February 25, 2016
Thursday’s Advocacy & Think Tank Roundup
- The Economic Policy Institute found that unemployment rates varied considerably by state and race in Q4 2015.
- The Housing Partnership Network released report on comparisons between affordable housing in the United Kingdom versus the United States.
- The National Housing Conference released its Housing Landscape 2016 Report, finding that in general housing costs are continually increasing, growing about six percent from 2011 to 2014.
February 25, 2016 | Permalink | No Comments
February 24, 2016
Challenging Wrongful Foreclosures
The California Supreme Court issued an opinion a few days ago that has been getting a lot of attention, Yvanova v. New Century Mortgage Corp., S218973 (Feb. 18, 2016). The opinion opens by noting that
The collapse in 2008 of the housing bubble and its accompanying system of home loan securitization led, among other consequences, to a great national wave of loan defaults and foreclosures. One key legal issue arising out of the collapse was whether and how defaulting homeowners could challenge the validity of the chain of assignments involved in securitization of their loans. (1)
The Court concludes that
a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee’s sale. (30)
First, let us be clear what it is NOT saying: “We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed.” (2) This is an important distinction between challenging a nonjudicial foreclosure and having standing to bring a wrongful foreclosure tort action.
And let us be clear as to what it is saying: if a homeowner argues that that an assignment of a deed of trust is void, that can provide the basis for a wrongful foreclosure action because it “is no mere ‘procedural nicety,’ from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so.” (22) Quoting Adam Levitin, the Court finds that
“Such a view fundamentally misunderstands the mortgage contract. The mortgage contract is not simply an agreement that the home may be sold upon a default on the loan. Instead, it is an agreement that if the homeowner defaults on the loan, the mortgagee may sell the property pursuant to the requisite legal procedure.” (23, italics changed)
Sounds like common sense to me.
February 24, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- The Dynamics of Subprime Adjustable-Rate Mortgage Default: A Structural Estimation, Hanming Fang, You Jin Kim & Wenli Li, FRB of Philadelphia Working Paper No. 16-2.
- The Federal Home Loan Bank System and U.S. Housing Finance, W. Scott Frame, FRB Atlanta Working Paper No. 2016-2.
- Examination of Potential Misrepresentation in CMBS, Ruoyu Shao.
- Does Zoning Help or Hinder Transit-Oriented (Re)Development?, Jenny Schuetz, G. Giuliano & Eun Jin Shin.
- A Simple Model of Subprime Borrowers and Credit Growth, Alejandro Justiniano, Giorgio E. Primiceri & Andrea Tambalotti, CEPR Discussion Paper No. CP11083 (Paid Access).
- Enhancing the Urban Environment Through Green Infrastructure, John R. Nolon, Environmental Law Reporter, Vol. 46, No. 1, 2016.
- Spillover Effects of Continuous Forbearance Mortgages, Kadiri Karamon, Douglas A. McManus & Elias Yannopoulos.
- Hobby Lobby as a Land Use Case: Charting For-Profit RLUIPA Claims, Ross Campbell, NYU Journal of Law & Liberty, Vol. 10, No. 2, 2016, Forthcoming.
- A Forced Labor Theory of Property and Taxation, Theodore P. Seto, The Philosophy of Tax Law (Oxford University Press 2016), Forthcoming; Loyola Law School, Los Angeles Legal Studies Research Paper No. 2016-04.
February 24, 2016 | Permalink | No Comments
February 23, 2016
The Future of the Sharing Economy
I was interviewed on PBS’ Nightly Business Report (produced by CNBC) about the near-term future of the sharing economy in the wake of the horrible shootings in Kalamazoo, allegedly by an Uber driver while he was working for the service. You can find the interview here (my segment appears right after the 22nd minute). A transcript of the interview follows:
SUE HERERA: So, will the tragic Uber shooting spree over the weekend change the way that people feel about the sharing economy?
Let’s turn to David Reiss for his thoughts. He’s professor of law at Brooklyn’s Law School Center for Urban Business Entrepreneurs.
Nice to have you here, David. Welcome back.
DAVID REISS, BROOKLYN LAW SCHOOL PROF. OF LAW: Thank you.
HERERA: I guess that is the question. Do you think it will change the way people feel about the sharing economy, this case in particular?
