REFinBlog

Editor: David Reiss
Brooklyn Law School

May 2, 2022

Foreclosure Echo

By David Reiss

 

David Reiss CC BY-NC-SA

Linda Fisher recently posted a pdf of The Foreclosure Echo: How the Hardest Hit Have Been Left out of the Economic Recovery, a book she co-authored with Judith Fox. It came out before the pandemic, so you might have missed it. The abstract reads,

This book tells the story of the foreclosure crisis from a new perspective – that of ordinary people who experienced it. This angle has not been thoroughly communicated before now. The authors are legal academics who have worked for decades defending low- to moderate-income people from foreclosure and challenging predatory lending practices. They have a wealth of experience representing people whose American Dream was shattered when they were threatened with losing their homes. Using actual experiences – often examined through a legal lens – supplemented by economic, social science and legal research, The Foreclosure Echo explains how people experienced the crisis and how their lenders and public institutions let them down. The book also details the lingering effects of the crisis – such as vacant and abandoned buildings – and how these effects have magnified inequality. Finally, the book suggests reforms that could help avoid another crisis.

It is a timely read, and it resonates with some of the challenges homeowners will face as the consequences of the pandemic work themselves out in the housing market with the expiration of the various foreclosure moratoria that were in effect during the earlier stages of the pandemic.

May 2, 2022 | Permalink | No Comments

April 27, 2022

Sharing Your Home with Strangers

By David Reiss

Debra Bechtel, Crystal Liu, Ernira Mehmetaj, and I have just posted Sharing Your Home with Strangers: Common-Interest Ownership and Financing Options to SSRN (as well as to bepress). The abstract reads,

As the affordable housing crisis in the U.S. escalates, housing policy analysts and advocates are re-examining, modifying, and combining ways of decreasing the costs of homeownership through shared owner-ship and shared financing while also, in some instances, preserving long-term affordability. This Article will touch upon the vast array of models and take a deep dive into one of them, the relatively new shared equity financing model. That model holds some promise and a lot of peril for homeowners.

April 27, 2022 | Permalink | No Comments

October 29, 2021

Reducing Land Use and Zoning Restrictions

By David Reiss

By Narnaudov1 - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=99170604
The White House hosted an event today on Reducing Land Use and Zoning Restrictions. While the event was pretty short — an hour or so — it had a bunch of heavy hitters presenting, including Professor Edward Glaeser of Harvard. For many years, Glaeser has written about how local land use laws restrict the construction of housing. It is great to see the White House taking this issue so seriously as it has a massive impact on the affordability of housing as well as the ability of people to move to places with lots of jobs, like the Bay Area.

This effort is part of Biden’s Build Back Better Plan, which is intended, in part, to

  • Incentivize the removal of exclusionary zoning and harmful land use policies. For decades, exclusionary zoning laws – like minimum lot sizes, mandatory parking requirements, and prohibitions on multifamily housing – have inflated housing and construction costs and locked families out of areas with more opportunities. President Biden’s plan seeks to help jurisdictions reduce barriers to producing affordable housing and expand housing choices for people with low or moderate incomes. The Build Back Better Plan will create an incentive program that awards flexible and attractive funding to jurisdictions that take concrete steps to reduce barriers to affordable housing production.

The Biden Administration seems to be picking up the gauntlet from previous administrations (here and here) that have made reducing land use restrictions on housing an initiative worth pushing. As opposed to the last two administrations, however, the Biden Administration is taking up the issue earlier in its tenure, so its push may have more legs than the ones that preceded it.

October 29, 2021 | Permalink | No Comments

October 7, 2021

Common Sense for the Shareholders of Fannie and Freddie

By David Reiss

By Joyofmuseums - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=75944298

The United States Court of Appeals for the Eighth Circuit issued a mixed decision for Fannie & Freddie shareholders in  Bhatti v. Federal Housing Finance Agency, No. 18-2506 (8th Cir. Oct. 6, 2021).  While the Court ruled (consistent with the Supreme Court’s recent ruling in Collins v. Yellin, 141 S. Ct. 1761 (2021)) that the shareholders could sue for retrospective relief (damages), it otherwise ruled against the shareholders.  The court ends on what I found to be a very commonsensical note in its discussion of the nondelegation claim:

