Author Archives: David Reiss

All The Single Ladies . . . Buy Houses

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Realtor.com quote me in More Single Women Hunt for Homes, Not Husbands. It reads, in part,

Alayna Tagariello Francis had always assumed she’d marry first, then buy a home. But when she found herself footloose, free, and definably single in her early 30s, she decided to make a clean break from tradition: She started home shopping for one.

“After dating for a long time in New York City, I really didn’t know if I was going to meet anyone,” she says. “I didn’t want to keep throwing away money on rent or fail to have an investment because I was waiting to get married.”

So in 2006, Francis bought a one-bedroom in Manhattan for $400,000—and was surprised by how good it felt to accomplish this milestone without help.

“To buy a home without a husband or boyfriend wasn’t my plan,” she says, “but it gave me an immense sense of pride.”

It’s no secret that both men and women are tying the knot later in life. A generation ago, statistics from the Census Bureau showed that men and women rushed to the altar in their early 20s; now, the median age for a first-time marriage has crept into the late 20s—and that’s if they marry at all.

The surprise is that even though today’s women still make 21% less than men, more single women than men are now choosing to charge ahead and invest in a home of their own. It’s changing the face of homeownership in America.

And while that decision to buy can help build wealth and ensure financial stability, plenty of women are finding the road from renter to owner is filled with unforeseen obstacles—and plenty of soul-searching.

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Why women shouldn’t wait

But then again, few of us have fully operational Ouija boards we can pull out of storage to pinpoint exactly when our ideal significant other will arrive on the scene. So putting house hunting on pause is something fewer women are willing to do.

“Women today don’t sit around and wait for Prince Charming,” says Wendy Flynn, a Realtor® in College Station, TX, who has helped numerous single women buy homes. After all, Flynn points out, “The time frame for meeting your dream man, getting married, and having kids—well, that’s a pretty long timeline.” So even if you do meet The One a day after closing on your home, “you could sell your home in a few years and still make a profit—or at the worst, probably break even.” If you buy right, that is.

That said, women who do want to marry and have kids as soon as possible will want to eye their potential home purchase with that in mind. Is the new place big enough for a family? Or, if you think you’ll sell and move into a larger place once you’re hitched, how easy will it be to sell your original home—or are you allowed to rent it out?

And if you marry or a partner moves in, make sure to consult a lawyer if you want your partner to share homeownership along with you.

“You definitely should not assume that your spouse’s home is transferred automatically to you once you get married,” says David Reiss, an urban law professor at Brooklyn Law School.

Brooklyn: Sky’s the Limit

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Brooklyn Law School’s Center for Urban Business Entrepreneurship is hosting a Networking Reception with Panel Discussion to Follow on April 12th from 6 to 8:30 pm. The panel discussion is entitled, Brooklyn: Sky’s the Limit:

The Borough of brownstones and warehouses continues to emerge as a global powerhouse with a skyline that may soon rival that of the Manhattan. From the world’s largest roof farm to drone design and launch, to dynamic architectural environments in which Brooklyners live, work, and play, the Borough is taking its place as one of the most innovative and entrepreneurial urban areas in the world. The numerous ventures driving these and other pioneering efforts in Brooklyn are raising novel legal, policy, business, and societal issues that generate opportunities for growth along with some growing pains.

Join Brooklyn Law School and the Center for Urban Business Entrepreneurship (CUBE) for a lively panel discussion that explores these phenomena and their impact on the lives, environment, and flourishing businesses of the Borough and its growing and diverse population.

Introductory Comments
Kathleen D. Warner ’92, Executive Vice President and Managing Director, NYC Economic Development Corporation’s Center for Economic Transformation

Panelists
David Ehrenberg, The Brooklyn Navy Yard – President and CEO
Jonathan Marvel, Marvel Architects – Principal
Ron Shiffman, Pratt Institute for Community and Environment Development – Co-founder
Todd Sigaty, SHoP Architects – Director of Legal Affairs and Sotheby’s Institute of Art – Lecturer
Brian Streem, Aerobo drone developers – Co-founder and CEO
Lee Wellington ’13, Urban Manufacturing Alliance, Executive Director

Moderator
Brian August, 110 Stories – Founder and CEO

This event will be preceded (from 4 to 6) by the CUBE Shark Tank, also known as the CUBE Innovators Competition:

Come experience the Third Annual CUBE Innovators Competition, where Brooklyn Law School students will compete for a small amount of funding for projects and ventures that they will pitch to the audience and an impressive panel of judges. This event is being sponsored by CUBE and Levi & Korsinsky, LLP.

Judges
Tom Chernaik, CEO, Command Post
Mary Juetten, CEO and Founder, Traklight
Eduard Korsinsky ’95, Founding Partner, Levi & Korsinsky, LLP
Charlie O’Donnell, Partner and Founder, Brooklyn Bridge Venture
Basha Rubin, CEO and Founder, Priori Legal
Marshall Silverman ‘74, President and CEO, Silverman Studio Group

Learn more about CUBE.

