December 29, 2015
Tuesday’s Regulatory & Legislative Round-Up
- The White House’s Promise Zone initiative is seeking new applications from communities interested in becoming promise zones. Promise Zones were created in 2013 by The Obama Administration, with the goal of partnering with high poverty communities to create jobs, and promote economic security, public safety, educational access and quality affordable housing. Promise Zone benefits include: tax benefits for businesses locating in or hiring from promise zones, preferences in obtaining federal contracts, and technical assistance in addressing local community revitalization issues. The Promise Zone designation lasts for 10 years.
December 29, 2015 | Permalink | No Comments
December 28, 2015
What Makes NYC Crowded
NewsDocVoices quoted me in What Makes NYC Become More and More Crowded. It reads, in part,
Yuqiao Cen, a graduate engineering student at NYU, makes sure to shower before 10pm every night, otherwise she is criticized for making too much noise in her apartment. She lives with her landlord and his family of five in a 3-bedroom apartment on 11th Avenue in Brooklyn.
Similar to Cen, Yanjun Wu, a newly admitted graduate student at Fordham University, barely stays in his living room because she feels uneasy wearing pajamas while her male roommates are around. She lives with 4 roommates in a 4-bedroom apartment on the Upper West Side.
Cen and Wu are not the only ones forced to share an apartment. Many of their classmates and friends living in New York are also doing the same thing. In fact, a recent study conducted by the New York City Comptroller Office suggested that NYC has become much more crowded in the past 10 years with the crowding rate being more than two and a half times the national average.
The study “Hidden Households” was conducted by Scott Stringer, New York City Comptroller, highlighting the growing crowding rate in housing in NYC. According to the study, New York City’s crowding rate has rose from 7.6 percent in 2005 to 8.8 percent in 2013. The number of crowded housing units grew from 228,925 in 2005 to 272,533 in 2013, representing an increase of 19 percent.
The increase in the crowding rate is city-wide. The Comptroller’s study indicates that the proportion of crowded dwelling units increased in all of the five boroughs except Staten Island during this time period. Brooklyn has the largest increase with 28.1 percent, Queens has 12.5 percent and 12.3 percent in the Bronx.
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“Fundamentally, this is a story about supply and demand,” said David Reiss, professor of Law in Brooklyn Law School, and research director of Center for Urban Business Entrepreneurship. “The increase of the housing supply has been very slow, while the increase of the population was very fast, and that is the recipe for crowding. Because people can’t afford to live where they want to live, their choices would be continuing to live where they want to live and be crowded, or to switch to location with more space for your dollar.”
The data confirm Reiss’s observation. According to the U.S. Census Bureau, NYC’s population in 2013 was 8.43 million, increasing from t8.2 million in 2005. However, the 2014 Housing Supply Report, conducted by New York City Rent Guidelines Board, also indicates that the number of permits issued for new construction of residential units had reached its peak – 34,000 in 2008, but the number decreased greatly to 6,000 in 2009. Although the number kept gradually going up, and reached to 18,000 in 2013, the market is no longer as hot as before the financial crisis of 2008.
Contrary to common belief, income does not in itself drive crowding. Although “Hidden Households” shows that 23.6 percent of crowded households reported household incomes in the City’s bottom quartile, it also revealed that 18.5 percent of crowded households have incomes in the City’s top quartile and 5.2 percent of crowded households have incomes in the 90th percentile or higher.
In the beginning of apartment hunting, Wu and her roommates wanted to rent a five-bedroom apartment so that everyone could have their own private space. “The market is too busy in New York,” said Wu. “Once we were going to pay the [lease] for an apartment on Roosevelt Island, but someone was ahead of us by just a few minutes.”
After weeks of apartment hunting, Wu and her roommates decided to make a compromise – two of them would have to share a bedroom, in order to get a decent apartment at an acceptable price – $4,900 per month, with neither an elevator nor a laundry room.
“Land is very expensive, and there is not much left for residential development but a tremendous number of people want to live in New York,” said Albert Goldson, Executive Director of Indo-Brazilian Associates LLC, A NYC-based global advisory firm. “Real estate prices started to go up, so you have people who are middle class or who have modest salaries who can no longer afford [to pay a] mortgage. And what many of them would have done, either single people or a family, was ‘double up’. Like single people who bring in a roommate, now have several roommates in a unit.”
Most experts in the urban planning industry believe that the underlying cause of the growing crowding rate is the affordability of housing. Goldson argues that the city needs to be more available for middle-class people who are actually working here and potentially leaving the city if it is too small or uncomfortable to live here anymore.
From Reiss’ perspective, the way to solve affordability of housing is to amend its zoning code to encourage the construction of housing. Vertical construction is a trend and a solution to the crowding situation. But in the meantime, with more people living in taller buildings, the density would definitely increase. “If the city is really committed to increasing the affordability of housing, you have to be committed to increase the housing density as well,” said Reiss.
December 28, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- HSBC settles class action by homeowners that claimed the bank received kickbacks for insurance policies on their properties.
- Goldman Sachs, Deutsche Bank and RBS have petitioned the US Supreme Court to consider repose statutes and statutes of limitations extenders that could block a $2.1 billion mortgage-backed securities suit against them.
