June 3, 2015
Reiss on SCOTUS Junior Lien Decision
Bloomberg BNA quoted me in Nagging Economic and Credit Questions Dampen Bankruptcy Victory for Bankers (behind paywall). It reads, in part:
The U.S. Supreme Court delivered an important bankruptcy ruling for bankers that doesn’t, however, do anything about still-struggling homeowners (Bank of Am. N.A. v. Caulkett, 2015 BL 171240, U.S., No. 13-cv-01421, 6/1/15); (Bank of Am. N.A. v. Toledo-Cardona, 2015 BL 171240, U.S., No. 14-cv-00163, 6/1/15).
In a June 1 decision, the court said Chapter 7 debtors cannot void junior liens on their homes when first-lien debt exceeds the value of the property, as long as the senior debt is secured and allowed under the Bankruptcy Code.
The decision is a victory for Bank of America, which held both junior liens in the two related cases, and for banking groups that said a different result could have destabilized more than $40 billion in commercial loans secured by similar liens.
But Brooklyn Law School Professor David Reiss June 2 said the case highlights the need for a broad remedy for homeowners who have continued to struggle to make payments since the financial crisis.
“The bank’s position as a legal matter is a very reasonable one, but from a policy perspective we needed and still need a bigger and more systemic solution to the problems that households face,” Reiss told Bloomberg BNA.
* * *
[S]ome said the ruling highlights economic questions on several levels.
Reiss, who coedits a financial blog, June 2 said the case shows the federal government’s inability to deal head-on with the impact of financial turmoil in 2008 and 2009.
“Not enough is being done to move households beyond the crisis, and it’s bad for households and it’s bad for the financial sector,” Reiss said. “Here we are seven or eight years later and we’re sitting here with these valueless second mortgages. We’re just slogging through the muck and we’re not coming up with any good solutions to get past it.”
June 3, 2015 | Permalink | No Comments
Wednesday’s Academic Roundup
- The Boom, the Bust and the Future of Homeownership, by Stuart A. Gabriel & Stuart S. Rosenthal, Real Estate Economics, Vol. 43, Issue 2, pp. 334-374, 2015.
- Promoting ‘Inclusive Communities’: A Modified Approach to Disparate Impact Under the Fair Housing Act, by Cornelius Joseph Murray IV, Louisiana Law Review, Vol. 75, No. 213, 2014.
- How Low Can House Prices Go? Estimating a Conservative Lower Bound, by Alexander N. Bogin, Stephen Bruestle, & William M. Doerner, May 14, 2015.
- Strategic Mortgage Default: The Effect of Neighborhood Factors, by Michael G. Bradley, Amy Crews Cutts, & Wei Liu, Real Estate Economics, Vol. 43, Issue 2, pp. 271-299, 2015.
- An Agency Problem in the MBS Market and the Solicited Refinancing Channel of Large-Scale Asset Purchases, by John Kandrac & Bernd Schlusche, FEDS Working Paper No. 2015-027.
June 3, 2015 | Permalink | No Comments
June 2, 2015
Tuesday’s Regulatory & Legislative Update
- Mayor Bill De Blasio’s new 10 year plan for New York City Housing Authority (NYCHA), entitled NexGeneration NYCHA, focuses on four goals to transform NYCHA: short-term financial stability and diversifying long-term funding; increased operational efficiency; rebuilding, expanding, and preserving the city’s public and affordable housing stock; and engaging residents in improved social services.
- Representatives in the House ( Turner – R Ohio & Fattah – D Penn.) join forces in a bi-partisan effort to urge Congress to reauthorize New Market Tax Credits (NMTC), which expired in 2014 (their letter here). The NMTC was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). Legislation to permanently extend the NMTC is pending in both the House (H.R. 855) and Senate (S. 591).
June 2, 2015 | Permalink | No Comments
Saving on Utility Bills (en Español y Ingles)
Univision quoted me in Estrategias para Ahorrar Dinero Cada Mes (Strategies to Save Money Each Month). It reads, in part (in English),
Save water and energy. You can monitor your heat/air conditioning services in simple ways, for example, by acquiring a programmable thermostat, which will allow you to maintain your home at a comfortable temperature while you are home and turn in it “energy efficient” when you go out, suggests David Reiss, Research Director, Center for Urban Business Entrepreneurship (NY).
Has your water bill gone up in the last few years? Check your toilet and make sure it’s not running or that your sink is not leaking.
Repairing your bathroom fixtures and keeping them in good working order will help you save money, added the expert.
