Friday’s Government Reports Roundup
- The S. Government Accountability Office (GAO) released a report on the Troubled Asset Relief Program (TARP) making two recommendations to the Treasury: (1) the Treasury should estimate future expenditures for the Making Home Affordable program, and (2) it should deobligate funds that will likely not be expended and move up to $2 billion of such funds to the TARP-funded Hardest Hit Fund.
March 18, 2016 | Permalink | No Comments
March 17, 2016
High and Low Property Taxes
Newsmax quoted me in Lowest Property Tax Is Hawaii and the Highest Is New Jersey. It reads, in part,
The average American household spends $2,089 on real estate property taxes each year and residents of the 27 states with vehicle property taxes shell out another $423, according to the National Tax Lien Association.
However, some states cost more than others when it comes to the American Dream and its staples of a house and car.
“Different parts of the country have different levels of taxation and amenities paid for by the tax receipts,” said David Reiss, professor of law and research director with the Center for Urban Business Entrepreneurship at Brooklyn Law School.
The state with the lowest real estate property taxes is Hawaii where residents pay only $482 per household, which is the least average amount typically shelled out by a taxpayer, according to a 2016 WalletHub study, ranking states with the highest and lowest property taxes.
“High property taxes tend to be correlated with high income and high income tends to be correlated with Blue States, so it is not surprising that high property taxes are correlated with Blue States,” Reiss said.
* * *
“Local property taxes can help pay for all sorts of municipal services, including schools, road maintenance and emergency services,” Reiss said.
Alabama, Louisiana and Delaware, D.C. and South Carolina follow Hawaii among the states with the lowest property taxes.
High tax localities, such as Westchester County in New York, could have annual taxes that easily are in the tens of thousands of dollars a year range but such areas also have some of the best schools in the nation.
The WalletHub report further found that in Blue states, real estate property taxes are 39% higher at $2,250 a year than homeowners in Red states who pay $1,613.
The yearly burden weighs far more heavily on taxpayers in some states than in others based on region.
For example, communities in the Northeast typically have higher property taxes than many of those in the rest of the country.
“Monthly mortgage payments are usually much higher than monthly real property tax payments, measuring in the high hundreds in low-cost metros like Pittsburgh to the thousands in a high-cost metro like San Francisco so it is hard to put default rates squarely on the shoulders of real property taxes,” said Reiss.
March 17, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- The National Low-Income Housing Coalition released state-by-state estimates of funds allocated by the National Housing Trust Fund.
- A new study published in Sociological Studies found that in major cities like New York, Chicago, Los Angeles and Houston, 35 percent of all neighborhoods will eventually re-segregate in the next 20 years.
- The Economic Policy Institute released a report on wage inequality, finding that it has continued in its 35-year rise last year.
March 17, 2016 | Permalink | No Comments
March 16, 2016
Party at Your Place?
Realtor.com quoted me in Moved Out? Watch Out, Teens May Be Partying in Your Old Home. It opens,
Teenagers are always on the lookout for a house party—and there’s nothing better than a venue where it’s all but guaranteed that nobody’s parents will barge in and disrupt all their risky business: vacant homes!
That’s right, if you’ve moved out and planted a “for sale” sign on your lawn—or are waiting to move into a place under construction—it’s a sitting duck for young revelers to … revel in.
The latest victim of this fast-growing trend: a newly built home in El Dorado Hills, CA, where nearly 200 kids broke in and had a bacchanal before they were busted by the cops. According to the Sacramento Bee, most of the partygoers scattered to safety, but 14 were detained and cited for trespassing.
Sadly, by the time law enforcement arrived, the house had suffered enough damage to qualify as a felony. Cops noted numerous holes in walls, busted electronics, and other property devastation in the house (estimated to be worth around $500,000).
And this is hardly an isolated incident: Last month, a teen in nearby Ceres, CA, pulled up a “for sale” sign from the yard of an unoccupied house, then spread the word on social media to come on down—BYOB and BYOW (bring your own weed)—charging $10 a head for the 100 or so who showed up. The noise prompted neighbors to eventually call the cops, who suspect the “host” has made a habit of organizing fetes in abandoned homes.
All in all, such stories can haunt the dreams of homeowners who’ve moved out or are about to move in: Are hooligans holding beer pong tournaments in your abandoned (or soon to be occupied) living room every Saturday night? And if they do crack your granite countertops, who’s responsible for the damage?
The answer depends on your homeowner insurance, which rarely covers policyowners who aren’t living on the premises.
“Many homeowner policies won’t cover a home if it’s vacant,” warns David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. Funny right? But here’s the punch line: “Homeowners should also be concerned about injuries suffered by the teens. It is all too plausible that you will face a lawsuit if one of them gets hurt while partying at the house. This is true notwithstanding the fact that the teens had trespassed.”
In other words, if some drunk punk stumbles and falls off your balcony and lands on his noggin, it might be all on you.
Yet there are things you can do to head this problem off at the pass.
“Some insurance companies offer endorsements to your existing policy or altogether new insurance policies that cover vacant homes,” points out Reiss. “Some even offer special coverage for vandalism damages. It’s worth looking into them if your home will be vacant, even for a relatively short time.”
March 16, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- Consumer Risk Appetite, the Credit Cycle, and the Housing Bubble, Joseph L. Breeden & José J. Canals-Cerda, FRB of Philadelphia Working Paper No. 16-5.
