November 4, 2014
Regulation and Housing Supply
Gyourko and Molloy have posted Regulation and Housing Supply to SSRN. Unfortunately, it is behind a paywall (although it is also available at NBER if your library has access and an earlier draft can be found here). The abstract of this book chapter states that it reviews the scholarly literature on the causes and effects of local government regulation that “influences the amount, location, and shape of residential development.” The abstract continues,
November 4, 2014 | Permalink | No Comments
November 3, 2014
Housing Opportunity for Kids
The Center for Budget and Policy Priorities issued a report, Creating Opportunity for Children: How Housing Location Can Make a Difference. There is some research on the positive effects that homeownership has on outcomes for children. But it is hard to determine whether it is homeownership per se which causes the positive effects as opposed to a stable housing situation more generally. Thus, further research on the role of stable housing options, like that found in this report, is quite welcome. This report finds that the Housing Choice Voucher program
- Create strong incentives for local and state housing agencies to achieve better location outcomes.
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Modify policies that discourage families from living in lower-poverty communities.
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Minimize jurisdictional barriers to families’ ability to choose to live in high-opportunity communities.
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Assist families in using vouchers to live in high-opportunity areas. (7-8)
This is a pretty hefty report and it is worth digging into more deeply.
November 3, 2014 | Permalink | No Comments
October 31, 2014
Homeowners Lost in the Shuffle
The Special Inspector General of the Troubled Asset Relief Program (SIGTARP) issued a report, Homeowners Can Get Lost in the Shuffle And Suffer Harm When Their Servicer Transfers Their Mortgage But Not the HAMP Application or Modification, that highlights some of the structural problems in the servicing industry. The report notes, for instance, that, “Homeowner calls to SIGTARP’s Hotline about difficulties experienced in HAMP as a result of mortgages being transferred from one servicer to another have persisted throughout the life of the program and have escalated in the last year.” (1) This is just the most recent reminder that servicing transfers continue to be a major source of trouble for homeowners.
SIGTARP concludes,
October 31, 2014 | Permalink | No Comments
October 30, 2014
Reiss on Refinancing
MainStreet quoted me in Fed’s End to Quantitative Easing Will Affect How You Invest and Buy a House. It reads in part,
The Federal Reserve’s decision to end its bond buying program after six years to help boost the economy is a sign that more recovery and growth will occur. So what does the typical American on Main Street need to know?
While the Fed did not indicate a timeline for when interest rates will rise, consumers should be prepared and “see the writing on the wall” since variable rates such as credit cards, adjustable rate mortgages and home equity loans will start to rise slowly and gradually, said Bankrate.com chief financial analyst Greg McBride, CFA.
“The low interest rates will come to an end,” he said. “Consumers should pay down debt while the rates are low rather than contend with it once rates move up.”
Mortgage rates will remain low but will fluctuate according to global risks, not because of any actions taken by the Fed, said Ernie Goss, a professor of economics at Creighton University in Omaha. Consumers should expect rates for short term rates such as auto loans to rise “ever so slightly” between now and July 2015, he said.
The good news about rising interest rates is that savers will begin earning more on their nest eggs, but the increase could be offset by a higher cost of borrowing and could discourage people from getting loans and spending, said Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling, a Washington, D.C. non-profit organization.
“If mortgage rates rise, consumers with variable rate mortgages will see their monthly payments go up, putting a dent in the amount they have available for disposable spending,” she said.
Even if mortgage rates do increase, consumers need to consider the costs of refinancing before they embark on the process, said David Reiss, a law professor at the Brooklyn Law School in New York. Homeowners need to determine how long they plan to live in their home and if the cost of refinancing outweighs the lower monthly payments.
“If you are not sure that you will be there for a few years at least, the cost of refinancing may be more than the amount you save in decreased interest payments,” he said. “How many years will it take you to recoup that cost in reduced interest rate payments?”
