June 2, 2020
Non-debt Financing for Home Purchases
Professor Shelby Green
I will be presenting on Non-Debt Financing for Home Purchase: Risks and Promises as part of the ABA’s Section of Real Property, Trust and Estate Law “Professors’ Corner.” It will take place at 12:30 PM (Eastern Time) on June 9th. The program is free for ABA members and non-members alike, although registration is required. Professor Shelby D. Green of Pace University’s Elisabeth Haub School of Law will moderate. The program description reads:
A new class of financing options is emerging, including non-debt or equity investment, either facilitating the initial purchase with no borrowing or enabling access to equity from existing homeownership. The presenter will discuss whether the surface appeal of these financing inventions may camouflage risks that if not disclosed and well-managed could portend disruption in the housing markets.
Update: The slides for the presentation can be found here.
June 2, 2020 | Permalink | No Comments
May 28, 2020
Law in The Time of COVID: The Ripple Effect in Real Estate
Dean Michael Cahill
In many ways, COVID-19 has changed the way we live for both the immediate future and long-term. Brooklyn Law School Dean Michael Cahill has been sitting down with members of the Brooklyn Law School faculty to discuss the legal ramifications of our response to COVID-19 and what a post-pandemic world may look like. Here is the link to our discussion of the effect of the pandemic on the real estate market and beyond: https://youtu.be/j9DFBOsU3qw.
May 28, 2020 | Permalink | No Comments
February 20, 2020
Money, Government and Mortgages
Robert Skidelsky
I just finished reading Money and Government by Robert Skidelsky (2018). It is a bit tough in parts for non-economists, but it is a great read for those trying to understand the appropriate relationship between economic theory and government policy. While that may sound dry indeed, it is of key importance to the design of a post-Financial Crisis world regulatory order.
The book delves into the the “Mysteries of Money,” providing a short history of a deceptively simple topic that I continue to find to be difficult to wrap my head around: what exactly is money and what can you do with it? The book then goes into some inside baseball analysis of the history of economic thought. I skimmed this section because it related some pretty technical debates among early economists to set up its more accessible discussion of Keynesian economics and its challenger, Milton Friedman-led Monetarism. The book then takes a look at how economic theory impacted governments’ responses to the Financial Crisis, for good and for ill.
I think readers of this blog would be most interested by Skidelsky’s insights in the final section, where he tries to sketch “A New Macroeconomics.” He asks and answers the question, “What Should Governments Do and Why?” He wants to make banking safe and address inequality.
Readers of this blog will be particularly interested in his analysis and recommendations for the mortgage market. He argues that the “main theoretical mistake behind securitization was the assumption that securities are always liquid: they can always be sold quickly and without (much) loss.” (328) The Financial Crisis demonstrated in spades that this was not true. He argues that “[c]ompelling banks to hold mortgages for a period of years” is the solution to this particular problem. (363) I do not think that I agree with this solution, but as he argues his point at a high level of generality, it probably is best to say that the devil will be in the details for any reform program in this sphere.
I found his analysis of populism compelling. He argues that the “political divide between right and left . . . is increasingly overshadowed by one between nationalism and globalism.” (372) I won’t go into the details here, but he has a very trenchant analysis of how the economist’s theoretical Homo economicus fails to account for important aspects of our humanity as individuals, as members of groups and as citizens of nation-states. He warns that we do that at our peril: citizens of democracies will punish their leaders for failing to take into account their complex need to flourish in all of those ways that economists can reduce down to one-dimensional units of measurement, such as “utility.”
Yale University Press says that the book is out of print, but Amazon has paperback copies available if you dig a bit on the book’s web page (and, of course, there are Kindle versions available for those so inclined). I recommend that you get yourself a copy.
February 20, 2020 | Permalink | No Comments
February 19, 2020
Urban Renewal’s Legacy
I was quoted in The Ledger (Florida) in Seeking Progress, City Upended Lives in Eliminating Moorehead Community. It opens,
After selecting Moorehead as the site of a new auditorium, Lakeland officials began efforts 50 years ago to inform residents, assess properties, make offers to owners and assist residents in finding new places to live.
Dividing the predominantly black neighborhood roughly in half, the city planned to acquire all of the eastern section north of Lime Street by 1971 and the remainder in 1972.
