December 4, 2015
Friday’s Government Reports Roundup
- S. Department of Housing and Urban Development released its 2015 Annual Homeless Assessment Report to Congress, estimating the latest national one-night of homelessness.
- The National Low Income Housing Coalition (NLIHC) released its report, “A Rare Occurrence: The Geography and Race of Mortgages over $500,000”, finding that only 5% of the 20 million mortgages that originated between 2012 and 2014 were in an amount over $500,000.
December 4, 2015 | Permalink | No Comments
December 3, 2015
Reps and Warranties Mean What They Say
The New York Appellate Division, 1st Department, issued a ruling in Bank of New York Mellon v. WMC Mortgage, 654464/12 (Dec. 1, 2015) that stands for the proposition that representations and warranties regarding mortgage-backed securities mean what they say and say what they mean. The opinion opens,
This breach of warranty action arises from a residential mortgage backed securitization called the J.P. Morgan Mortgage Acquisition Trust 2006-WMC4 (the Trust). The Trust was arranged and sponsored by defendant J.P. Morgan Mortgage Acquisition Corporation (JPMMAC), which made certain representations and warranties as to the quality of the mortgage loans in the Trust. We find that plaintiff’s interpretation of the language of the representations and warranty at issue is the only reasonable interpretation . . ..
The Pooling and Servicing Agreement represented and warranted that
“With respect to the period from [the] Whole Loan Sale Date to and including the Closing Date, [JPMMAC] hereby makes the representations and warranties contained in paragraph (a) . . . of Schedule 4 attached hereto . . . . [that] [t]he information set forth in the Mortgage Loan Schedule and the tape delivered by [WMC] to [JPMMAC] is true, correct and complete in all material respects.”
It also stated that if “JPMMAC breached a representation or warranty it made . . . it was to cure the breach within 90 days after notification; if it failed to do so, it was to repurchase the defective mortgage loan or substitute a qualifying loan for the defective one.” This is pretty standard stuff so far.
By 2012, it appeared that more than 40% of the mortgages remaining in the pool were delinquent and that the R&Ws had been violated. The certificate holders therefor demanded that JPMMAC repurchase the mortgages that were in breach of the R&Ws, which JPMMAC refused to do.
JPMorgan argued, against the plain language of the R&Ws, that it only covered defects that arose during a short period prior to the closing date of the securitization. The Court gave short shrift to this implausible reading of the R&Ws.
This opinion does not make new law, but one wonders what effect it will have on securitization business practices. R&Ws are driven by many things — concerns about credit risk, but also tax compliance with the REMIC rules, to name a couple. I am curious as to how MBS R&Ws have changed since the early 2000s — and whether the parties to these transactions understand how R&Ws allocate risk among them.
December 3, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Round-Up
- The Federal Reserve Bank of NY’s Center for Microeconomic Data has released its 3rd quarter Household Debt and Credit Report which shows that Mortgage debt, the largest component of household debt, increased in by $144 billion since the 2nd quarter of 2015. Balances on Home Equity Lines of Credit decreased by $7 billion.
- The Mortgage Bankers Association (MBA) sent a letter to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, proposing that advocating upfront risk sharing targets be set for 2016. This proposal is prompted by FHFA’s near doubling of insurance fees, which are necessary to reduce the risks borne by the taxpayer when debtors default. The MBA is advocating for private opportunity to compete in the insurance of these loans – which they say will lead to lower fees for borrowers as well.
- The National Association of Realtors (NAR) has released its Pending Home Sales Index for October which inches up .2% to sustain 14 consecutive months of increase. NAR also is predicting another housing boom for 2016.
December 3, 2015 | Permalink | No Comments
December 2, 2015
A Different Approach to Homelessness
The Christian Science Monitor quoted me in In One California Community, a Different Approach to Homelessness. It reads, in part,
On a sunny morning in the beachfront community of Pacific Palisades, Steven “Boston” Michaud perches confidently on a large dock tie just above the sand. He waves vaguely at the hills above the Pacific Coast Highway, indicating where he sleeps. “It’s up there, but you’ll never see me,” he says, pointing to his own shadow on the ground, “because I’m a shadow and I don’t bother anyone.”
Mr. Michaud is one of about 170 homeless people in Pacific Palisades, an affluent waterfront neighborhood in Los Angeles. Pacific beaches have long been a magnet for the homeless from around the world.
Overall, California experienced the second-largest increase in the number of homeless people (1,786 individuals) among the 50 states this past year, according to the US Department of Housing and Urban Development. As their ranks have swelled, some homeless people have edged out of the shadows and have taken up in tidier areas in the Golden State. That, in turn, has attracted the attention of residents – especially when crimes have occurred.
Even Michaud isn’t as invisible as he says he is. A local supermarket took out a restraining order against him.
