley T. Borden, Tax Notes, Vol. 146, p. 381, No. 381, January 2015; Brooklyn Law School, Legal Studies Paper, No. 402.
- United States Tax Court allows partial charitable contributions deduction.
- The House Committee on Ways and Means to markup “America’s Small Business Tax Relief Act of 2015” (H.R. 636) on February 4, 2015.