REFinBlog

Editor: David Reiss
Brooklyn Law School

August 30, 2016

Protecting Fannie and Freddie’s Golden Future

By David Reiss

Two Golden Eggs

The Federal Housing Finance Agency had requested input on its Update on Implementation of the Single Security and the Common Securitization Platform. By way of background,

The Federal Housing Finance Agency’s (FHFA) 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac includes the strategic goal of developing a new securitization infrastructure for Fannie Mae and Freddie Mac (the Enterprises) for mortgage loans backed by 1- 4 unit (single-family) properties. To achieve that strategic goal, the Enterprises, under FHFA’s direction and guidance, have formed a joint venture, Common Securitization Solutions (CSS). CSS’s mandate is to develop and operate a Common Securitization Platform (CSP or platform) that will support the Enterprises’ single-family mortgage securitization activities, including the issuance by both Enterprises of a single mortgage-backed security (Single Security) and to develop it in a way that allows for the integration of additional market participants in the future. (1)

This is obviously very technical stuff. My own brief comment focused on the need to model and contextualize this development:

FHFA has requested public input on its Update on Implementation of the Single Security and the Common Securitization Platform. The FHFA has made significant progress on the Single Security and the Common Securitization Platform (SS/CSP). In doing so, FHFA has proceeded apace on the technical goals set forth in both the 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and the 2016 Conservatorship Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions.

Congress’ failure to act on housing finance reform has left it to FHFA to determine the future of the residential mortgage market for the foreseeable future. It is therefore incumbent upon FHFA policymakers to provide further context on how the SS/CSP will operate when fully implemented in 2018.

Thus, FHFA should provide further updates that provide (1) scenarios of how the secondary market may look in 2018 and beyond; and (2) it should also evaluate how SS/CSP would be integrated with the major reform plans that have been proposed by lawmakers and policy analysts, in case Congress were to adopt one of them.

  • FHFA should model how SS/CSP might impact market share of various mortgage originators such as large and small financial institutions as well as how it might impact the credit box for residential borrowers.
  • FHFA should consider how SS/CSP would work with theCorker/Warner bill; the Parrott et proposal; the Bright & DeMarco proposal, among others. FHFA should explain how SS/CSP path dependency might impact each of these proposals. In particular, it should evaluate transition costs that are likely to arise with each option.

FHFA has approached SS/CSP as a technical challenge.  But when implemented, SS/CSP may be setting up a housing finance system that lasts for decades. While Congress has failed to act, FHFA must do its best to evaluate how SS/CSP will affect the housing finance ecosystem.  The stakes for market actors and homeowners are too high not to. (1-2)

The American housing finance system has been the goose that has laid golden eggs decade after decade. We want to be certain that FHFA doesn’t kill it, or even weaken it, unintentionally.

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August 30, 2016 | Permalink | No Comments

Tuesday’s Regulatory and Legislative Roundup

By Jamila Moore

  • The Environmental Protection Agency spent $500,000 to help the residents of New Jersey and prevent a local environmental disaster. A nearby facility refrigeration practices led to a leak of ammonia which could cause a number of health issues throughout that local community.

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August 30, 2016 | Permalink | No Comments

August 29, 2016

Monday’s Adjudication Roundup

By Jamila Moore

 

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August 29, 2016 | Permalink | No Comments

August 26, 2016

Friday’s Government Report Roundup

By Jamila Moore

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August 26, 2016 | Permalink | No Comments

August 25, 2016

What Is Constructive Eviction?

By David Reiss

broken-window-960188_1280

Realtor.com quoted me in What Is a Constructive Eviction? A Rental Gone Very, Very Wrong. It opens,

Most renters have certainly heard of eviction—the dreaded process in which a landlord kicks out a tenant for not paying rent or some other major infraction. But what is a constructive eviction?

That’s a whole different ballgame, where a landlord essentially “evicts” a tenant by not fixing an uninhabitable rental. And while “constructive” may sound like a positive word, it’s not. It means the landlord is failing to fulfill his legal duty.

Constructive eviction is rare, but tenants who face this dire scenario should know their rights, and how to fight back.

How Constructive Evictions Work

“A common way landlords attempt to force out tenants would be by failing to provide heat in the winter,” says Brooklyn Law School professor David Reiss. Other ways a landlord could run into constructive eviction territory include turning off the water supply or failing to clean up flaking lead paint or toxic mold.

Constructive evictions are uncommon, because most landlords will usually help tenants with an issue. Or, if they are reluctant at first, they’ll eventually reach a compromise with a tenant through the court system, says Boston attorney Robert Pellegrini.

As such, tenants should attempt to work through any problems with the landlord first. That said, if a property owner won’t budge and the living environment puts a renter in harm’s way, a tenant can pursue a constructive eviction claim.

How To File A Constructive Eviction Claim

Unfortunately, tenants can’t file a constructive eviction claim if their floors creak or if their walls are painted a hideous shade of avocado green.

“More minor conditions like peeling (nonlead) paint, stuck windows, and drafty doors would be weak bases for a claim,” says Reiss.

Pellegrini agrees, adding, “The standards are very high for this, because you’re basically asking the court to conclude that the landlord essentially evicted you when he hasn’t.”

Here are five things a tenant must demonstrate to an attorney to prove a constructive eviction:

  1. Your landlord owed you (the tenant) a duty, such as providing heat in the winter or a residence free from toxic mold.
  2. The landlord neglected the duty.
  3. The apartment became uninhabitable as a result of the neglect.
  4. You gave the landlord notice of the neglect and time to take care of it.
  5. You left the apartment within a reasonable amount of time after the landlord’s failure to fix the issue.

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August 25, 2016 | Permalink | No Comments

Thursday’s Advocacy and Think Tank Roundup

By Jamila Moore

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August 25, 2016 | Permalink | No Comments

August 24, 2016

Wednesday’s Academic Roundup

By Jamila Moore

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August 24, 2016 | Permalink | No Comments