But some communities in the state think that too much emphasis has been put on law enforcement to deal with homelessness – and not enough on other approaches that account for the needs of homeless people and try to address the root causes of the problem. These places are thus coming up with a new generation of creative ways to deal with the persistent problem of homelessness. Pacific Palisades, which is trying out a private, philanthropic approach, is one of these communities.
* * *
Private philanthropy in support of community needs is not new, says Mr. Berg of the National Alliance to End Homelessness. But what is new and less common in dealing with homelessness, he says, “is the organized approach to philanthropy at the local level.”
While she applauds the ambition of the effort, Maria Foscarinis, executive director of the National Law Center on Homelessness & Poverty, has concerns about the implications of a privatization approach. “The government’s role is to provide for public needs in critical times,” she says, adding, “This just serves as yet another example of the government stepping away from that role.”
Beyond that, there is the question of who can afford to duplicate the Palisades approach. Raising enough money to hire social services staff is beyond the reach of many communities, says Brooklyn Law School professor David Reiss, who specializes in housing policies. “So it is unlikely that Pacific Palisades is going to start a big trend, but a well-intentioned program could be effective locally, like many other community-based initiatives.”
December 2, 2015 | Permalink | No Comments
Wednesday’s Academic Roundup
- Inflation and Activity – Two Explorations and Their Monetary Policy Implications, Olivier J. Blanchard, Eugenio Cerutti & Lawrence H. Summers, HKS Working Paper No. 070.
- Real Estate Value Impacts from Fracking: Industry Response and Proper Analytical Techniques, Richard Roddewig & Rebel A. Cole, Real Estate Issues 39(3), 2014, 6–20.
- How Auctions Amplify House-Price Fluctuations, Alina Arefeva.
- Marketing and Product Description: Value Added in the Real Estate Market, Sebastien Gay & Allen T. Zhang.
- Strategic Information Disclosure and Bank Lending, Sumit Agarwal, Souphala Chomsisengphet & Qi (Susie) Wang.
- S. Bank Market Structure: Evolving Nature and Implications, David G. McMillan & Fiona Jayne McMillan.
- Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Building Market, Levente Timar, Arthur Grimes & Richard Fabling.
- Demand and Supply of Mortgage Credit, Alex van de Minne & Federica Teppa, De Nederlandsche Bank Working Paper No. 486.
December 2, 2015 | Permalink | No Comments
December 1, 2015
HUD at 50
The Office of Policy Development and Research at the Department of Housing and Urban Development has issued HUD at 50: Creating Pathways to Opportunity. It is a massive tome, with a lot of interest in it for the housing geeks among us. In the Preface, Deputy Assistant Secretary for Policy Development Lynn Ross writes,
This volume looks back on HUD’s history and looks forward to ways the agency might evolve. If you are familiar with the mission and the work of PD&R, you will not be surprised to learn that this book includes thorough analyses of not only how programs succeeded, but also how they sometimes fell short and what was done in response. I hope you will take the time to engage with the analysis and ideas contained throughout this volume. We’ve organized this book so you can read the thematic chapters in any order—although you can certainly read it cover to cover.
Given that HUD at 50 is more than 250 pages long, only the most dedicated among us will do so. Nonetheless, it is worth skimming the table of contents to see if any of the entries are worth reading in full:
- Introduction by Julián Castro
- Chapter 1 The Founding and Evolution of HUD: 50 Years, 1965–2015 by Jill Khadduri
- Chapter 2 Race, Poverty, and Federal Rental Housing Policy by Ingrid Gould Ellen and Jessica Yager
- Chapter 3 Urban Development and Place by Raphael W. Bostic
- Chapter 4 Housing Finance in Retrospect by Susan Wachter and Arthur Acolin
- Chapter 5 Poverty and Vulnerable Populations by Margery Austin Turner, Mary K. Cunningham, and Susan J. Popkin
- Chapter 6 Housing Policy and Demographic Change by Erika Poethig, Pamela Blumenthal, and Rolf Pendall
- Conclusion Places as Platforms for Opportunity: Where We Are and Where We Should Go by Katherine M. O’Regan
I will take a closer look at some of these chapters in the coming days, but feel free to dip in before I do!
December 1, 2015 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Round-Up
- The Department of Housing and Urban Development has released a notice to the Federal Register to announce the Designated Difficult Development Areas and Qualified Census Tracks for purposes of the Low Income Housing Tax Credit, which become effective July 1st 2016. This is the firs time that the Department has used Small Area Market Rents (SAMRs) as opposed to Metropolitan Area Market Rents for designation of Difficult Development Areas. The use of SMARs will allow a more granular assessment of rent differences within Metropolitan areas.
- Representatives Blum and Aguilar sent a letter, signed by 34 members of the U.S. House of Representatives urging Congress to act quickly to extend the 2014 Tax Extenders Legislation. Enterprise Community Partners Blog details how this extension would affect the Low Income Housing Tax Credit and the New Market Tax Credit, which have been utilized successfully by developers of affordable housing.
December 1, 2015 | Permalink | No Comments


