August 4, 2015
Tuesday’s Regulatory & Legislative Round-Up
- New York City Mayor Bill De Blasio recently unveiled an Inclusionary Housing Program which allows developers to build beyond existing restrictions if they create permanent affordable units, this is one of the most aggressive programs in the country – as many as one in four new apartments will include permanently affordable and low income units (available as rental or ownership programs).
- While the U.S. Congress is in recess advocacy groups are encouraging members to get in touch with their representatives who will be considering tax extenders and other affordable housing legislation when they return.
August 4, 2015 | Permalink | No Comments
August 3, 2015
Foreclosures & Credit Card Debt
Paul S. Calem, Julapa Jagtiani and William W. Lang have posted Foreclosure Delay and Consumer Credit Performance to SSRN. Effectively, it argues that long foreclosure delays may have reduced the credit card default rate because homeowners in default were able to pay down their credit card debt while living for free in their homes. The abstract reads,
The deep housing market recession from 2008 through 2010 was characterized by a steep rise in the number of foreclosures and lengthening foreclosure timelines. The average length of time from the onset of delinquency through the end of the foreclosure process also expanded significantly, averaging up to three years in some states. Most individuals undergoing foreclosure were experiencing serious financial stress. However, the extended foreclosure timelines enabled mortgage defaulters to live in their homes without making mortgage payments until the end of the foreclosure process, thus providing temporary income and liquidity benefits from lower housing costs. This paper investigates the impact of extended foreclosure timelines on borrower performance with credit card debt. Our results indicate that a longer period of nonpayment of mortgage expenses results in higher cure rates on delinquent credit cards and reduced credit card balances. Foreclosure process delays may have mitigated the impact of the economic downturn on credit card default.
The authors conclude,
our findings indicate that households do not consume all the benefits from temporary relief from housing expenses; instead, they use that temporary relief to cure delinquent credit card debt and reduce their credit card balances. Interestingly, we find that payment relief from loan modifications has a similar impact to payment relief from longer foreclosure timelines; both are associated with curing card delinquency and reducing card balances.
These households, however, are likely to become delinquent on their credit cards again within six quarters following the end of the foreclosure process. Thus, the results suggest that there may be added risk for nonmortgage lenders when foreclosures are completed and households must incur the transaction costs of moving and incur significant housing expenses once again. This implies an additional dimension of risk to credit card lenders that has not been observed previously. (23)
I am not sure what to make of these findings for borrowers, regulators, credit card lenders or mortgage lenders. Would a utility-maximizing borrower run up their credit card debt while in foreclosure? Should states seek to change foreclosure timelines to change consumer or lender behavior? Should profit-maximizing credit card lenders seek to further limit borrowing upon a mortgage default? What should profit-maximizing mortgage lenders do? I have lots of questions but no good answers yet.
August 3, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- The Third Circuit upholds class certification in case against PNC Bank NA, in which individuals are alleging the bank participated in an illegal home equity lending scheme.
- Residential Credit Solutions Inc., a mortgage servicing company, will pay $1.6 million in restitution and fines, according to the CFPB, for many violations, but specifically for issues with loan modifications and treating consumers as if they had defaulted.
August 3, 2015 | Permalink | No Comments
July 31, 2015
Rapid Growth for Property Managers
Buildium.com quoted me in Can Rapid Growth Endanger Your Business? It reads, in part,
For property managers, the prospect of rapid growth can be thrilling. You lease the units in your first building, fill vacancies quickly, add services that let you charge higher rent, the building owner compliments your work, and before you know it, you’re thinking: “Why not more?” After all, why waste a great opportunity to make more money by simply repeating what you’ve done so well at your first property? All the stars seem aligned…
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7 Steps to Find Out If You’re Ready to Expand Your Property Management Portfolio
Here are seven steps to take before fast-tracking you company’s expansion:
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#6: Know the local rules & the laws
If the buildings you manage are different entities — one rent-controlled and the other a cooperative in an historic neighborhood, for example — you must understand their different requirements. The same can hold true for buildings in different communities where regulations covering trash pick-up and snow removal may vary.
And differences can be even greater for buildings in different states. In New York City, multifamily buildings with more than four units [may be] rent-regulated and involve a complex set of regulations between landlord and tenant, says attorney David Reiss, a professor of law and the Research Director at Brooklyn Law School’s Center for Urban Business Entrepreneurship. “If you don’t know what they are, it can be a recipe for disaster,” he says.
