August 18, 2016
Micro-Units for Millennials
Construction Dive quoted me in An Emerging Megatrend? Developers Experiment with Microunits to Target Millennial Market. It opens,
As U.S. home prices and rents continue to soar, some developers are taking aim at a new target market — those willing to sacrifice square footage to be able to live near their work and area nightlife at a more budget-friendly price.
These microhousing units, also known as microapartments and microcondos, have most of the amenities of their full-size counterparts but typically range from around 350 square feet to 550 square feet, with some buildings offering up units at a relatively roomy 1,000 square feet. Many also come outfitted with furnishings specifically designed for the unit — folding beds, hidden storage and convertible pieces that do double duty, such as a dining table that also functions as a work desk.
However, the growing concept is seeing mixed results in the U.S. Is microhousing just a passing fad as younger renters look for an affordable stepping stone to a larger space, or does it represent a shift in what some Americans are looking for in a home?
The Draw of Smaller Spaces
Jam-packed cities like Tokyo are prime markets for these tiny units because the cost of land is at a premium, according to David Reiss, professor of law and academic program director at the Center for Urban Entrepreneurship at the Brooklyn Law School. Microunits are particularly appealing to single, young professionals who spend a lot of time working and hanging out with friends rather than entertaining in their own homes, he said.
The primary draw, however, is “location, location, location,” Reiss said. “When young adults are choosing between a small space in the center city or a larger space further afield, there will always be some who opt for the former.”
This hasn’t always been the case, according to architect David Senden, partner at international design firm KTGY. Americans used to put a premium on living space, but there’s been a “shift on the priority list,” and “location and has jumped to the absolute top,” he said. There’s also a growing desire for shorter commuting times.
However, whether the overall demand for microhousing is on the uptick is debatable. Some developers see microunits as the solution that will provide millennials with the opportunity to live in vibrant urban settings, as well as offer baby boomers or those looking to downsize a minimalist living space without having to give up the modern conveniences they’ve come to expect.
When Microhousing Is a Viable Concept
Reiss said population density and high prices need to be components of any successful micro project . When prices, in both rent and homes, “outpace middle-class income,” as they have done in cities like San Francisco and New York City, then some people will give up square footage in order to stay close to their friends or jobs. “The microunit might present a very attractive trade-off of space and cost for that demographic,” he said. Reiss added that New York City is even amending its zoning laws to allow for more micro developments.
August 18, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- Senior Fellow in Residence Ed DeMarco and Center for Financial Markets Director Michael Bright have released the first in a four-part series of papers designed to help policymakers end the conservatorship of Fannie Mae and Freddie Mac and put our housing finance system on a path that ensures stability. This first paper briefly recaps how the system failed and reminds the reader why reform is necessary.
- The Joint Center for Housing Studies, published a report, Are Renters and Homeowners in Rural Areas Cost-Burdened?, which found that housing cost burden rates in some rural counties are significant. The study also learned that rural counties of the Northeast and west, that are adjacent to high-cost metros, have even higher cost burden rates than those in parts of the Midwest.
August 18, 2016 | Permalink | No Comments
August 17, 2016
Wednesday’s Academic Roundup
- This paper, Agglomeration Effects and Liquidity Gradients in Local Rental Housing Markets, empirically analyzes the relation between local liquidity in rental housing markets and urban agglomeration effects. Using listed rent offers from online market platforms,
- This paper, Housing Costs and Commuting Distance, shows households face a tradeoff between housing costs and commuting costs. Using a database that connects residence and workplace neighborhoods in eight larger metropolitan areas, we model the difference in housing costs as a function of estimated commuting distance.
- This overview article, The Disruptive Implications of Fintech-Policy Themes for Financial Regulators, which provides a framework for analysing the disruptive potential of fintech and regulatory implications, is envisaged to be an anchor for more specific pieces that examine particular areas of fintech in detail. The purpose of this article is not to delve into excessive detail regarding each area of fintech highlighted. We believe that such a high level perspective is necessary so as to introduce a more coherent blueprint for regulatory thinking and design, avoiding silo-based and narrowly reactive approaches to increasingly complex financial innovation that weaves in both digital and legal innovations.
- This paper, The Boom and Bust of US Housing Prices from Various Geographic Perspectives, summarizes changes in housing prices during the recent U.S. boom and bust from various geographic perspectives.
August 17, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- Enterprise submitted comments to HUD on the agency’s proposed transition to Small-Area Fair Market Rents in administering the Section 8 Housing Choice Voucher program. Enterprise also coordinated a similar comment letter on behalf of the High-Cost Cities Housing Forum, a peer-to-peer group comprised of the local housing commissioners from nine of the most expensive cities in the U.S.
August 16, 2016 | Permalink | No Comments
August 15, 2016
Monday’s Adjudication Roundup
- A New York state judge on Friday granted approval of a $4.5 billion settlement to resolve institutional investors’ claims that JPMorgan & Chase Co. misled consumers into buying risky residential mortgage-backed securities in the lead-up to the financial crisis in 2007.
- Massachusetts Mutual Life Insurance Co. has struck a deal to end a long-running suit accusing RBS Securities Inc. of misrepresenting $235 million in sales of mortgage-backed securities, the latest in a string of settlements for the insurer over crisis-era woes, according to a filing posted Friday.