June 2, 2015 | Permalink | No Comments
June 1, 2015
Reiss on Lawsky Legacy
Law360 quoted me in Lawsky’s Aggressive Tactics Provided Model For Regulators (behind a paywall). It reads, in part,
New York Superintendent of Financial Services Benjamin Lawsky’s frequent, aggressive and often creative enforcement actions generated billions of dollars for the state and put his agency at the forefront in financial services regulation, and observers expect a similar approach from Lawsky’s successor when he leaves his post next month.
Confirmed to lead the New York Department of Financial Services in May 2011, few expected the new agency, which combined the state’s banking and insurance regulators, to make much of a mark. But after collecting $3.3 billion in penalties and forcing several traders and top executives out of their positions, Lawsky’s agency has proven to be a powerful enforcer.
“His biggest legacy is simply that he stood up a brand new regulator in one of the global financial centers and made it matter almost immediately,” said Matthew L. Schwartz, a partner at Boies Schiller & Flexner LLP and a former federal prosecutor. Lawsky, who announced his departure from the agency on May 20, established a name for himself and for the Department of Financial Services when he jumped ahead of federal banking regulators and prosecutors in announcing a $340 million settlement with British bank Standard Chartered PLC over its alleged violation of U.S. sanctions against Iran and other countries in August 2012.
That a newly formed state regulatory agency would move ahead with a stiff penalty and threaten to wield the most powerful of weapons — the pulling of Standard Chartered’s license to operate in New York state — reportedly rankled his federal counterparts
* * *
“He made clear that consumer protection is integral to the mission of the agency,” Brooklyn Law School professor David Reiss said.
Despite Lawsky’s frequent reminders that he works for New York Gov. Andrew Cuomo — for whom he has also served as chief of staff — and the superintendent’s constant praise for his staff, there is fear among some reformers that the DFS won’t be the same without Lawsky at the helm.
“Lawsky proves that the character of individual regulators can make a crucial difference more than the letter of the law itself,” said Bartlett Naylor of Public Citizen.
“Ideally, he’ll inspire his successor and other regulators that honor awaits the vigilant and opprobrium will fall upon the indolent. More practically, however, the problems of regulatory capture by an enormously influential industry reliant on government favor can prove overwhelming,” Naylor added.
Others are more confident that the agency Lawsky set up will continue its work even after his move to the private sector.
In part, that’s because the penalties the DFS has wracked up have been a boon to New York’s budget.
Cuomo, the state’s former attorney general, has an interest in many of the issues Lawsky acted on, as well.
“I have every reason to expect that Cuomo would want to have a very vigorous enforcer to replace Lawsky,” Reiss said.
June 1, 2015 | Permalink | No Comments
Monday’s Adjudication Roundup
- NY Federal Court ended the suit against US Bank and Bank of America brought by Blackrock and NCUA for failure to properly oversee residential mortgage-backed security trusts finding that most of the trusts fell under state law.
- Deutsche Bank, Morgan Stanley and UBS Securities have settled with Federal Home Loan Bank of Boston for misleading it to purchase $5.9 billion in bad mortgage-backed securities.
- Associated Bank agrees to $200 million, record-breaking settlement with US Department of Housing and Urban Development in discriminatory lending suit.
June 1, 2015 | Permalink | No Comments
May 29, 2015
Friday’s Government Reports
- According to the Commerce Department sales of new single-family houses in April 2015 were at a seasonally adjusted annual rate of 517,000 which is a 26% increase over last April and a 6.8% increase since March.
- The Federal Housing Finance Authority’s (FHFA) House Price Index for April 2015 shows a 1.3% increase nationwide.The top five states in annual appreciation: 1) Colorado – 11.2 percent 2) Nevada – 10.1 percent 3) Florida – 8.7 percent 4) Washington – 7.6 percent 5) California – 7.5 percent. Increases were greatest in Oakland-Hayward-Berkeley, CA (MSAD), where prices increased by 13.4 percent. Prices were weakest in the Greensboro-High Point, NC, where they fell 2.3 percent.
- The FHFA’s monthly interest rate survey finds that April’s average mortgage interest rate of 3.78% represents a decrease of 2 basis points since March.
- The Federal Reserve Bank of New York recently released its Survey of Consumer Expectations (SCE) – Housing Survey 2015 in which it reports a finding that, “households remain broadly optimistic about housing market” and that “most renters want to own.”
May 29, 2015 | Permalink | No Comments