October 30, 2014 | Permalink | No Comments
October 29, 2014
Reiss on Home Mortgage Disclosure Act Proposed Rulemaking
I have submitted a Comment on Home Mortgage Disclosure Act Proposed Rulemaking to the Consumer Financial Protection Bureau. Basically, I argue
The Consumer Financial Protection Bureau’s Home Mortgage Disclosure Act proposed rulemaking (proposed Aug. 29, 2014) is a reasonable one. It increases the amount of information that is to be collected about important consumer products, such as reverse mortgages. It also increases the amount of important information it collects about all mortgages. At the same time, it releases lenders from having to determine borrowers’ intentions about how they will use their loan proceeds, something that can be hard to do and to document well. Finally, while the proposed rule raises some privacy concerns, the CFPB can address them.
October 29, 2014 | Permalink | No Comments
October 28, 2014
Reiss on Who Should Be Providing Mortgage Credit to American Households?
I have posted a short Response, Who Should Be Providing Mortgage Credit to American Households?, to SSRN (as well as to BePress). The abstract reads,
Who should be providing mortgage credit to American households? Given that the residential mortgage market is a ten-trillion-dollar one, the answer we come up with had better be right, or we may suffer another brutal financial crisis sooner than we would like. Indeed, the stakes are as high as they were in the Great Depression when the foundation of our current system was first laid down. Unfortunately, the housing finance experts of the 1930s seemed to have a greater clarity of purpose when designing their housing finance system. Part of the problem today is that debates over the housing finance system have been muddled by broader ideological battles and entrenched special interests, as well as by plain old inertia and the fear of change. It is worth taking a step back to evaluate the full range of options available to us, as the course we decide upon will shape the housing market for generations to come. This is a Response to Brent Horton, For the Protection of Investors and the Public: Why Fannie Mae’s Mortgage-Backed Securities Should Be Subject to the Disclosure Requirements of the Securities Act of 1933, 89 Tulane L. Rev. __ (forthcoming 2014-2015).
October 28, 2014 | Permalink | No Comments
November 5, 2014
GSE Nationalization and Necessity
By David Reiss
Nestor Davidson has posted Nationalization and Necessity: Takings and a Doctrine of Economic Emergency to SSRN. This essay will be of interest to those following the Fannie/Freddie shareholder litigation. The abstract reads,
Serious economic crises have recurred with regularity throughout our history. So too have government takeovers of failing private companies in response, and the downturn of the last decade was no exception. At the height of the crisis, the federal government nationalized several of the country’s largest private enterprises. Recently, shareholders in these firms have sued the federal government, arguing that the takeovers constituted a taking of their property without just compensation in violation of the Fifth Amendment. This Essay argues that for the owners of companies whose failure would raise acute economic spillovers, nationalization without the obligation to pay just compensation should be recognized as a natural extension of the doctrine of emergency in takings. Public officials must be able to respond quickly to serious economic threats, no less than when facing the kinds of imminent physical or public health crises — such as wildfires and contagion — that have been a staple of traditional takings jurisprudence. Far from an affront to the rule of law, this reflection of necessity through an extension of emergency doctrine would reaffirm the flexibility inherent in property law in times of crisis.
Davidson looks at the various companies that were nationalized during the financial crisis, including Fannie and Freddie, and concludes,
It does no violence to norms of ownership—or the rule of law—to acknowledge that overriding necessity in times of crisis can be as relevant to economic emergency as it has always been to more prosaic threats. The doctrine of economic emergency that this Essay has proposed accords with the deepest traditions of our system of property, and rightly should be so recognized. (215)
Davidson reaches a very different conclusion than does Richard Epstein, who argues that just compensation is warranted for shareholders in the two companies. I have no doubt that the judges deciding these cases will have to struggle with very same issues that Davidson sets forth in this article, so it is worth a read for those who are closely following these cases.
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November 5, 2014 | Permalink | No Comments