December 28, 2015 | Permalink | No Comments
December 25, 2015
New, Improved Grinch
From Dr. Seuss’ How The Grinch Stole Christmas!, a book I have read hundreds of times with my boys,
"PoohPooh to the Whos!" he was grinchishly humming. "They're finding out now that no Christmas is coming!" "They're just waking up! I know just what they'll do!" "Their mouths will hang open a minute or two, Then the Whos down in Whoville will all cry BooHoo!" "That's a noise," grinned the Grinch, "That I simply MUST hear!" So he paused. And the Grinch put his hand to his ear. And he did hear a sound rising over the snow. It started in low. Then it started to grow. But the sound wasn't sad! Why, this sound sounded merry! It couldn't be so! But it WAS merry! VERY! He stared down at Whoville! The Grinch popped his eyes! Then he shook! What he saw was a shocking surprise! Every Who down in Whoville, the tall and the small, Was singing! Without any presents at all! He HADN'T stopped Christmas from coming! IT CAME! Somehow or other, it came just the same! And the Grinch, with his grinch-feet ice-cold in the snow, Stood puzzling and puzzling: "How could it be so?" "It came with out ribbons! It came without tags!" "It came without packages, boxes or bags!" And he puzzled three hours, till his puzzler was sore. Then the Grinch thought of something he hadn't before! "Maybe Christmas," he thought, "doesn't come from a store." "Maybe Christmas...perhaps...means a little bit more!" And what happened then? Well...in Whoville they say, That the Grinch's small heart Grew three sizes that day! And the minute his heart didn't feel quite so tight, He whizzed with his load through the bright morning light, And he brought back the toys! And the food for the feast! And he, HE HIMSELF! The Grinch carved the roast beast!
December 25, 2015 | Permalink | No Comments
December 24, 2015
Thursday’s Advocacy & Think Tank Round-Up
- The National Association of Realtors (NAR)’s Existing Home Sales (EHS) (completed transactions). EHS fell 10.5% from October and 3.8% from last November. NAR believes this precipitous decline is not due to any decrease in demand but, rather, tight inventory and the Industry’s having to adjust to new “Know Before You Owe” mortgage disclosure rules.
- Seeking Alpha blog’s about the evolving receivership of Fannie Mae and Freddie Mac.
December 24, 2015 | Permalink | No Comments
Wall Street Naughty List
Law360 quoted me in Checks Needed For Naughty List To Improve Wall Street’s Rep. It reads, in part,
Wall Street banks may back a push to create a central registry of employees who misbehave in a bid to improve internal culture at the country’s biggest banks, but worries about the accuracy of any potential list and other due process concerns have given some observers pause.
Federal Reserve Bank of New York President William F. Dudley has been advocating for the creation of such a central registry that can be used by banks when recruiting new talent as a way to make sure that serial rulebreakers are kept out of the biggest banks. And a readout of a meeting on bank culture with Wall Street bigwigs in November appear to show that the banks are getting behind the idea.
While creating such a central registry could go a long way toward preventing bad actors from engaging in future frauds and improving the internal workings of banks, there are risks that people could be wrongly included on the list and shut out from jobs, or that individuals could be made scapegoats for larger, institutional failures at the big banks.
In order to prevent that from happening, any formal registry of wrongdoers set up by the banks must have strict rules for when a person is added and how they can appeal their placement on the list, said Ellen Zimiles, a managing director at Navigant Consulting.
* * *
Still, despite her concerns, Zimiles said that having a registry of bad actors could increase the amount of individual accountability for Wall Street’s misdeeds, something that has been lacking.
But some say it does not go far enough.
The Dodd-Frank Act mandated new compensation rules, and more than five years after the law’s passage, they have still not been completed. Without compensation reforms, including clawbacks for violations, a central registry will not be enough to truly reform Wall Street’s internal culture, said David Reiss, a Brooklyn Law School professor.
“Together, perhaps the registry and clawbacks could have a positive effect on firm behavior if they are implemented thoughtfully and are designed to work together,” he said.
And even with the addition of compensation reforms to the central registry forming a “belt and suspenders” approach to reform bank culture, the fiercest of Wall Street critics say that changes will not come unless bankers are brought before courts for alleged violations and sent to jail if found guilty.
“And, of course, along with the belt and suspenders, there should be prison bars as well,” Bart Naylor of Public Citizen said.
That’s something that critics say was missing after the financial crisis.
The registry, however, could be a start to bringing about much-needed accountability, they said.
December 24, 2015 | Permalink | No Comments
December 23, 2015
Fannie/Freddie 2016 Scorecard
The Federal Housing Finance Agency has posted the 2016 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions. The FHFA assesses the three entities using the following criteria, among others:
- The extent to which each Enterprise conducts initiatives in a safe and sound manner consistent with FHFA’s expectations for all activities;
- The extent to which the outcomes of their activities support a competitive and resilient secondary mortgage market to support homeowners and renters . . . (2)
The FHFA expects Fannie and Freddie to “Maintain, in a Safe and Sound Manner, Credit Availability and Foreclosure Prevention Activities for New and Refinanced Mortgages to Foster Liquid, Efficient, Competitive, and Resilient National Housing Finance Markets.” (3) The specifics are, unfortunately, not too specific when it comes to big picture issues like maintaining credit availability in a safe and sound manner, although the scorecard does discuss particular programs and policies like the Reps and Warranties Framework and the expiration of HAMP and HARP.
The FHFA also expects Fannie and Freddie to “Reduce Taxpayer Risk Through Increasing the Role of Private Capital in the Mortgage Market.” Here, the FHFA has more specifics, as it outlines particular risk transfer objects, such as requiring the Enterprises to transfer “credit risk on at least 90 percent of the unpaid principal balance of newly acquired single-family mortgages in” certain loan categories. (5)
The last goals relate to the building of the Common Securitization Platform and Single Security: Fannie and Freddie are to “Build a New Single-Family Infrastructure for Use by the Enterprises and Adaptable for Use by Other Participants in the Secondary Market in the Future.” (7) The FHFA us moving with all deliberate speed to reshape the secondary mortgage market in the face of indifference or gridlock in Congress.
The FHFA may implement the reform of Fannie and Freddie all by its lonesome. Maybe that’s the best result, given where Congress is these days.
December 23, 2015 | Permalink | No Comments
