November 10, 2015
Tuesday’s Regulatory & Legislative Round-Up
- The Federal Housing Finance Agency has released for public comment its proposed information collection National Survey of Existing Mortgage Borrowers which would survey first time mortgage borrowers purchasing single family homes. The survey will collect information on the mortgaged property and the borrowers financial knowledge and resources, among other things.
- The Department of Housing and Urban Development (HUD) and the Department of Justice (DOJ) have released a funding notice Pay for Success Supportive Housing Demonstration is a grant opportunity offering up to $1.3 million in awards to create supportive housing for formerly incarcerated individuals. Pay for success programs are contracts between the service provider and the government in which agreed on outcomes are compensated with success payments when results are achieved.
- Portland, Oregon has declared a state of emergency with regard to the housing situation. The city has plans to spend $67 million in tax dollars to develop affordable housing.
November 10, 2015 | Permalink | No Comments
November 9, 2015
CFPB Mortgage Highlights Fall ’15
The Consumer Financial Protection Bureau released its Fall 2015 Supervisory Highlights. In the context of mortgage origination, the CFPB found that
supervised entities, in general, effectively implemented and demonstrated compliance with the rule changes, there were instances of non-compliance with certain [rules] . . .. There were also findings of violations of disclosure requirements pursuant to the Real Estate Settlement Procedures Act (RESPA), implemented by Regulation X; the Truth in Lending Act (TILA), implemented by Regulation Z; and consumer financial privacy rules, implemented by Regulation P. (9, footnotes and sources omitted).
Specifically, it found that one or more entities failed to
- “fully comply with the requirement that charges at settlement not exceed amounts on the good faith estimate by more than specified tolerances.” (10)
- comply with the regulations governing HUD-1 settlement statements because of fees on the HUD-1 did match those on invoices; improper calculations on the HUD-1; and fees charged for services that were not provided, among other things.
- provide required disclosures.
- reimburse borrowers for understated APRs and finance charges, as required by Regulation Z.
In the context of mortgage servicing, the CFPB found that while it
continues to be concerned about the range of legal violations identified at various mortgage servicers, it also recognizes efforts made by certain servicers to develop an adequate compliance position through increased resources devoted to compliance. . . . Supervision continues to see that the inadequacies of outdated or deficient systems pose considerable compliance risk for mortgage servicers, and that improvements and investments in these systems can be essential to achieving an adequate compliance position. (15)
This is all well and good, but as I have noted before, it is hard to estimate how much of a problem exists from such a report — one or more entities did this, we are concerned about a range of legal violations of that . . .. I understand that the CFPB’s primary audience for this report are CFPB-supervised entities concerned with the CFPB’s regulatory focus, but this approach barely rises to the level of anecdote for the rest of us.
November 9, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- The US Supreme Court denied cert without comment in class action against McGraw-Hill Cos. for false statements made by its S&P rating agency about mortgage-backed securities. The finding from the judge stands that S&P’s ratings were “mere commercial puffery.”
- The US Supreme Court denied cert without comment in case that wanted the Court to consider whether property owners had standing to sue BNY Mellon, and other banks. The banks claimed ownership over mortgage-backed securities, which were then transferred to trusts of the banks.
- The Second Circuit will not rehear Bedford CMBS Acquisition LLC’s case where the company is attempting to pickup $200 million worth of defaulted commercial mortgage-backed securities from a Wells Fargo trust.
- The US Securities and Exchange Commission files suit against developer in Florida for claiming their investments would be under the EB-5 visa program, but were rather used to purchase luxury cars, a boat and a residence.
- Dodona, a hedge fund, settles with Goldman Sachs Group Inc. in mortgage-backed securities class action for breach of contract and fraud.
- The Consumer Financial Protection Bureau filed a brief in the D.C. Circuit claiming that PHH Corp. had interpreted the Real Estate Settlement Procedures Act incorrectly in its $109 million disgorgement order.
- Wells Fargo settles with Ch. 13 bankrupt homeowners for $81.6 million for failing to give proper notice for changing monthly payment amounts.
November 9, 2015 | Permalink | No Comments
Friday’s Government Reports Roundup
- HUD’s Office of Policy Development & Research released its most recent issue of Cityscape, featuring research from a symposium about affordable housing and neighborhood qualities.
- The HOME Coalition released “Building HOME: The HOME Investment Partnerships Program’s Impact on America’s Families and Communities”, analyzing the program’s impact. The report analyzes the economic impact on leveraged investments, jobs supported, and local income generated.
- The FHFA released its Annual Housing Report for 2014 Fannie Mae and Freddie Mac.
November 6, 2015 | Permalink | No Comments
November 5, 2015
SF’s Airbnboom
The Christian Science Monitor quoted me in San Francisco Votes Down Airbnb Limits: Can Competing Interests Be Balanced? It reads, in part,
A defeated ballot measure in San Francisco, which would have imposed further restrictions on users of Airbnb and similar websites, is a sign of how the issue of short-term housing rentals is vexing city governments in the United States and beyond.