- Moody’s Corp. has urged the Supreme Court to overturn a First Circuit decision reviving a suit alleging the company fraudulently rated mortgage backed securities, arguing that a Massachusetts district court has no authority to transfer the case because it lacks personal jurisdiction.
- A New York appellate court on Thursday revived breach-of-contract and negligence claims brought against financial giant Morgan Stanley by a trust over nearly $111 million in losses suffered by investors in residential mortgage-backed securities
August 15, 2016 | Permalink | No Comments
August 12, 2016
Friday’s Government Report Roundup
- Many government agencies are growing concerned about the noncompliance and data collection practices of the Internal Revenue Service (IRS).
- Supportive Housing reaches out to assist the mentally ill and individuals with chronic health conditions to ensure these individuals lead successful lives and are not left to homelessness.
August 12, 2016 | Permalink | No Comments
August 16, 2016
Loan Mod Racketeering?
By David Reiss
James Cagney and Mae Clarke in “Public Enemy”
Bloomberg BNA Banking quoted me in BofA Must Face RICO Claims on Loan Modifications (behind paywall). It opens,
Bank of America must face claims that it and another company violated federal anti-racketeering laws by denying loan modifications to eligible borrowers, a federal appeals court said Aug. 15 ( George v. Urban Settlement Svcs., 10th Cir., No. 14-cv-01427, 8/15/16 ).
The ruling by the U.S. Court of Appeals for the Tenth Circuit reinstates purported class claims by Richard George and other borrowers that Bank of America and Urban Settlement Services (“Urban”), a settlement company, feigned compliance with guidelines under the Home Affordable Modification program (HAMP) while modifying as few loans as possible.
A district court dismissed the claims, saying the plaintiffs failed to sufficiently allege the existence of an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organizations Act (RICO), but the Tenth Circuit reversed, saying they made a “facially plausible” claim.
The ruling sends the case back to the district court to consider that and other allegations.
Case Moves Forward
The decision is the latest in connection with HAMP, a 2009 Treasury Department effort aimed at stabilizing the housing market that was closely related to disbursement of government funds to banks under the Troubled Asset Relief Program. Bank of America received $45 billion in TARP funds.
The plaintiffs are represented by Steve Berman, Ari Y. Brown, Kevin K. Green, and Tyler S. Weaver in the Seattle and San Diego offices of Hagens Berman Sobol Shapiro.
“We are more than pleased the court has ruled our complaint has sufficiently alleged that Bank of America’s massive HAMP mortgage-modification program was in fact a RICO enterprise,” Berman, the firm’s managing partner, said in an Aug. 15 statement. “For years, we have tirelessly fought this major Wall Street kingpin to right the wrongs it committed against hundreds of thousands of homeowners and taxpayers who footed the $45 billion government bailout BoA took in, only to have it used to propagate a scheme to squeeze every dollar from BoA customers and wrongfully foreclose thousands of homes in the process.”
Bank of America spokesman Rick Simon said the bank denies the claims, which he said paint a false picture of the bank’s practices and its employees.
“In fact, Bank of America has been an industry leader in HAMP and other beneficial mortgage modifications,” Simon told Bloomberg BNA in an Aug. 15 e-mail. “We are reviewing the Circuit court’s decision and considering our options.”
The lawsuit, which involved loans originally held by Countrywide Home Loans, said Bank of America and Urban were part of a fraudulent scheme to keep borrowers from acquiring permanent HAMP loan modifications, allegedly because defaulted loans were more profitable.
They said Urban functioned as a “black hole” for HAMP-related documents submitted by borrowers, ensuring that trial modifications would not be made permanent.
Tenth Circuit Reverses
In its September 2014 ruling, the district court said the plaintiffs failed to allege, as required by RICO, that Bank of America was distinct from the alleged racketeering enterprise.
The Tenth Circuit reversed in a decision by Judge Nancy Moritz, who wrote for a three-judge panel. The plaintiffs, she said, “don’t contend that either a parent corporation or its subsidiary corporation is the enterprise. Rather, they assert that BOA and Urban—two separate legal entities— joined together, along with several other entities, to form and conduct the affairs of the BOA-Urban association-in-fact enterprise.”
According to the plaintiffs, she said, Bank of America and Urban “performed distinct roles within the enterprise while acting in concert with other entities to further the enterprise’s common goal of wrongfully denying HAMP applications.”
That is enough to “plausibly allege” that Bank of America meets the “enterprise” requirement, she said.
Crisis Cases Continue
Brooklyn Law School Professor David Reiss said the decision shows that financial crisis-era litigation is not over. “This case is an example of litigation that arises from the supposed fixes for the crisis—fixes that were often implemented poorly, as can be seen from a variety of cases and regulatory actions,” Reiss told Bloomberg BNA in an Aug. 15 e-mail.
The lawsuit alleged in part that documents submitted by borrowers were intentionally “scattered” across various computer databases and systems, allegedly with the goal of creating the appearance that borrowers had not completed the paperwork required to convert their trial plans into permanent modifications.
Reiss called it significant that the court accepted, for purposes of a motion to dismiss, the plaintiffs’ theory that the alleged “black hole” treatment of documents could rise to the level of a RICO violation.
“While courts have held against defendants in individual cases with similar facts, the possibility that they could hold against lenders and servicers in a class action raises the stakes quite a bit for defendants,” Reiss said.
Share this:
Like this:
August 16, 2016 | Permalink | No Comments