REFinBlog

Editor: David Reiss
Brooklyn Law School

May 25, 2017

Thursday’s Advocacy & Think Tank Roundup

By Jamila Moore

  • Despite the spike in the national mortgage interest rate and the low inventory of U.S. homes, 2017’s first quarter sold at its fastest pace in over ten years. As a result, home prices are increasing. There  are fewer perspective homes; however, the pool of buyers is immense. Though there is an increase in the purchase of homes, millennials don’t seem rushed to purchase a home.
  • Guild Mortgage company is creating a new down payment trend. The mortgage company is offering a 1% down payment plan aimed at increasing the number of millennials willing to purchase homes. Qualifying applicants will be required to pay a 1% down payment and opt for a 2% grant or 2% paid by the lender. Guild’s program is unique from other 1% mortgage programs because it complies with the Home Ready Guidelines.

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May 25, 2017 | Permalink | No Comments

May 24, 2017

American Bankers on Mortgage Market Reform

By David Reiss

The American Bankers Association has issued a white paper, Mortgage Lending Rules: Sensible Reforms for Banks and Consumers. The white paper contains a lot of common sense suggestions but its lack of sensitivity to consumer concerns greatly undercuts its value. It opens,

The Core Principles for Regulating the United States Financial System, enumerated in Executive Order 13772, include the following that are particularly relevant to an evaluation of current U.S. rules and regulatory practices affecting residential mortgage finance:

(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;

(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry; and

(f) make regulation efficient, effective, and appropriately tailored.

The American Bankers Association offers these views to the Secretary of the Treasury in relation to the Directive that he has received under Section 2 of the Executive Order.

 Recent regulatory activity in mortgage lending has severely affected real estate finance. The existing regulatory regime is voluminous, extremely technical, and needlessly prescriptive. The current regulatory regimen is restricting choice, eliminating financial options, and forcing a standardization of products such that community banks are no longer able to meet their communities’ needs.

 ABA recommends a broad review of mortgage rules to refine and simplify their application. This white paper advances a series of specific areas that require immediate modifications to incentivize an expansion of safe lending activities: (i) streamline and clarify disclosure timing and methodologies, (ii) add flexibility to underwriting mandates, and (iii) fix the servicing rules.

 ABA advises that focused attention be devoted to clarifying the liability provisions in mortgage regulations to eliminate uncertainties that endanger participation and innovation in the real estate finance sector. (1, footnote omitted)

Its useful suggestions include streamlining regulations to reduce unnecessary regulatory burdens; clarifying legal liabilities that lenders face so that they can act more freely without triggering outsized criminal and civil liability in the ordinary course of business; and creating more safe harbors for products that are not prone to abuse.

But the white paper is written as if the subprime boom and bust of the early 2000s never happened. It pays not much more than lip service to consumer protection regulation, but it seeks to roll it back significantly:

ABA is fully supportive of well-regulated markets where well-crafted rules are effective in protecting consumers against abuse. Banks support clear disclosures and processes to assure that consumers receive clear and comprehensive information that enables them to understand the transaction and make the best decision for their families. ABA does not, therefore, advocate for a wholesale deconstruction of existing consumer protection regulations . . . (4)

If we learned anything from the subprime crisis it is that disclosure is not enough.  That is why the rules.  Could these rules be tweaked? Sure.  Should they be dramatically weakened? No. Until the ABA grapples with the real harm done to consumers during the subprime era, their position on mortgage market reform should be taken as a special interest position paper, not a white paper in the public interest.

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May 24, 2017 | Permalink | No Comments

Wednesday’s Academic Roundup

By Jamila Moore

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May 24, 2017 | Permalink | No Comments

May 23, 2017

Renovating Among The Stars

By David Reiss

Justin Theroux, photo by David Shankbone

Realtor.com quoted me in Justin Theroux’s Renovation Drama: What Went Wrong? It opens,

Actor Justin Theroux might have many admirers (including his wife, Jennifer Aniston), but apparently the “Leftovers” hunk inspires more than his share of haters, too—including his Manhattan neighbor Norman Resnicow. Apparently their feud started two years ago, when Theroux decided to renovate his apartment; Resnicow lives one floor down.

