The CFPB released its Strategic Plan, Budget, and Performance Plan and Report which provides a good summary of what the Bureau has done to date. I was particularly interested in this summary of its work to build a representative database of mortgages:

In FY 2013, the CFPB began a partnership with the Federal Housing Finance Agency (FHFA) to build the National Mortgage Database (NMDB). This work continues in FY 2014. For this database, the FHFA and the Bureau have procured (from a credit reporting agency) credit information with respect to a random and representative sample of 5% of mortgages held by consumers. The NMDB is the first dataset that will provide a truly representative sample of mortgages so as to allow analysis of mortgages over the life of the loans, including firsts, seconds, and home equity loans.

In all of the data used for its analyses, the Bureau will work to ensure that strong protections are in place around personally identifiable information. (66)

Such a database (assuming privacy concerns are adequately addressed) will be an invaluable tool for the Bureau (and researchers too, to the extent that they are allowed to access it). One question that the Strategic Plan does not answer is how fresh will the mortgage data be. The mortgage market can innovate at warp speed, as it did in the mid-2000s, so it will be important for the CFPB database to be as current as possible and accessible to researchers as quickly as possible. That being said, even if the data is a bit stale, it will still provide invaluable guidance regarding abusive behaviors in the market. It should also provide guidance regarding a lack of sustainable credit in the market generally as well as within those communities that have historically suffered from such a lack, low- and moderate-income communities as well as communities of color.

On a separate note, I would say that the Strategic Plan makes some assumptions about the efficacy of financial education that should probably be studied carefully. There is a lot of research that challenges the usefulness of financial education. The Bureau should grapple with that research before it invests heavily in financial education implementation.


I have posted An Overview of the Fannie and Freddie Conservatorship Litigation to  SSRN (and to BePress as well). The abstract reads:

The fate of Fannie Mae and Freddie Mac are subject to the vagaries of politics, regulation, public opinion, the economy, and not least of all the numerous cases that have been filed in 2013 against various government entities arising from the placement of the two companies into conservatorship. This short article will provide an overview of the last of these. The litigation surrounding Fannie and Freddie’s conservatorship raises all sorts of issues about the federal government’s involvement in housing finance. These issues are worth setting forth as the proper role of these two companies in the housing finance system is still very much up in the air. The plaintiffs, in the main, argue that the federal government has breached its duties to preferred shareholders, common shareholders, and potential beneficiaries of a housing trust fund authorized by the same statute that authorized their conservatorships. At this early stage, it appears that the plaintiffs have a tough row to hoe.


Law360.com quoted me in Capital Rules To Spread Beyond Banks Under Housing Bill (behind a paywall). The story reads in part,

Mortgage servicers, aggregators and other actors in the U.S. housing finance market would for the first time be subject to the same capital requirements that apply to banks under a new bipartisan bill aimed at replacing Fannie Mae and Freddie Mac, potentially eliminating an advantage nonbank firms currently enjoy.

The elimination of Fannie Mae and Freddie Mac is the centerpiece of S. 1217, the Housing Finance Reform and Taxpayer Protection Act of 2014, introduced by Senate Banking Committee Chairman Tim Johnson, D-S.D., and the committee’s ranking Republican, Sen. Mike Crapo, R-Wyo. The government-sponsored entities would be replaced by a proposed Federal Mortgage Insurance Corp. that would backstop the housing finance market in a manner similar to the Federal Deposit Insurance Corp.’s backing of the banking system.

Among the details in the 442-page bill released Sunday are provisions that would allow the FMIC to impose capital standards and other “safety and soundness” rules to mortgage servicers, firms that package mortgages into securities and guarantors that provide the private capital backing to mortgage-backed securities. Compliance with these standards would be required for access to a government guarantee.

Previously those types of institutions have not been subject to safety and soundness rules, unless they were part of a bank. If the Johnson-Crapo bill moves forward as currently written, those firms could be in for a big change, said David Reiss, a professor at Brooklyn Law School.

“Historically, nonbanks have had a lot less regulation than banks. So, by giving them a safety and soundness regulator you are taking away a regulatory advantage – that is, less regulation – that they have had as financial institutions,” he said.

*     *      *

“What it effectively does is create safety and soundness standards for guarantors, aggregators and servicers, as if they were banks. There’s been this long debate about what you do about the nondepository institutions, and this would empower FMIC to supervise private-party participants like banks,” said Laurence Platt, a partner with K&L Gates LLP.

Specifically, the potential rules would apply to aggregators, which serve to collect mortgages and pack them into securities, and guarantors, or firms that provide the private capital to back those securities. Mortgage servicers that process payments and provide other services to mortgages inside those securities would also be included under the FMIC’s regulatory umbrella, according to the bill.

The FMIC would also have the power to force the largest guarantors and aggregators to maintain higher capital standards than their smaller competitors as a way to mitigate the risk of any such market player becoming too big to fail, and will be able to limit such firms’ market share if they get too big, according to the bill.

Underwriting standards for mortgages that would be backed by the FMIC would match, as much as possible, the Consumer Financial Protection Bureau’s qualified mortgage standards, which went into effect in January, according to the legislation.

Moreover, the FMIC would be able to write regulations for force-placed insurance that is applied to mortgages where borrowers do not purchase their own private mortgage insurance under the legislation. The CFPB and other regulators have tackled perceived problems in the force-placed insurance market in recent months.

Extending those capital and other safety and soundness requirements to nonbank firms would be akin to extending supervision authority of nonbank mortgage servicers and other firms to the CFPB, a power granted by the Dodd-Frank Act, Reiss said.

