March 17, 2016
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
Tuesday’s Regulatory & Legislative Roundup
- HUD released list of grants for 6,400 homeless housing and service programs worth $1.6 billion to address housing and support services for homeless individuals and families.
- HUD is considering new rule that would address over-income tenants in public housing, where individuals’ incomes have increased over the threshold for public housing since their initial admission.
March 15, 2016 | Permalink | No Comments
March 14, 2016
Final Accounting for National Mortgage Settlement
Luca Pacioli, A Founding Father of Accounting
Joseph Smith, the Monitor of the National Mortgage Settlement, has issued his Final Compliance Update. He writes,
I have filed a set of five compliance reports with the United States District Court for the District of Columbia as Monitor of the National Mortgage Settlement (NMS or Settlement). The following report summarizes these reports, which detail my review of each servicer’s performance on the Settlement’s servicing reforms. This report includes:
• An overview of the process through which my team and I have reviewed the servicers’ work.
• Summaries of each servicer’s performance for the third quarter 2015.
Pursuant to the Settlement, the requirement to comply with the servicing standards ended for Bank of America, Chase, Citi, Ditech and Wells Fargo as of the end of the third quarter 2015. Accordingly, this is my last report under the NMS for these servicers. Like all mortgage servicers, they are still required to follow servicing-related rules issued by the Consumer Financial Protection Bureau (CFPB). (2)
Smith concludes,
The Settlement has improved the way these servicers treat distressed borrowers, and, under its consumer relief requirements, the banks provided more than 640,000 borrowers with $51 billion in debt forgiveness, loan modifications, short sale assistance and refinancing at a time when families and the market were subject to distress and uncertainty.
I believe the Settlement has contributed towards the rebuilding of public trust and confidence in the mortgage market and hope that it will inform future regulation of financial institutions and markets. I look forward to further discussions on these topics among policymakers, consumer advocates and mortgage servicers. (13)
I have blogged about the Monitor’s earlier reports and have been somewhat unhappy with them. Of course, his primary audience is the District Court to which he is submitting these reports. But I do not believe that the the reports have “contributed towards the rebuilding of public trust and confidence in the mortgage market” all that much. The final accounting should be accurate, but it should also be understandable to more than a select few.
The reports have been opaque and have not give the public (even the pretty well-informed members of the public, like me) much information with which to contextualize their findings. I hope that future settlements like this take into account the need to explain the findings of decision makers and court-appointed monitors so that the public can have a better sense of whether justice was truly done.
March 14, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- The Second Circuit threw out the district court’s ruling that an insurer did not improperly deny coverage to a couple whose house collapsed because it claimed that the district court judge misconstrued a clause in the policy.
- Quicken Loans filed a motion to dismiss in False Claims Act suit for improperly underwriting mortgages.
- Mission Peak Capital filed a complaint claiming that American Capital Ltd. cannot back out of $52 million mortgage-backed securities deal.
March 14, 2016 | Permalink | No Comments