- The Pricing Effects of Open Space Amenities, Qin Fan, J. Andrew Hansz & Xiaoming Yang, Journal of Real Estate Finance and Economics, Vol. 52, No. 3, 2016.
- Real Estate Risk and Hedge Fund Returns, Brent W. Ambrose, Charles Cao & Walter D’Lima, Journal of Real Estate Finance and Economics, Vol. 52, No. 3, 2016.
- Pricing Mortgages: Endogenous Interest Rate and Leverage, Liang Peng.
- Climate Resilient Urban Development: Why Responsible Land Governance is Important, David P. Mitchell, Stig Enemark & Paul Van der Molen, Land Use Policy, 49 (2015) 190-198.
- Buying Happiness: Property, Acquisition, & Subjective Well-Being, David Fagundes.
- Property, Intellectual Property, and Social Justice: Mapping the Next Frontier, Peter S. Menell, Brigham-Kanner Property Rights Conference Journal 2015, UC Berkeley Public Law Research Paper No. 2736517.
March 16, 2016 | Permalink | No Comments
March 15, 2016
Did Dodd-Frank Make Getting a Mortgage Harder?
Christopher Dodd
Barney Frank
____________________________________________________________
The short answer is — No. The longer answer is — No, but . . .
Bing Bai, Laurie Goodman and Ellen Seidman of the Urban Institute’s Housing Finance Policy Center have posted Has the QM Rule Made it Harder to Get a Mortgage? The QM rule was originally authorized by Dodd-Frank and was implemented in January of 2014, more than two years ago. The paper opens,
the qualified mortgage (QM) rule was designed to prevent borrowers from acquiring loans they cannot afford and to protect lenders from potential borrower litigation. Many worry that the rule has contributed to the well-documented reduction in mortgage credit availability, which has hit low-income and minority borrowers the hardest. To explore this concern, we recently updated our August 2014 analysis of the impact of the QM rule. Our analysis of the rule at the two-year mark again finds it has had little impact on the availability of mortgage credit. Though the share of mortgages under $100,000 has decreased, this change can be largely attributed to the sharp rise in home prices. (1, footnotes omitted)
The paper looks at “four potential indicators of the QM rule’s impact:”
- Fewer interest-only and prepayment penalty loans: The QM rule disqualifies loans that are interest-only (IO) or have a prepayment penalty (PP), so a reduction in these loans might show QM impact.
- Fewer loans with debt-to-income ratios above 43 percent: The QM rule disqualifies loans with a debt-to-income (DTI) ratio above 43 percent, so a reduction in loans with DTIs above 43 percent might show QM impact.
- Reduced adjustable-rate mortgage share: The QM rule requires that an adjustable-rate mortgage (ARM) be underwritten to the maximum interest rate that could be charged during the loan’s first five years. Generally, this restriction should deter lenders, so a reduction in the ARM share might show QM impact.
- Fewer small loans: The QM rule’s 3 percent limit on points and fees could discourage lenders from making smaller loans, so a reduction in smaller loans might show QM impact. (1-2)
The authors find no impact on on interest only loans or prepayment penalty loans; loans with debt-to-income ratios greater than 43 percent; or adjustable rate mortgages.
While these findings seem to make sense, it is important to note that the report uses 2013 as its baseline for mortgage market conditions. The report does acknowledge that credit availability was tight in 2013, but it implies that 2013 is the appropriate baseline from which to evaluate the QM rule. I am not so sure that this right — I would love to see some modeling that shows the impact of the QM rule under various credit availability scenarios, not just the particularly tight credit box of 2013.
To be clear, I agree with the paper’s policy takeaway — the QM rule can help prevent “risky lending practices that could cause another downturn.” (8) But we should be making these policy decisions with the best possible information.
March 15, 2016 | Permalink | No Comments
March 18, 2016
Fannie & Freddie’s Duty to Serve
By David Reiss
The Federal Housing Finance Agency had issued a request for comments on a proposed rulemaking back in December about Enterprise Duty to Serve Underserved Markets. Comments were due yesterday. I drafted a short comment letter on one of the many topics raised by the rulemaking. The abstract reads,
The FHFA has requested input on its proposed rule that would provide a Duty to Serve credit to Fannie Mae and Freddie Mac (The Enterprises) for eligible activities that facilitate a secondary mortgage market for mortgages related to preserving the affordability of housing for homebuyers, among other things. I write to comment regarding the preservation of affordable homeownership through shared equity homeownership programs.
The Proposed Rule requires that each Objective of an Underserved Markets Plan be measurable in order to determine whether it has been achieved by the Enterprise. The Proposed Rule requires that these programs “promote successful homeownership.” § 1282.34(d)(4)(iii). While the Proposed Rule addresses ways that ensure that housing remains affordable for future owners after resale, it does not offer a way to measure successful or sustainable homeownership for participants while they are in a shared equity program.
The FHFA should require that the Enterprises measure the tenure of homeowners participating in shared equity programs and disallow Duty to Serve credit if participants fail to maintain their housing for reasonable length of time. While this comment is being made in the context of shared equity programs, it applies with equal force to all homeownership programs that are counted for Duty to Serve purposes.
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March 18, 2016 | Permalink | No Comments