“It can be described as part of the effort since the passage of Dodd-Frank to regulate the breadth of the financial services industry instead of one part of it, the banking sector,” he said.


The NYS Comptroller issued a report, Housing Affordability in New York State. The report finds that

The percentage of New York State households with housing costs above the affordability threshold, as defined by the U.S. Department of Housing and Urban Development (HUD), rose for both homeowners and renters from 2000 to 2012, according to U.S. Census Bureau data. As of 2012, more than 3 million households in the State paid housing costs that were at or above the affordability threshold of 30 percent of household income. Within that group, more than 1.5 million households paid half or more of their income in housing costs. Statewide, the estimated percentage of rental households with rents above the affordability level increased from 40.5 percent in 2000 to 50.6 percent in 2012. (1, footnote omitted)

The report suggest that “that many New Yorkers are feeling pressure from a combination of stagnant or declining real income and increasing housing costs. A combination of factors including comparatively slow economic growth over time, a rising real estate tax burden, and limited housing supply in many areas of the State contribute to the increasing challenge New Yorkers face in finding affordable housing.” (2)

A pretty consistent theme on this blog is that limits on housing production necessarily limit housing affordability. While this seems obvious to me (perhaps I hang around too many economists?!?), it certainly is not to other people. Many people with whom I discuss affordable housing policy acknowledge that in theory, limits on the supply of housing should effect the price of housing (they all took Econ 101 when they were in college). But they look around New York City, see new high rises going up while housing prices are going up at the same time. They then doubt that increasing the supply of housing will reduce the cost of housing. All I can say is who are you going to believe — your Econ 101 teacher or your own lyin’ eyes?

But of course that is not a compelling argument. So I tell my interlocutors that it is necessary to take into account the fact that NY is seeing a dramatic increase in demand. This demand comes from the increasing resident population as well as the inflow of the ultra rich who want a (fifth?) part-time home in NYC as well as a safe place to park some capital. This high demand masks a problem that NY has faced for decades — too little new housing construction to support the existing residents, let alone all of the new residents.

The de Blasio Administration has acknowledged the need for increased housing construction as part of its program to increase housing affordability in the five NYC counties. The Comptroller’s report acknowledges that a similar dynamic is occurring throughout New York State. Perhaps Governor Cuomo will identify ways in which the State government can take a leading role in encouraging housing construction in all 62 of New York State’s counties.


The court in deciding White v. Bank of Am., N.A., 2013 U.S. Dist. (N.D. Ga., 2013) ultimately denied the plaintiff’s motion for reconsideration, therein upholding the decision of the lower court.

Plaintiffs alleged that because BANA did not hold the note and it was not the assignee of the security deed it lacked the authority to foreclose. Plaintiffs alleged further that defendants falsely represented that BANA was the plaintiffs’ secured creditor. Plaintiffs sought injunctive relief and compensatory and punitive damages.

On May 10, 2013, the lower court granted the defendants’ motions to dismiss plaintiffs’ complaint. The lower court found that the plaintiffs executed the security deed with the power of sale in favor of MERS, and that MERS assigned its rights under the security deed to BACHLS; that BACHLS merged into BANA; and that, as a result of the merger, BANA acquired the rights and interests of BACHLS, including the security deed.

The lower court concluded that BANA, as holder of the Note and Security Deed, was entitled to foreclose on the property and that the plaintiffs had not, and could not, state a claim for relief under any legal theory based on BANA’s alleged lack of authority to foreclose on the Property.

On appeal, the plaintiffs reassert their argument that BANA lacked standing to foreclose on the property because it did not also hold the note. Plaintiffs argued that the note was “unauthenticated” and thus the endorsement from First Option to Countrywide is not valid.

After considering the plaintiff’s contentions, this court found that the plaintiffs’ motion for reconsideration on this basis should be denied.


The court in deciding Bank of N.Y. Mellon Trust Co. Nat’l Ass’n v. Robinson, 2013 Mich. App. (Mich. Ct. App. 2013) ultimately dismissed the Robinson’s claims, therein affirming the decision from the lower court.

The Robinsons raised two issues. First, the Robinsons argued that MERS, through its predecessor, committed fraud in the execution of the mortgage. Second, the Robinsons allege that plaintiff did not have the right to foreclose because there is no evidence of record that the Robinsons’ note was assigned to plaintiff. After considering the Robinson’s arguments, the court dismissed them.



The court in deciding Koenig v. Bank of Am., N.A., 2013 U.S. Dist. (E.D. Cal., 2013) ultimately granted the defendant’s motion to dismiss.

Plaintiff Philip A. Koenig commenced this action against defendant Bank of America. Plaintiff alleged causes of action for violations of the Fair Debt Collections Practices Act (“FDCPA”) and the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Plaintiff also brought claim requesting declaratory relief against the defendant. Defendant filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). After considering the arguments, the court granted the defendant’s motion to dismiss.

The theory underlying the totality of plaintiff’s complaint was that defendant had no right to affect foreclosure on the property. The second cause of action was a request for declaratory relief. Plaintiff sought a declaration from the court indicating that the defendant did not have and had never had any interest in the property.

Plaintiff alleged that the entity that intended to foreclose on the property was not the lender that originated any mortgage and was not an assignee of any mortgagee or a duly appointed trustee, thus the entity lacked the legal authority to foreclose.

After consider the plaintiff’s arguments, the court rejected them and granted the defendant’s motion to dismiss.