July 23, 2014
Court Finds that Defendants Failure to Record all Assignments of the Deed did not Violate ORS 86.735
The court in deciding Romani v. Northwest Trs. Servs., 2013 U.S. Dist. L (D. Or., 2013) granted the motion for summary judgment in favor of Northwest.
The plaintiff’s complaint asserted four claims. Plaintiff alleged that the non-judicial foreclosure of her property was defective. Plaintiff claimed that: 1) that the designation of MERS as beneficiary was invalid, and 2) that the defendants failed to record all assignments of the deed of trust in violation of ORS 86.735.
Plaintiff argued that MERS could not be the beneficiary under ORS 86.705(2) and that, as a result, MERS purported assignment of the deed of trust to Wells Fargo, as well as all other actions taken by MERS should be deemed void.
Plaintiff argued that the foreclosure sale was invalid because the defendants failed to record every transfer of the deed of trust, as required under the OTDA. Specifically, the plaintiff alleged that the transfers of the deed of trust which occurred when the note were transferred by endorsement were not recorded.
Plaintiff sought a declaratory judgment that 1) the defendants had no legal or equitable rights in the note or the deed of trust and 2) that the defendants lack of legal standing to institute, maintain, or enforce a foreclosure on the property entitled her to seek permanent injunctive relief barring the defendants from seeking to foreclose on the property in the future.
After consideration of the plaintiff’s arguments, the court dismissed them as moot and granted summary judgment in favor of the defendant.
July 23, 2014 | Permalink | No Comments
July 22, 2014
Risky Cash-Out Refis
Anil Kumar of the Dallas Fed has posted Do Restrictions on Home Equity Extraction Contribute to Lower Mortgage Defaults? Evidence from a Policy Discontinuity at the Texas’ Border to SSRN. The abstract reads
Given that excessive borrowing helped precipitate the housing crisis, a key component of a policy agenda to prevent future meltdowns is effective regulation to curb unaffordable mortgage debt. Texas is the only US state that limits home equity borrowing to 80 percent of home value. Anecdotal reports have long suggested that home equity restrictions shielded Texas homeowners from the worst of the subprime mortgage crisis. But there is, as yet, no formal empirical investigation of these restrictions’ role in curbing mortgage default. This paper is the first to empirically estimate the impact of Texas home equity restrictions on mortgage default using individual and loan level data from three different sources. The paper exploits the policy discontinuity around Texas’ interstate borders induced by the home equity restrictions to identify the causal effect of home equity extraction on mortgage default in a border discontinuity design framework. The paper finds that limits on home equity borrowing in Texas lowered the likelihood of mortgage default by about 2 percentage points with a significantly larger impact on mortgage borrowers in the bottom quartile of the credit score distribution. Estimated default hazards for mortgages within 50 to 100 miles of the Texas’ border decline sharply as one crosses into Texas. Overall, the paper finds evidence that Texas’ home equity restrictions exert a robust negative impact on mortgage default.
This is a really important paper asking a really important question. If its findings are confirmed, it brings us back to that age-old question of paternalism in consumer financial protection: should we limit a consumer’s choice if that choice is consistently shown to have harmful effects? I am not sure where I come down in this particular case, but I wonder if some version of Quercia et al.‘s benefit ratio could help measure the costs and benefits of such a rule. The benefit ratio compares “the percent reduction in the number of defaults to the percent reduction in the number of borrowers who would have access to [a certain type of] mortgages.” (20) I am not sure whether access to cash out refi mortgages is of the same import as purchase mortgages or even plain old refis, but the concept of the benefit ratio might still make sense in this context.
July 22, 2014 | Permalink | No Comments
July 21, 2014
A Resilient NYC
NYU’s Furman Center released a report, The Price of Resilience: Can Multifamily Housing Afford to Adapt? It explains that storm-proofing New York City
poses several special challenges not shared by all coastal areas. First, New York City is largely built out, with much of its building stock long predating current flood-resistant design standards. Resilience in New York, then, primarily means retrofitting older buildings, not just strengthening building codes for new construction. Second, much of the official guidance about how to retrofit residential properties to reduce risk and lower insurance premiums is geared toward 1-4 family buildings, reflecting the national housing stock. In New York City, though, only one-third of the buildings thought to be vulnerable to flooding are1-4 family, detached homes. A much larger number of housing units vulnerable to future storms are located in roughly 4,500 multifamily buildings with five or more rental units. Finding ways to cost effectively retrofit these types of buildings to protect residents and reduce insurance premiums for owners needs to be central to New York City’s storm-preparedness efforts.
Finally, the extreme shortage of affordable housing in New York may make the direct and indirect costs of retrofitting particularly hard to bear. Based on current federal policy, increased flood risk requires for many buildings either investment in physical improvements or payment of higher insurance premiums. Without external funding or other relief, there is no clear avenue to enact these resilience improvements while maintaining affordability. Eliminating all units below the predicted flood level, for example, could result in the loss of thousands of indispensable housing units. Even if units are not lost, property owners may pass on the costs of retrofitting buildings to residents through a rent increase, reducing the supply of affordable units in New York City’s coastal areas. For buildings that are constrained in their ability to raise rents and raise funds for improvements, like many of the rent stabilized and subsidized buildings in the city, the financial burden of making costly retrofits might be overwhelming, leading to the conversion of those buildings to market rate (when permitted), unsustainable operating budgets that may require a bail-out, or a large number of buildings left unprepared for future storms. The costs of not retrofitting, however, may be even more burdensome: building owners may face skyrocketing flood insurance premiums if they do not retrofit their buildings.