Also important to know, he says, is that some buildings are located in historic districts, which the Landmarks Preservation Commission can authorize, and that affects how owners and managers can renovate, rehab, and maintain exteriors, Reiss says. “You might have to place an air conditioning unit a certain way.”
#7: Consult with other property managers
Besides doing your homework, talk to owners and managers of similar properties who’ve expanded beyond a single listing. Reiss says many communities have property management organizations that share information, or your city or town may have an association of like-minded businesses. If not, maybe, you can become a local hero by starting one.
July 31, 2015 | Permalink | No Comments
Friday’s Government Reports Roundup
- HUD’s Office of Policy Development and Research released paper, which describes its “Bridge to Family Self-Sufficiency” Program. The program is intended to determine if low-income families in public housing improve their overall stability, with the right support.
- HUD released public, Affirmatively Furthering Fair Housing, which is intended to more efficiently further the purposes and policies of the Fair Housing Act.
July 31, 2015 | Permalink | No Comments
July 30, 2015
Airbnb in NYC
New York Communities for Change/Real Affordability for All have issued a housing report, Airbnb in NYC. This is an advocacy piece that raises important questions about how Airbnb is changing the nature of housing markets in a hot destinations. The report states that
A new independent analysis of Airbnb’s website by www.InsideAirbnb.com shows that nearly 16,000 or just under 60% of Airbnb listings are entire homes or apartments for rent (in violation of state law and/or NYC zoning laws), and that they are available for rent an average of 247 days a year. To put that in perspective, those 16,000 Airbnb listings that are not available for everyday New Yorkers would be the equivalent of a loss of approximately one full year of Mayor de Blasio’s ten-year plan to build and preserve 200,000 affordable housing units, negating nearly all of the affordable apartments the administration has financed in the past year.
Despite Airbnb’s claims that the nearly 90 percent of their listings are from regular New Yorkers renting out spare rooms to make extra cash, the InsideAirbnb.com data show that nearly one-third of Airbnb listings come from hosts with multiple units, such as commercial landlords. (3)
While Airbnb has criticized the methodology of this report, it does appear to undercut Airbnb’s characterization of its hosts.
Opponents of the sharing economy will find a lot in this report that confirms their concerns. For instance, in the top 20 Airbnb zip codes in NYC, “housing units are rented on Airbnb for rates equivalent to more than 300% of the neighborhood’s average rent.” (5)
But supporters of the sharing economy will also find much to confirm their own views: “In 20 different zip codes in Manhattan, Brooklyn and Queens, entire/home/apartment Airbnb listings comprise at least 10% of total rentals.” (5) Supporters will say that the people have spoken with their pocketbooks — the sharing economy is here to stay, notwithstanding what the law says.
The sharing economy continues to shake up the old economy. The fact that so many Airbnb listings in NYC appear to violate the law means that the controversy over its appropriate role will probably come to a head sooner rather than later. The outcome of that controversy will then spill over and permeate the hottest residential neighborhoods in the hottest cities in the U.S.
July 30, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think-Tank Round-Up
- Enterprise Community Partner’s and other affordable housing advocates have launched #CapsHurtCommunities, a campaign to raise spending caps imposed and restore critical funding. They are urging organizations and concerned citizens to reach out to Congress while the members on recess – asking them to support tax extenders legislation and fully fund affordable housing. The Summer Advocacy Tool Kit contains a variety ideas for creating awareness around the issue.
- The Make Room Campaign’s mission is to raise awareness around the rent affordability crisis currently being played out in homes across the U.S. The Campaign has a novel approach – celebrity concerts, held on the 1st, (when the rent is due) in rent burdened living rooms. In July, Grammy Award winning Artist Timothy Bloom held a concert in the Paterson NJ (See, NJ Factsheet) home of the five member Montgomery family, which spends more than half its income on rent and despite holding three jobs, is behind on bills and cannot afford a vehicle. Last Month’s concert was in the Los Angeles, CA (See, CA Factsheet) home of the Duartes where Carly Rae Jepson performed her hit song, “Call Me Maybe.”
- National Association of Realtors’ Pending Home Sales Index took a dip in June, after five months of increases. on the other hand, when compared to June of 2014, it reflects an 8.2% increase.
July 30, 2015 | Permalink | No Comments