As anyone who’s lived under, next to, or anywhere near a demolition site knows, home renovations can get noisy—which is why Resnicow, a lawyer, felt it within his rights to ask Theroux to do the neighborly thing and install soundproofing to muffle the ruckus. There was just one problem: According to the New York Post, the requested soundproofing would cost a whopping $30,000 and make it difficult for Theroux to preserve the original flooring in his place, which he was keen to do. So he refused.

That’s when things got ugly. According to a lawsuit filed by Theroux, Resnicow embarked on a “targeted and malicious years-long harassment campaign” to derail those renovations and just make life unpleasant for the actor.

  • Resnicow accused Theroux’s contractors of damaging the marble in the building’s entranceway, and demanded they make repairs.
  • He halted Theroux’s roof deck renovations by arguing that the fence separating their portions of the deck encroached on his property.
  • Then, for good measure, he cut down the ivy lining the fence purely because he knew that the site of the foliage made Theroux happy.

Theroux now seeks $350,000 from Resnicow, alleging nuisance, trespass, and all in all “depriving Mr. Theroux of his right to use and enjoy his property.”

But Resnicow remains resolute, telling the Post, “I have acted for one purpose only, which remains to assure my and my wife’s health and safety.”

How to balance renovations with neighbor relations

As Theroux’s predicament makes painfully clear, few issues can ruin a neighborly relationship like noise—particularly if you live in an apartment building or other tight quarters. Problem is, homeowners also have a right to make home improvements. So at what point does reasonable renovation ruckus become so loud it’s a legitimate nuisance? That depends, for starters, on where you live, as noise ordinances and other regulations vary by area.

New York City’s Noise Code prohibits construction noise that “exceeds the ambient sounds level by more than 10 decibels as measured from 15 feet from the source.” (And in case you have no clue how to figure that out, the city uses devices called sound meters; you can also download sound meter apps to take your own measurements.) Volume levels aside, most areas have limits on when you can hammer away; in New York, work is typically limited to 7 a.m. to 6 p.m., Monday through Friday.

The third variable to consider is the co-op, condo, or HOA board that governs your building or community, which may place further restrictions on hours or even the type of renovations you do. Yet if a homeowner like Theroux is following these rules, odds are he’s in the clear.

“In New York City, they say ‘hell hath no fury like an attorney dealing with noisy neighbors,’ but as long as you have the proper permits, then construction noise created during normal business hours is generally allowed, with the understanding that it will only be temporary,” says Emile L’Eplattenier, a New York City real estate agent and analyst for Fit Small Business. “As long as he isn’t running afoul of his building’s rules—which is doubtful—then his neighbor has little recourse.”

Still, if you’re a homeowner about to embark on a renovation who doesn’t want to drive your neighbors nuts, what can you do? For starters, keep in mind that even if the sounds don’t ruffle you, people’s noise sensitivities can vary.

In the words of David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School, “One person’s quiet hum is another’s racket.”

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May 23, 2017 | Permalink | No Comments

Tuesday’s Regulatory & Legislative Roundup

By Jamila Moore

  • The U.S. Court of Appeals, District of Columbia is gearing up to hear the landmark case challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB). In 2016, PHH received a 100 million dollar fine regarding their consumer and mortgage insurance practices. PHH alleges the director of CFPB has sole power to make decisions without necessary checks and balances which is unconstitutional. The Court’s ruling will determine the constitutionality of the bureau’s leadership structure.
  • The De Blasio administration recently proposed the addition of a new homeless shelter in Crown Heights, Brooklyn. Many of the residents in the Crown Heights neighborhood expressed growing concerns regarding the types of residents flocking to their neighborhood. Although the city’s 32 million dollar structure is much needed, residents seem to think one more shelter is too much for their community.

