April 1, 2016
Realtor.com quoted me in Watch Out, Your Closing Funds May Be Heading to a Cybercriminal. It opens,
Imagine being on the brink of owning a home—you can almost feel the keys in your hand. You’ve wired tens of thousands of dollars into escrow to seal the deal … then, poof, that money disappears. Sound surreal? It’s becoming surprisingly common as cybercriminals have turned to hacking real estate transactions, according to The Washington Post.
How it works: Hackers break into a real estate agent’s or settlement service provider’s email accounts, then monitor correspondences so they know when a closing is about to happen. Then, they assume the identity of the real estate or escrow agent and email the home buyers instructing them where to wire their closing funds … to an offshore account that can’t be traced.
While no one knows the exact number of victims or extent of the problem, the National Association of Realtors® in Chicago told the Post that this scam has hit “hundreds, if not thousands,” of home closings. It’s become serious enough, in fact, that on March 18, the Federal Trade Commission issued a warning to home buyers. As for what’s fueling this trend, some experts we spoke to point to the relatively lax security in the world of real estate compared with other financial industries.
“It was just a matter of time until scammers recognized the opportunity to target real estate agents and their clients,” says Robert Siciliano, CEO of IDTheftSecurity.com. “Currently, most industries that have experienced large data breaches have put systems in place and have become hardened. That means the real estate industry and others become the path of least resistance. Unlike the entire financial industry who have encrypted communications, the real estate industry is a hodgepodge of free email accounts and unprotected communications.”
Holly Isdale, founder of wealth management company Wealthaven, also points out that many real estate agents “are working from highly insecure areas—coffee shops, building lobbies, cars between meetings. As such, they are highly visible targets where their communications are vulnerable to attack.”
But agents are not the only weak link in the chain.
“This problem does not just affect real estate agents; it has also happened with escrow companies, attorneys, and other professionals involved in real estate deals,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School in New York City.
- HUD’s Office of Policy Development & Research released A Qualitative Assessment of Parental Preschool Choices and Challenges Among Families Experiencing Homelessness.
- The Center on Budget and Policy Priorities released a report finding that the 2017 House Budget would cut $150 billion from SNAP benefits.
March 31, 2016
The Consumer Financial Protection Bureau has issued a notice and request for comment on the Financial Well-Being National Survey. The CFPB is asking for comments on
(a) Whether the collection of information is necessary for the proper performance of the functions of the Bureau, including whether the information will have practical utility; (b) The accuracy of the Bureau’s estimate of the burden of the collection of information, including the validity of the methods and the assumptions used; (c) Ways to enhance the quality, utility, and clarity of the information to be collected; and (d) Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. (81 F.R.13778)
The first question is of great importance and it is great that the CFPB is asking it. As I have frequently noted, financial education efforts have not been all that successful. Moreover, efforts to improve financial literacy have often had perverse results.
My first instinct is that there is no harm in conducting the Financial Well-Being National Survey. It asks questions such as “How would you assess your overall financial knowledge?” and “How confident are you that the way you are managing money today is getting you to the results you want?” (5)
The key question that remains, however, is will the answers to such questions actually help shape consumer protection policy in a productive way? The CFPB should be sure that the answer to that question is yes before proceeding with the Survey.
Comments are due soon, on April 14th. Get crackin’!
March 30, 2016
A bevy of housing finance big shots have issued a white paper, A More Promising Road to GSE Reform. The main objective of the proposal
is to migrate those components of today’s system that work well into a system that is no longer impaired by the components that do not, with as little disruption as possible. To do this, our proposal would merge Fannie and Freddie to form a single government corporation, which would handle all of the operations that those two institutions perform today, providing an explicit federal guarantee on mortgage-backed securities while syndicating all noncatastrophic credit risk into the private market. This would facilitate a deep, broad and competitive primary and secondary mortgage market; limit the taxpayer’s risk to where it is absolutely necessary; ensure broad access to the system for borrowers in all communities; and ensure a level playing field for lenders of all sizes.
The government corporation, which here we will call the National Mortgage Reinsurance Corporation, or NMRC, would perform the same functions as do Fannie and Freddie today. The NMRC would purchase conforming single-family and multifamily mortgage loans from originating lenders or aggregators, and issue securities backed by these loans through a single issuing platform that the NMRC owns and operates. It would guarantee the timely payment of principal and interest on the securities and perform master servicing responsibilities on the underlying loans, including setting and enforcing servicing and loan modification policies and practices. It would ensure access to credit in historically underserved communities through compliance with existing affordable-housing goals and duty-to-serve requirements. And it would provide equal footing to all lenders, large and small, by maintaining a “cash window” for mortgage purchases.