REISS: I think we have to look at the short term and long term. In the short term, we’ll see people will think twice about it. But in the long term, and as I think people think about their experience with sharing economy services and seeing how frequently terrible and tragic incidents like this occur, I think we’re going to see a return to probably some growth in that area as people put this into perspective.
BILL GRIFFETH: Are you surprised as our reporter Kate Rogers pointing out here that in their conference call just now, they seem to be digging in their heels on not changing their background check policies here. Why not, as I said, do that if only for PR reasons just to reassure the public? I mean, this is a PR problem for them right now, isn’t it?
REISS: It is. And I think they’re probably in crisis response mode. They’re probably not wanting to make big promises about big changes to acknowledge that their business model is intrinsically flawed and they will probably want to make changes on their own time.
HERERA: There have been more calls for more regulation of the sharing economy, specifically by those who are impacted in a negative way by the sharing economy. We have to put that out there. But do you think it opens the door a little bit wider for regulation?
REISS: I certainly do. I think there’s been this attitude of it’s better to ask forgiveness than to ask permission and an incident like this and all of its tragic consequences raise the argument that maybe that’s not the right way to go, that getting it right the first time is better than kind of seeing how it unfolds.
GRIFFETH: Growing pains in the sharing economy or is this a real dent? What do you think?
REISS: I think it’s growing pains. I think the sharing economy has been growing so rapidly with so many innovations. But I think it’s here to stay. I think people are voting with their feet in terms of using the services and government is trying to figure out how to adapt and how to regulate and what’s the appropriate level of regulation.
HERERA: Does it change, though, their liability? Do they have to change some of their policies, all of their policies because there’s a liability issue? And the weekend’s horrible events really point that out.
REISS: I think businesses react to lawsuits and to large judgments, and if courts and juries find that this behavior was negligent or reckless, they will get a clear message and they will change to adapt. I think that regulators are going to look carefully at them. So, I think a lot of this is in flux and I’m sure there’s going to be changes. I don’t know what they will be.
GRIFFETH: Have you used Uber and will you think twice, if not?
REISS: I’ve used Lyft, and I would continue to do.
HERERA: All right. On that note, David, good to see you again. Thanks for joining us.
David Reiss with Brooklyn Law School’s Center for Urban Business Entrepreneurs.
February 23, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- Governor Cuomo announced a new program to investigate discrimination in housing rentals and sales, which uses undercover trained testers to act as potential home purchasers and renters.
February 23, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- Goldman Sachs Group Inc. settles for $27.5 million in an investor class action over toxic collateralized debt obligations. A New York federal judge has preliminarily approved the settlement.
- In Chapter 13 Bankruptcy, the plans must prioritize condominium liens, which the district court determined addresses not only payment, but also security, “and therefore doesn’t elevate the collateral of the lien.”
- NY Attorney General, Eric Schneiderman, states that Morgan Stanley will pay $3.2 billion to settle claims of misleading investors about the quality of the mortgage-backed securities it packaged prior to the financial crisis.
- Borrowers have filed suit against Bank of America NA for intentionally and systematically failing to release mortgage liens on their property when they repaid everything, creating affected property titles.
February 22, 2016 | Permalink | No Comments
February 22, 2016
Consumer-Friendly Financial Innovation
By David Reiss
Under the Policy, Bureau staff would, in its discretion, issue no-action letters (NALs) to specific applicants in instances involving innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes implemented or regulations issued by the Bureau would be applied (for example if, because of intervening technological developments, the application of statutes and regulations to a new product is novel and complicated). The Policy is also designed to enhance compliance with applicable federal consumer financial laws. A NAL would advise the recipient that, subject to its stated limitations, the staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester with respect to a specified matter. NALs would be subject to modification or revocation at any time at the discretion of the staff, and may be conditioned on particular undertakings by the applicant with respect to product or service usage and data-sharing with the Bureau. Issued NALs generally would be publicly disclosed. NALs would be nonbinding on the Bureau, and would not bind courts or other actors who might challenge a NAL recipient’s product or service, such as other regulators or parties in litigation. The Bureau believes that there may be significant opportunities to facilitate innovation and access, and otherwise substantially enhance consumer benefits, through the Policy. (1-2)
Colleagues and I had commented on this policy when it was first proposed, arguing that it should incorporate metrics to ensure that it is achieving its stated goals. It does not seem that the CFPB agreed with our comments. So, while I think the final policy is a step in the right direction, I am not sure if we can really measure how good of a step it is.
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February 22, 2016 | Permalink | No Comments