REFinBlog

Editor: David Reiss
Brooklyn Law School

A Member of the Law Professor Blogs Network

May 6, 2015

Wednesday’s Academic Roundup

By Shea Cunningham

May 6, 2015 | Permalink | No Comments

May 5, 2015

Tuesday’s Regulatory & Legislative Round-Up

By Serenna McCloud

  • House Appropriations Subcommittee on Transportation, Housing and Urban Development (THUD) approved its fiscal year (FY) 2016 appropriations bill.
  • Federal Housing Finance Agency (FHFA) has adopted a final rule requiring the Federal Home Loan Banks (Banks) and the Office of Finance to include demographic data related to their boards of directors in their annual minority and women inclusion reports to FHFA.  The final rule also requires that the Banks and the Office of Finance include a description of their outreach activities and strategies to promote diversity in nominating or soliciting nominees for positions on boards of directors.
  • Six federal financial regulatory agencies today issued a final rule that implements minimum requirements for state registration and supervision of appraisal management companies (AMCs).  An AMC is an entity that provides appraisal management services to lenders or underwriters or other principals in the secondary mortgage markets.

May 5, 2015 | Permalink | No Comments

Connecting Housing to Health

By David Reiss

The Center for Housing Policy’s latest issue of Insights from Housing Policy Research featured a research summary on The Impacts of Affordable Housing on Health:

the authors examined recent research on the various ways in which the production, rehabilitation, or other provision of affordable housing may affect health outcomes for children, adults, and older adults. This report is organized around ten hypotheses on the contribution of affordable housing to supporting positive health outcomes. Overall, the research supports the critical link between stable, decent, and affordable housing and positive health outcomes. (1, footnote omitted, emphasis in the original)

The authors conclude that “providing affordable housing is a valuable strategy to support and improve wellbeing. It is important for policymakers to understand that safe, adequate, and affordable housing is not just shelter but also an investment in good health for low-income households.” (8)

The article seems pretty result-driven, so I am not sure how reliable it is as a research summary. I was particularly struck by its frequent conflating of causation and correlation. This conflation is seen in the conclusion above: there is surely a link between housing and health, but what is causing what?

Take the first hypothesis: “Affordable Housing Can Improve Health Outcomes by Freeing Up Family Resources for Nutritious Food and Health Care Expenditures.” (2) Sure, but so can increased income or decreased expenses in other parts of a budget. This first hypothesis isn’t really a story about affordable housing, but about poverty. So a better question might be — what is the most efficient way to increase resources for food and health care? The research cited does not appear to make the case that affordable housing is the right answer to that question.

There is no question that this is first and foremost an advocacy document. This should come as no surprise, given that the Center for Housing Policy is the research division of the National Housing Conference. That being said, the footnotes do provide an overview of the research in this area. Some readers might find it useful in that regard.

 

May 5, 2015 | Permalink | No Comments

May 4, 2015

Who Knows The ABCs of Finance?

By David Reiss

Annamaria Lusardi recently posted a working paper, Financial Literacy: Do People Know the ABCs of FInance? to SSRN. The abstract reads,

Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex financial instruments. However, there is evidence that many individuals are not well-equipped to make sound saving decisions. This paper looks at financial literacy, which is defined as the ability to process economic information and make informed decisions about financial planning, wealth accumulation, debt, and pensions. Failure to plan for retirement, lack of participation in the stock market, and poor borrowing behavior can all be linked to ignorance of basic financial concepts. Financial literacy impacts financial decision-making, with implications that apply to individuals, communities, countries, and society as a whole. Given the lack of financial literacy among the population, it may be important to remedy it by adding financial literacy to the school curriculum.

As I have stated previously, not only is financial literacy in bad shape, but efforts to improve it have not proven to be very effective. Lusardi’s paper has some sobering findings:

most individuals in the United States and in other countries cannot
perform simple calculations and do not understand basic financial concepts such as interest compounding, the difference between nominal and real values, and risk diversification. Knowledge of more complex concepts, such as the difference between bonds and stocks, the workings of mutual funds, and basic asset pricing, is even scarcer. Financial illiteracy is widespread among the general population and particularly acute among specific demographic groups, such as women, the young and the old, and those with low educational attainment. (3)

Because evidence does not demonstrate that additional financial education is all that effective, I take a different lesson from Lusardi’s review of survey results. The government should take an active role in regulating financial markets to protect consumers from abusive behavior and to encourage them to make good financial decisions. Financial education is no replacement for consumer protection.

May 4, 2015 | Permalink | No Comments

Monday’s Adjudication Roundup

By Shea Cunningham

  • Ocwen and Assurant settle with homeowners for $140 million in class action suit, in which the homeowners alleged that Ocwen received kickbacks by inflating premium costs for forced-placed insurance.
  • New York’s Appellate Division, First Department, affirmed dismissal of suit against UBS AG for $30 million, brought by Hanwha Life Insurance Co. (a Korean corporation) claiming that NY courts do not have an interest in adjudicating the suit. Hanwha purchased $30 million in credit-linked notes from UBS that turned out to be worthless. It was trying to recover its losses because it relied on UBS’s advice in purchasing the notes.
  • CFPB and the Maryland Attorney General filed suit and settlement consent orders against a title company and participants in an alleged illegal mortgage-kickback scheme.
  • After the National Credit Union Administration Board (NCUA) filed a complaint against HSBC for failing as trustee of $2 billion in residential mortgage-backed securities trusts, HSBC claims that the regulator lacks standing to represent the trusts and is barred by Delaware’s three-year statute of limitations.
  • Wells Fargo and Deutsche Bank moved to dismiss fives suits from BlackRock Inc., Pacific Investment Management Co. and NCUA for allegedly failing to watch over 850 RMBS trusts as the trustees.

May 4, 2015 | Permalink | No Comments

May 1, 2015

En-Titled Insurance

By David Reiss

Benjamin M. Lawsky, the New York State Superintendent of Financial Services, has promulgated a proposed regulation regarding title insurance that is sure to shake up the title industry and, more importantly, reduce closing costs for NY homeowners.

The proposed regulation opens with a statement of its scope and purpose:

(a) The purpose of this Part is to promote the public welfare by proscribing practices that are not in accordance with Insurance Law section 2303, which provides that insurance rates shall not be excessive, inadequate, or unfairly discriminatory. This Part also interprets and implements Insurance Law section 6409(d), which prohibits giving any consideration or valuable thing as an inducement for title insurance business, as well as Insurance Law section 6409(e), which states that title insurance premiums shall reflect the anti-inducement prohibition of Insurance Law section 6409(d).

(b) This Part further protects consumers, pursuant to the authority of Insurance Law sections 2110 and 2119 and Article 24 and Financial Services Law sections 301 and 302, by ensuring that the title insurance industry provides valuable products and services to consumers at reasonable rates and fees and does not overcharge consumers or charge improper and excessive fees that constitute engaging in untrustworthy behavior and unfair and deceptive acts and practices. (Section 227.0 )

New York has long had some of the most expensive title insurance premiums in the country, so homeowners and other owners of real estate should welcome this development. Title insurance agents are not allowed to compete on price in NY, so they compete for business from real estate lawyers (who typically select the title insurance agent for any given transaction) by offering them all sorts of perks such as hard-to-get tickets to events and fancy meals. The proposed regulation attempts to rein in this behavior.

The NYS Department of Financial Services will be accepting comments for 45 days after the proposed regulation is published in the State Register, so get crackin’.

May 1, 2015 | Permalink | No Comments

Friday’s Government Reports

By Serenna McCloud

May 1, 2015 | Permalink | No Comments