May 8, 2015
Friday’s Government Reports Roundup
- CFPB releases its 2014 Fair Lending Report, discussing its fair lending acts over the past year. It shows that the CFPB required institutions to provide over $224 million in remediation in 2014.
- A S. Census Bureau paper examines the effects of foreclosures on families during the financial crisis and in the years following.
- The Center for Housing Policy released a report “Impacts of Affordable Housing on Health: A Research Summary,” which discusses how Affordable Housing is correlated to better health than unaffordable, unstable and poor quality housing.
- The National Housing Conference released report: “Broadband Connectivity in Affordable Housing,” which highlights the need for internet access in affordable housing.
- HUD released the “2015 Worst Case Housing Needs” report.
May 8, 2015 | Permalink | No Comments
May 7, 2015
Borrowing from Yourself
MainStreet.com quoted me in Dipping Into Your 401(k) to Finance the Purchase of a Home is a Tricky Decision. It reads, in part,
Dipping into the funds she had amassed in her 401(k) account to make up the remaining difference for her down payment was not a decision that Alyson O’Mahoney embarked on lightly.
After contemplating the benefits and disadvantages of borrowing $40,000 from her retirement account to use for a down payment on her mortgage, the marketing executive for Robin Leedy & Associates in Mount Kisco, N.Y. was certain that she making the right choice.
O’Mahoney was undaunted by the prospect of having another bill each month, even though she opted out of discussing this critical decision with her financial advisor — as she knew he would discourage her.
“It all fit into my debt and income ratio and the bank was fine with it,” she said. “I pay it back automatically with each paycheck and the 5% interest goes to me. It was the easiest process.”
Many financial advisors steer their clients away from borrowing from their retirement, because employers will typically demand that you repay the loan within a short period if you leave your job or get fired. If you can’t pay it back from your savings, then the loan will be treated as a distribution that is subject to federal and state income tax, as well as an early withdrawal penalty of 10% if you’re under the age of 59.5, said Shomari Hearn, a certified financial planner and vice president at Palisades Hudson Financial Group in the Fort Lauderdale, Fla. office.
“If you’re contemplating leaving your company within the next few years or are concerned about job security, I would advise against taking out a loan from your 401(k),” he said.
* * *
If you accept another job offer, refinancing your mortgage may be difficult when you are facing a time crunch, said David Reiss, a law professor at Brooklyn Law School.
“If you leave your job, the loan will come due, and you will have to figure out how to repay it – potentially just at the time it would be hardest to do so,” he said. “Given that it might be hard to refinance the property on such short notice, you might find yourself stuck between a rock and a hard place.”
May 7, 2015 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Round-Up
- Enterprise Community Partners issued a side by side comparison of the four housing finance reform bills currently in congress many of which seek to replace Fannie Mae and Freddie Mac.
- NYU’s Furman Center released its annual Report: State of New York City’s Housing and Neighborhoods in 2014, part I of which is a focus on density – notes that while the population has grown density is actually down.
- The Urban Institute recently released its Affordable Housing Needs Assessment for the District of Columbia in which it makes a neighborhood by neighborhood evaluation of housing need and concludes that on the whole housing costs exceed affordability for the majority of residents.
May 7, 2015 | Permalink | No Comments
May 6, 2015
LawProfs in MERS Litigation
The Legal Services Center of Harvard Law School (through Max Weinstein et al.); Melanie Leslie, Benjamin N. Cardozo School of Law; Joseph William Singer, Harvard Law School; Rebecca Tushnet, Georgetown University Law Center and I filed an amicus brief in County of Montgomery Recorder v. MERSCorp Inc, et al. (3rd Cir. No. 14-4315). The brief argues,
MERS represents a major departure from and grave disruption of recording practices in counties such as Montgomery County, Pennsylvania, that have traditionally ensured the orderly transfer of real property across the country. Prior to MERS, records of real property interests were public, transparent, and provided a secure foundation upon which the American economy could grow. MERS is a privately run recording system created to reduce costs for large investment banks, the “sell-side” of the mortgage industry, which is largely inaccessible to the public. MERS is recorded as the mortgage holder in traditional county records, as a “nominee” for the holder of the mortgage note. Meanwhile, the promissory note secured by the mortgage is pooled, securitized, and transferred multiple times, but MERS does not require that its members enter these transfers into its database. MERS is a system that is “grafted” onto the traditional recording system and could not exist without it, but it usurps the function of county recorders and eviscerates the system recorders are charged with maintaining.