Creative Credit Union Mortgages

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Credit Union

DepositAccounts.com quoted me in Types of Institutions in the U.S. Banking System – Credit Unions. It reads, in part,

What You Need to Know About Credit Unions

For more than 100 years, credit unions have been providing financial services to their members. Forget about what you thought you knew about credit unions. Long gone are the days when credit unions were seemingly only a “bank” for government employees. Today some 100 million Americans are member-owners of 6,900 credit unions and credit unions have more than $1 trillion in assets.

The Credit Union National Association (CUNA) defines a credit union as a non-for-profit, member-owned financial cooperative, democratically managed by its members, and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.

Simply put — credits unions are about their members, not profits.

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How are credit unions different from banks?

“They are structured very differently. Credit unions don’t issue stock or pay dividends to outside shareholders, so they are not beholden to outside third party interests,” says Steve Rick, chief economist of CUNA Mutual Group, an insurer and maker of financial productions within credit unions.

Each person who holds an account is a member, and each member has one vote, “rather than the voices of only the powerful few stockholders heard at for-profit banks. And all earnings go straight back to members in the form of favorable interest rates and lower fees that other for-profit institutions can’t beat,” he adds.

Banks are governed by paid shareholders and voting rights depend on the number of shares owned. Earnings go to outside bond and stockholders in the form of dividends.

As cooperatives, credit unions are part of a broader cooperative community that shares philosophies around benefiting their member owners. One of the core missions of the credit union system is to educate its members on financial issues to ensure their financial health.

“It’s worth noting that credit unions can offer creative types of mortgages that should be explored by first-time and experienced homebuyers alike. The PenFed Credit Union, along with some other credit unions, has a 5/5 ARM that adjusts every five years. A product like this combines aspects of a fixed rate mortgage (fewer, but not the fewest) surprises about payment sizes, with aspects of an ARM (lower, but not the lowest) interest rates,” says David Reiss, a Brooklyn Law School professor specializing in real estate.

Living with Nightmare Neighbors

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photo by dsb nola

US News & World Report quoted me in How to Avoid and Live With Neighbor Nightmares. It opens,

When Mike Scanlin and his wife moved into an expensive ground-floor condominium within a four-story building in a posh part of Los Angeles 18 months ago,the real estate agent assured him that there were no noise nuisances, like loud dogs or kids.

It did seem that way at first, but as Scanlin discovered, “There is a 9-year-old boy’s bedroom directly above our bedroom. He is, like most 9-year-olds, hyperactive.”

Especially in the morning, and the evening, Scanlin says, when the boy “runs, jumps, screams and makes tons of noise.”

Scanlin has talked to the boy’s mother to no avail. An entrepreneur who works from home, Scanlin also sent building managers complaint letters, who in turn, sent letters to the mom.

“Nothing has worked. It’s getting worse,” Scanlin says. “Sometimes the kid gets up at 3 a.m. and rearranges the furniture in his room, with wood scraping on wood, directly above our bed.”

Scanlin and his wife are moving out next month. They aren’t willing to wait around until the kid grows up or hopefully grows out of his behavior.

They say you can’t choose your family, but you can choose your friends and neighbors. Easier said than done, when it comes to housing. It isn’t easy to move, and for some homeowners, financially speaking, once you do plant your roots, you may not be in any position to go elsewhere. That’s why, if you’re buying a home, it’s critical to have some sense of who’s living next door – or above you. Neighbors are important for renters to consider, too, especially if you’re locking yourself in with a lease.

So before you buy or rent, ask yourself the following questions. Because if the answers aren’t promising, you may like the solutions at your disposal even less.

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What to do if there are problems. Unfortunately, there isn’t much you can do, realistically, which is why it’s so important to try and assess the neighbor situation before moving in. When you do have a dispute, “these are always difficult situations, without easy legal answers,” says David Reiss, a professor of law at Brooklyn Law School.

“When you escalate by calling the police or filing a lawsuit, you risk developing a Hatfield and McCoys scenario with nobody getting what they want,” Reiss says. “It’s also important to remember that what you think to be utterly reasonable may not be perceived that way by your neighbor or even by disinterested third parties. What is loud music to you may just be a run-of-the-mill Saturday night party to them.”

True enough, and your neighbors have rights, too – which is, again, why it can be difficult to work out a disagreement.

If you can’t resolve problems with your neighbors, Reiss says, “you can try to determine whether your neighbor is breaking any local ordinances. For instance, loud noise.”

You may want to involve the police and see if they will deal with the problem informally, Reiss adds. “They may or may not,” he says.

Surveying Financial Well-Being

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photo by Sean MacEntee

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’!

Road to GSE Reform

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photo by Antonio Correa

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.