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May 23, 2017 | Permalink | No Comments

May 22, 2017

Using Home Equity Responsibly

By David Reiss

photo by Scott Lewis

Chase.com quoted me in How a Home Equity Line of Credit Can Help Your Family. It reads,

If you’re a homeowner, you could qualify for a unique financial product: the Home Equity Line of Credit (HELOC). HELOCs allow you to borrow money against the equity you have in your home and similar to a credit card, they offer a revolving credit line that you can tap into as needed.

“Equity is the market value of your home less what you owe on your mortgage balance,” explains David Lopez, a Philadelphia-based member of the American Institute of Certified Public Accountant’s Financial Literacy Commission.

With home values on the rise and interest rates historically low, HELOCs are an attractive option right now. Plus, according to Lopez, for most borrowers, there’s the added benefit of a potential tax deduction on the interest you pay back.

However, since your home is on the hook if you can’t meet your debt obligations, you’ll have to be cautious, explains David Reiss, a professor at Brooklyn Law School and editor of REFinblog, which covers the real estate industry.

So, what are the most common reasons you might consider leveraging this tool? According to the Novantas 2015 Home Equity Survey, 50 percent of people said they opened a HELOC to finance home renovations, upgrades and repairs.

That was the case for Laura Beck, who along with her husband, used their equity to fund a substantial home renovation that doubled their square footage and home’s value.”The HELOC let us do a full renovation right down to re-landscaping the yard without being nervous about every penny spent,” she says.

Interested? Here are a few of the most common reasons people leverage a HELOC:

Home improvement expenses

Upgrades to your home can increase the market value and not to mention, allow you to enjoy a house that is customized to fit your family’s needs.

Pro Tip: Some improvements and energy efficient upgrades, such as solar panels or new windows may also score you a bonus tax credit, says Lopez.

Debt Consolidation

Exchanging high interest debt (like credit cards) for a lower interest rate makes sense, especially since interest payments on your HELOC are usually tax deductible, says Lopez.

Pro Tip: Reiss stresses how important it is to “be cautious about converting unsecured personal debt into secured home equity debt unless you are fully committed to not running up new balances.”

Surprise expenses

When faced with a situation in which money is the only thing preventing you from getting the best medical care, a HELOC can be a literal life saver, Reiss explains.

Pro Tip: If you need to pay an existing medical bill, however, try negotiating with the health care provider rather than use your equity, says Reiss. Often, they are willing to work something out with you, and you won’t have to risk your house.

College expenses

Reiss explains how a good education can improve one’s career outlook, increase earnings, and has the potential of offering a strong return on your investment.

Pro Tip: Before turning to your equity for education costs, try to maximize other forms of financial aid like scholarships, grants, and subsidized loans.

No matter your reason for considering a HELOC, if used responsibly it can be a great tool, says Reiss. For information on how to qualify, speak to a banking professional to see if this is a good option for you.

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May 22, 2017 | Permalink | No Comments

Monday’s Adjudication Roundup

By Jamila Moore

  • A Florida couple is unhappy. The Eleventh Circuit upheld a fine and probation sentence given to the couple by a lower district court. The initial ruling, stemmed from the couple’s failure to disclose an insurance company’s payout of a sink hole found on their property. Furthermore, the couple did not repair the sink hole with the funds received which added to the damage of their failure to disclose issue.
  • Wells Fargo Bank NA plead with the Supreme Court regarding a Nevada Lien Law. The Nevada law allows homeowner associations “seeking back dues in foreclosure” to receive lien priorities over lenders. The Ninth Circuit invalidated the law, and Wells Fargo Bank is hoping the U.S. Supreme Court will do the same.
  • The Department of Revenue failed in their attempt to tax rooftop solar panels. An appellate Arizona court recently “upheld the state law exempting rooftop solar panels from property tax valuations.”

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May 22, 2017 | Permalink | No Comments