The MERS system was modeled after the Depository Trust Company (DTC), an institution created to hold corporate and municipal securities, but, unlike the DTC, MERS has no statutory basis, nor is it regulated by the SEC. MERS’s lack of statutory grounding and oversight means that it has neither legal authority nor public accountability. By allowing its members to transfer mortgages from MERS to themselves without any evidence of ownership, MERS dispensed with the traditional requirement that purported assignees prove their relationship to the mortgagee of record with a complete chain of mortgage assignments, in order to foreclose. MERS thereby eliminated the rules that protected the rights of mortgage holders and homeowners. Surveys, government audits, reporting by public media, and court cases from across the country have revealed that MERS’s records are inaccurate, incomplete, and unreliable. Moreover, because MERS does not allow public access to its records, the full extent of its system’s destruction of chains of title and the clarity of entitlements to real property is not yet known.
Electronic and paper recording systems alike can contain errors and inconsistencies. Electronic systems have the potential to increase the accessibility and accuracy of public records, but MERS has not done this. Rather, by making recording of mortgage assignments voluntary, and cloaking its system in secrecy, it has introduced unprecedented and perhaps irreparable levels of opacity, inaccuracy, and incompleteness, wreaking havoc on the local title recording systems that have existed in America since colonial times. (2-3)
May 6, 2015 | Permalink | No Comments
Wednesday’s Academic Roundup
- Beyond Disparate Impact: How the Fair Housing Movement Can Move On, by Rigel Christine Oliveri, Washburn Law Journal, Forthcoming,
- Crowding Out Effects of Refinancing on New Purchase Mortgages, by Steven A. Sharpe & Shane M. Sherlund, FEDS Working Paper No. 2015-017.
- Have Distressed Neighborhoods Recovered? Evidence from the Neighborhood Stabilization Program, by Jenny Schuetz, Jonathan S. Spader & Alvaro Cortes, FEDS Working Paper No. 2015-016.
- A Standing Question: Mortgages, Assignment, and Foreclosure, by Eric A. Zacks & Dustin A. Zacks, Journal of Corporation Law, Vol. 40, 2015, Forthcoming.
- Socioeconomic and Racial Disparities in the Financing Returns to Homeownership, by Tom Mayock & Rachel Spritzer.
- REIT Spinoffs: Passive REITs, Active Businesses, by Richard Nugent, Tax Notes, pg. 1513 & 1635, March 23 & 30, 2015.
- Asset-Level Risk and Return in Real Estate Investments, by Jacob S. Sagi, April 19, 2015.
May 6, 2015 | Permalink | No Comments
May 5, 2015
Tuesday’s Regulatory & Legislative Round-Up
- House Appropriations Subcommittee on Transportation, Housing and Urban Development (THUD) approved its fiscal year (FY) 2016 appropriations bill.
- Federal Housing Finance Agency (FHFA) has adopted a final rule requiring the Federal Home Loan Banks (Banks) and the Office of Finance to include demographic data related to their boards of directors in their annual minority and women inclusion reports to FHFA. The final rule also requires that the Banks and the Office of Finance include a description of their outreach activities and strategies to promote diversity in nominating or soliciting nominees for positions on boards of directors.
- Six federal financial regulatory agencies today issued a final rule that implements minimum requirements for state registration and supervision of appraisal management companies (AMCs). An AMC is an entity that provides appraisal management services to lenders or underwriters or other principals in the secondary mortgage markets.
May 5, 2015 | Permalink | No Comments
Connecting Housing to Health
The Center for Housing Policy’s latest issue of Insights from Housing Policy Research featured a research summary on The Impacts of Affordable Housing on Health:
the authors examined recent research on the various ways in which the production, rehabilitation, or other provision of affordable housing may affect health outcomes for children, adults, and older adults. This report is organized around ten hypotheses on the contribution of affordable housing to supporting positive health outcomes. Overall, the research supports the critical link between stable, decent, and affordable housing and positive health outcomes. (1, footnote omitted, emphasis in the original)
The authors conclude that “providing affordable housing is a valuable strategy to support and improve wellbeing. It is important for policymakers to understand that safe, adequate, and affordable housing is not just shelter but also an investment in good health for low-income households.” (8)
The article seems pretty result-driven, so I am not sure how reliable it is as a research summary. I was particularly struck by its frequent conflating of causation and correlation. This conflation is seen in the conclusion above: there is surely a link between housing and health, but what is causing what?
Take the first hypothesis: “Affordable Housing Can Improve Health Outcomes by Freeing Up Family Resources for Nutritious Food and Health Care Expenditures.” (2) Sure, but so can increased income or decreased expenses in other parts of a budget. This first hypothesis isn’t really a story about affordable housing, but about poverty. So a better question might be — what is the most efficient way to increase resources for food and health care? The research cited does not appear to make the case that affordable housing is the right answer to that question.
There is no question that this is first and foremost an advocacy document. This should come as no surprise, given that the Center for Housing Policy is the research division of the National Housing Conference. That being said, the footnotes do provide an overview of the research in this area. Some readers might find it useful in that regard.
May 5, 2015 | Permalink | No Comments