From Fort Lauderdale, Fla., to Los Angeles, lawmakers and residents alike are struggling to balance the power of technological change with the many critics of the home-sharing industry: homeowners who complain about deterioration in the quality of life in residential neighborhoods, hotels that fret about lost revenues, and activists who say that short-term housing is stripping the marketplace of affordable long-term units.
Yet even some of the trend’s most ardent critics suggest that more restrictions are not necessarily the answer. Better enforcement of current laws would go a long way toward balancing the conflicting interests, they say.
* * *
On the other coast, just as many cities are struggling. New York City is still up in the air about how to handle the sharing economy, says Brooklyn Law School professor David Reiss, who has followed Airbnb’s evolution.
This week, Airbnb promised to provide detailed data to the New York City Council, he notes. “The company is doing this in part to fend off [legislation] that would severely limit their reach in NYC,” he says via e-mail. One piece of proposed legislation increases penalties for violations of existing laws, and another mandates that the city track illegal apartment conversions, according to Professor Reiss.
Still, the sharing economy is with us for the long term as consumers continue to vote with their wallets, he says. “The bottom line is that we are in a period of transition. And while it is unlikely that we will return to the pre-sharing economy, it is also unlikely that we will have a sharing economy that is driven just by market actors, without government regulation,” he adds.
November 5, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Round-Up
- The Center for American Progress has released a report The Uneven Housing Recovery which includes an interactive map the report analyzes the problem of negative equity, which grew out of the financial crisis and concludes that the lack of recovery in some areas, mostly non-metropolitan and rural, creates a risk of foreclosure and threatens to exacerbate the rental affordability crisis.
- Corelogic has released its latest Home Price Index it shows that there has been a 4.7% increase in home prices in September.
- HOME Coalition has released a report Building HOME which highlights the success of the HOME Investment Partnership Program by analyzing its impact in all 50 states, it also includes over 100 success stories. Enterprise Community Partners is hosting webinars in their effort to #saveHOME.
- MakeRoom’s November Living Room Concert was hosted in the home of Devin Hallford in Denver, Colorado, where rent has increased 50% since 2010. Devin is an aspiring artist and restaurant worker struggling to find an affordable place to live and pay back student loans. American Author’s performed a concert in Devin’s cramped living space to draw attention to the affordable housing crisis. MakeRoom has also released an interactive map which illustrated the rising trend of Millenials living with roommates later in life.
November 5, 2015 | Permalink | No Comments
November 6, 2015
The End of Private-Label Securities?
By David Reiss
Jamie Dimon, CEO of JPMorgan Chase
J.P. Morgan’s Securitized Products Weekly has a report, Proposed FRTB Ruling Endangers ABS, CMBS and Non-Agency RMBS Markets. This is one of those technical studies that have a lot of real world relevance to those of us concerned about the housing markets more generally.
The report analyzes proposed capital rules contained in the Fundamental Review of the Trading Book (FRTB). JPMorgan believes that these proposed rules would make the secondary trading in residential mortgage-backed securities unprofitable. It also believes that “there is no sector that escapes unscathed; capital will rise dramatically across all securitized product sectors, except agency MBS.” (1) It concludes that “[u]ltimately, in its current form, the FRTB would damage the availability of credit to consumers, reduce lending activity in the form of commercial mortgage and set back private securitization, entrenching the GSEs as the primary securitization vehicle in the residential mortgage market.” (1)
JPMorgan finds that the the impact of these proposed regulations on non-agency residential-mortgage backed securities (jumbos and otherwise) “is so onerous that we wonder if this was the actual intent of the regulators.” Without getting too technical, the authors thought “that the regulators simply had a mathematical mistake in their calculation (and were off by a factor of 100, but unfortunately this is what was intended.” (4) Because these capital rules “would make it highly unattractive for dealers to hold inventory in non-agency securities,” JPMorgan believes that they threaten the entire non-agency RMBS market. (5)
The report concludes with a policy takeaway:
Policymakers have at various times advocated for GSE reform in which the private sector (and private capital) would play a larger role. However, with such high capital requirements under the proposal — compared with capital advantages for GSE securities and a negligible amount of capital for the GSEs themselves — we believe this proposal would significantly set back private securitization, entrenching the GSEs as the primary securitization vehicle in the mortgage market. (5, emphasis removed)
I am not aware if JPMorgan’s concerns are broadly held, so it would important to hear others weigh in on this topic.
If the proposed rule is adopted, it is likely not to be implemented for a few years. As a result, there is plenty of time to get the right balance between safety and soundness on the one hand and credit availability on the other. While the private-label sector has been a source of trouble in the past, particularly during the subprime boom, it is not in the public interest to put an end to it: it has provided capital to the jumbo sector and provides much needed competition to Fannie, Freddie and Ginnie.
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November 6, 2015 | Permalink | No Comments