The campaign, which displaced 122 families, fit into a decades-long national phenomenon in which cities partially or completely removed minority neighborhoods for projects aimed at fostering urban renewal.
The American Housing Act of 1949, part of President Harry Truman’s “Fair Deal,” established the power of governments to seize private property for projects categorized as urban renewal. It also made federal funds available for such projects.
Though intended to replace substandard housing with better options, the Act spurred a flurry of activity that wound up displacing minorities, said David Reiss, a professor at Brooklyn Law School and academic program director of The Center for Urban Business Entrepreneurship. Cities used the program’s Title I funding to engage in what was sometimes called “Negro removal” or “slum clearance.”
Before the federal program was halted in 1974, some 2,500 urban renewal projects displaced about 1 million people nationwide, Reiss said.
“Two-thirds of those people were African-American, and if you think about African-Americans being 12 percent of the population, they were being displaced at a multiple, maybe at five times the rate of other Americans and particularly white Americans,” Reiss said. “So urban renewal really reshapes the urban fabric across the country.”
Property in minority communities tended to be cheaper to acquire, especially during the peak period of urban renewal, and Reiss said minorities also were less equipped to challenge authorities.
“It was structural racism on one level, where the majority would find it much easier to displace a black community than they would to displace a white community, although displacement wasn’t only in black communities — but as we see it’s overwhelmingly in black communities,” he said. “Because black communities were often poor, that would be another reason — being in a poor community would give you less political power to fight something like this.”
February 19, 2020 | Permalink | No Comments
January 29, 2020
Deed of Trust vs. Mortgage
LendingTree quoted me in Deed of Trust vs. Mortgage: Key Differences. It reads, in part,
Foreclosure process
Each type of security instrument leads to a different type of foreclosure process. Deed of trust states typically have a non-judicial foreclosure process. “The trustee has the power under the terms of the deed of trust to actually sell the property,” said David Reiss, professor of law at Brooklyn Law School and real estate expert. “That can happen in some jurisdictions in a matter of weeks or a matter of a few months.”
A deed of trust foreclosure doesn’t involve going to court. In mortgage states, though, the lender must get a court order to foreclose on a home. This is called a judicial foreclosure. “In many jurisdictions, particularly in New York and New Jersey, [a judicial foreclosure] could take years to actually do,” Reiss said. “From a lender perspective, that’s not so great.”
Your state’s laws will determine which security instrument you use and which type of foreclosure process lenders are required to follow. Some states allow both types of foreclosures, but non-judicial foreclosures are more common than judicial foreclosures. The states that primarily use a non-judicial foreclosure process are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wyoming and the District of Columbia.
January 29, 2020 | Permalink | No Comments
October 16, 2019
Teaching Real Estate Securitization
Some readers may be interested in a free upcoming program on how to teach real estate securitization. The program is co-sponsored by the AALS Real Estate Transactions Section and the New York City Bar Association’s Structured Finance Committee.
You can attend by live stream webcast or in person. You can attend as much of the program as you have time to attend, and feel free to pop in and out of the webcast.
Law professors and leading practitioners will serve as panelist instructors. I will be moderating a panel on Servicing & Its Discontents. It should be a great program for those who teach in this area.
See https://law-u.net/ for the full program and to register or even better, view the PROMOTIONAL VIDEO here.
October 16, 2019 | Permalink | No Comments
September 16, 2019
Housing Finance Reform Endgame?
The Hill published my column, There is Hope of Housing Finance Reform That Works for Americans. It opens,
The Trump administration released its long awaited housing finance reform report and it is a game changer. The report makes clear that it is game over for the status quo of leaving Fannie Mae and Freddie Mac in their conservatorship limbo. Instead, it sets forth concrete steps to recapitalize and release the two entities. This has been a move that investors, particularly vulture investors who bought in after the two companies entered into their conservatorships, have clamored for.
It is not, however, one that is in the best interests of homeowners and taxpayers. The report recognizes that there are better alternatives. Indeed, it explicitly states that the “preference and recommendation is that Congress enact comprehensive housing finance reform legislation.” But the report also states that the conservatorships, which are more than a decade old, have gone on for too long. So the report throws down a gauntlet to Congress that if it does not take action, the administration will begin the formal process of implementing the next best solution.
September 16, 2019 | Permalink | No Comments