The NMRC would differ from Fannie and Freddie, however, in several important respects. It would be required to transfer all noncatastrophic credit risk on the securities that it issues to a broad range of private entities. Its mortgage-backed securities would be backed by the full faith and credit of the U.S. government, for which it would charge an explicit guarantee fee, or g-fee, sufficient to cover any risk that the government takes. And while the NMRC would maintain a modest portfolio with which to manage distressed loans and aggregate single- and multifamily loans for securitization, it cannot use that portfolio for investment purposes. Most importantly, as a government corporation, the NMRC would be motivated neither by profit nor market share, but by a mandate to balance broad access to credit with the safety and soundness of the mortgage market. (2-3, footnotes omitted)
The authors of the white paper are
- Jim Parrott, former Obama Administration housing policy guru
- Lewis Ranieri, a Wall Street godfather of the securitized mortgage market
- Gene Sperling, Obama Administration National Economic Advisor
- Mark Zandi, Moody’s Analytics chief economist
- Barry Zigas, Director of Housing Policy at Consumer Federation of America
While I think the proposal has a lot going for it, I think that the lack of former Republican government officials as co-authors is telling. Members of Congress, such as Chair of the House Financial Services Committee Jeb Hensaerling (R-TX), have taken extreme positions that leave little room for the level of government involvement contemplated in this white paper. So, I would say that the proposal has a low likelihood of success in the current political environment.
That being said, the proposal is worth considering because we’ll have to take Fannie and Freddie out of their current state of limbo at some point in the future. The proposal builds on on current developments that have been led by Fannie and Freddie’s regulator and conservator, the Federal Housing Finance Agency. The FHFA has required Fannie and Freddie to develop a Common Securitization Platform that is a step in the direction of a merger of the two entities. Moreover, the FHFA’s mandate that Fannie and Freddie’s experiment with risk-sharing is a step in the direction of the proposal’s syndication of “all noncatastrophic credit risk.” Finally, the fact that the two companies have remained in conservatorship for so long can be taken as a sign of their ultimate nationalization.
In some ways, I read this white paper not as a proposal to spur legislative action, but rather as a prediction of where we will end up if Congress does not act and leaves the important decisions in the hands of the FHFA. And it would not be a bad result — better than what existed before the financial crisis and better than what we have now.
- Borrowing Constraints and Homeownership Over the Recent Cycle, Arthur Acolin, Jesse Bricker, Paul S. Calem & Susan M. Wachter.
- Momentum Strategies and Investor Sentiment in the REIT Market, Ying Hao, Hsiang-Hui Chu, Kuan-Cheng Ko & Lin Lin, International Review of Finance, Vol. 16, Issue 1, pp. 41-71, 2016 (Paid Access).
- Exchange Efficiency with Weak Ownership Rights, Oren Bar-Gill & Nicola Persico, American Economic Journal: Microeconomics, Forthcoming; John M. Olin Center for Law, Economics, and Business, Discussion Paper No. 858.
- Emergency Takings, Brian A. Lee, Michigan Law Review, Vol. 114, p. 391, 2015; Brooklyn Law School, Legal Studies Paper No. 447.
- Drone Zoning, Troy A. Rule, 96 North Carolina Law Review, 2016 (Forthcoming).
- The Puzzle of Job Search and Housing Tenure: A Reconciliation of Theory and Empirical Evidence, Andrea Morescalchi, Journal of Regional Science, Vol. 56, Issue 2, pp. 288-312, 2016 (Paid Access).
March 29, 2016
Newsmax quoted me in How to Buy and Sell in the Sexiest of Real Estate Markets. It opens,
With the opening of the 7 subway station at 34th Street last year, more than 100 shops and 5,000 residences, the Hudson Yards neighborhood in Manhattan is creating new demand for housing.
“We’ll likely witness a progression of rising prices as the entire development grows both residentially and commercially,” said Brad Malow, licensed real estate broker with Charles Rutenberg, a real estate firm in Manhattan.
Stretching from West 30th to 34th Streets and 10th to 12th Avenues, Hudson Yards is just one example of how supply of inventory impacts pricing in the world of real estate.
“The problem right now in the sales market is that supply is not catching up fast enough to pent up demand,” Malow told Newsmax Finance. “If supply increases and demand stays the same, what usually results is lower pricing.”
The New York housing market is very different from most others in the U.S. The vacancy rate in New York has hovered at 2% on average, according to a Douglas Elliman/Miller Samuel data and new development inventory is up 101% with supply and demand fluctuating from season to season.
That makes proper pricing important to the marketing of all types of property given the extraordinarily low vacancy rate.
“The supply of new housing is very low given the size of the market and the rental market is heavily regulated, depressing the rents for many units,” said David Reiss, professor of law with the Brooklyn Law School in Brooklyn.