Congress’s delegation of authority directs the FHFA to act as a “conservator,” with clear and recognizable instructions. 12 U.S.C. § 4617(a). “[T]he Agency is authorized to take control of a regulated entity’s assets and operations, conduct business on its behalf, and transfer or sell any of its assets or liabilities.” Collins, 141 S. Ct. at 1776, citing 12 U.S.C. §§ 4617(b)(2)(B)-(C), (G). “When the FHFA exercises these powers, its actions must be ‘necessary to put the regulated entity in a sound and solvent condition’ and must be ‘appropriate to carry on the business of the regulated entity and preserve and conserve [its] assets and property.’” Id. (alteration in original), quoting 12 U.S.C. § 4617(b)(2)(D). “Thus, when the FHFA acts as a conservator, its mission is rehabilitation, and to that extent, an FHFA conservatorship is like any other.” Id. There is one difference: “when the FHFA acts as a conservator, it may aim to rehabilitate the regulated entity in a way that, while not in the best interests of the regulated entity, is beneficial to the Agency and, by extension, the public it serves.” Id. But this difference clarifies that serving the public is one goal of the FHFA’s conservatorship; it does not render the delegation unintelligible. See id. (explaining how the FHFA works to rehabilitate housing in the public interest under the statute). In light of the Court’s identification of the principles guiding the FHFA, it is clear those principles are intelligible. See Saxton v. Fed. Hous. Fin. Agency, 901 F.3d 954, 960 (8th Cir. 2018) (Stras, J., concurring) (“The provision is broad but not boundless.”). Congress’s delegation in the Recovery Act was permissible. Id. at 963 (“Picking among different ways of preserving and conserving assets, deciding whose interests to pursue while doing so,
and determining the best way to do so are all choices that the Housing and Economic Recovery Act clearly assigns to the FHFA, not the courts.”). This court affirms dismissal of the nondelegation claim. Page 6.

The plain reading of the Housing and Economic Recovery Act gave the FHFA broad authority to act on the public’s behalf.  The FHFA acted within that broad authority.  The court therefore rightly defers to the FHFA’s response to the financial crisis.  Case closed?

 

 

October 7, 2021 | Permalink | No Comments

July 21, 2021

Escalation Clauses in a Tight Market

By David Reiss

photo by Jeramey Jannene (CC BY 2.0)

I spoke with Business Insider about the use of escalation clauses in hot housing markets.  The article (behind a paywall) opens,

With people around the US competing in a tight housing market, many are turning to a unique strategy: escalation clauses.

Escalation clauses are meant to help buyers beat the competition for an in-demand property. When would-be buyers put an offer on a home that they anticipate will have other offers, it automatically increases the buyer’s original offer by a specified amount in an effort to outbid everyone else.

Whether the buyer is notified before a seller applies an escalation clause depends on the particular contract terms, according to David Reiss, a law professor at Brooklyn Law School specializing in real estate. Some real-estate agents encourage clients to use escalation clauses, though not every state or seller allows them.

These clauses can give you a fighting chance by allowing you to skip some of the negotiation and back-and-forth, but can be harmful in that they show sellers how much buyers are willing to spend.

Insider spoke with several home buyers who used escalation clauses to understand the risks and rewards they come with.

July 21, 2021 | Permalink | No Comments

April 5, 2021

Rent Regulation from NY to NZ

By David Reiss

Indira Stewart (left) and the rest of the TVNZ Breakfast Team

I was interviewed by Indira Stewart on the TVNZ Breakfast show, the biggest morning news show in New Zealand, about New York City’s system of rent regulation (I serve as the Chair of the NYC Rent Guidelines Board).  You can find the interview here.

April 5, 2021 | Permalink | No Comments

March 25, 2021

Shared Equity Financing

By David Reiss

Financing by Nick Youngson CC BY-SA 3.0 Alpha Stock Images

Ernira Mehmetaj and I published The Promise and Perils of Shared Equity Financing in the ABA’s Probate and Property magazine. It opens,

It is the rare homeowner, or even lawyer, who thinks twice about why mortgages are part of so many real estate transactions.  Real estate is expensive, and few have the money to pay for a home all in cash.  As a result, people enter in transactions with mortgage lenders and are exposed to all of the risks that come along with that type of financing:  default, late fees, foreclosure.

If you stripped away all of our history and our current practices in financing home ownership with mortgages, you might ask how could people with limited assets acquire something as expensive as a home?  It turns out that there are all sorts of ways to slice and dice the rights and responsibilities of homeownership to offer households just the aspects they want and no more.

A new development, shared equity financing, will make us all think twice about mortgages.  Its sharing of the risks and rewards of a home purchase will be attractive to many, but it also has its own share of perils that are unique to it.

March 25, 2021 | Permalink | No Comments