While I am not so sure that storm-proofing will be what pushes New York City’s housing stock into the unaffordable column (I think the relentless increases in demand might just to the job for units that are not rent regulated), the Furman Center report reminds us that we have a lot to do to protect New York from the next big storm. The Bloomberg Administration did a lot in a short time to identify what the City can do to increase the City’s resiliency. Given the quality of his housing and economic development team, there is reason to hope that the de Blasio Administration will continue to tackle the threat of climate change in a productive way.
The Furman Center report provides three concrete recommendations to ensure that NYC’s large stock of multi-family housing in flood zones is protected from future storm events:
- The Federal Emergency Management Agency (FEMA) should modify the guidelines for its National Flood Insurance Program for coverage of existing multifamily buildings;
- New York City should expand its Flood Resilience Zoning Text Amendment to cover buildings in the 500-year floodplain; and
- The city should revisit its existing rehabilitation programs to ensure that resilience measures can be readily funded; and it should require that buildings in the 100-year and 500-year floodplains that receive city assistance have adequate emergency and resilience plans.
These all seem like reasonable policies that should be implemented asap.
July 21, 2014 | Permalink | No Comments
July 18, 2014
GSE Shareholders Taking Discovery
Judge Sweeney of the Court of Federal Claims issued an Opinion and Order regarding jurisdictional discovery as well as a related Protective Order in the GSE Takings Case brought by Fairholme against the United States. I had previously discussed the possibility of a protective order here.
By way of background, and as explained in the Opinion and Order,
Defendant [the U.S.] has filed a motion to dismiss, contending that the court lacks jurisdiction to hear this case, that plaintiffs’ claims are not ripe, and that plaintiffs [Fairholme et al.] have failed to state a claim for a regulatory taking. Plaintiffs respond that defendant’s motion relies upon factual assertions that go well beyond, and in many respects, conflict with, their complaint. The court thus entered an order on February 26, 2014, allowing the parties to engage in jurisdictional discovery. (1-2)
Judge Sweeney discussed the likely scope of jurisdictional discovery in a hearing on June 4th. She suggested that the big issue would be the extent to which she was going to defer to the federal government as to its request the discovery be limited in order to allow the government discretion in its operational and policy roles in the housing finance system. The judge indicated that she might be open to a limited protective order that allowed the plaintiffs to examine documents under certain restrictions so that they are not made public.The judge also made clear that she was not going to authorize a fishing expedition.
The Opinion and Order is pretty consistent with what she had suggested in June, but I would characterize it as a tactical win for the plaintiffs. Judge Sweeney signaled that she was not going to be overly deferential to the federal government. This was clear throughout the Opinion and Order, regarding the scope of the Court’s jurisdiction over matters involving the FHFA, regarding the scope of the deliberative process privilege and regarding the overall scope of jurisdictional discovery that the Court will allow. The plaintiffs should very happy with this result.
July 18, 2014 | Permalink | No Comments
July 16, 2014
Good Data for the FHFA
The Federal Housing Finance Agency released a White Paper on the FHFA Mortgage Analytics Platform. By way of background, the White Paper states that
The Federal Housing Finance Agency (FHFA) maintains a proprietary Mortgage Analytics Platform to support the Agency’s strategic plan. The objective of this white paper is to provide interested stakeholders with a detailed description of the platform, as it is one of the tools the FHFA uses in policy analysis. The distribution of this white paper is part of a larger effort to increase transparency on mortgage performance and the analytical tools used for policy analysis and evaluation within the FHFA.
The motivation to build the FHFA Mortgage Analytics Platform derived from the Agency’s need for an independent empirical view on multiple policy initiatives. Academic empirical studies may suffer from a lack of high quality data, while empirical work from inside the industry typically represents a specific view. The FHFA maintains several vendor platforms from which an independent view is possible, yet these platforms tend to be inflexible and opaque. The unique role of the FHFA as regulator and conservator necessitated platform flexibility and transparency to carry out its responsibilities.
The FHFA Mortgage Analytics Platform is maintained on a continuous basis; as such, the material herein represents the platform as of the publication date of this document. As resources permit, this document will be up dated to reflect enhancements to the platform. (2)
This platform is a very welcome development for exactly the reasons that the White Paper sets forth. Academics have a very hard time accessing good data on the mortgage markets (its usually expensive, untimely, limited). Industry interpretations of data typically have agendas.
A sampling of the Platform’s elements include:
- Performing Unpaid Principal Balance
- Scheduled Paid Principal Balance
- Unscheduled Paid Principal
- Dollars of New 90 Day Delinquencies
- Non-Performing Balances
- Property Value of Non-Performing Loans (30-31)
Let us hope that the Platform offers a transparent and flexible tool to track this very dynamic market.
July 16, 2014 | Permalink | No Comments
July 19, 2014
Georgia Court Dismisses RESPA, TILA, and HOEPA Claims
By Ebube Okoli
The court in deciding Mitchell v. Deutsche Bank Nat’l Trust Co., 2013 U.S. Dist. (N.D. Ga., 2013) granted the defendant’s motion to dismiss.
Plaintiffs Reginald and Jamela Mitchell claimed that the defendants Deutsche Bank National Trust Co. and MERS violated the Truth-in-Lending Act (“TILA”), the Real Estate Settlement Procedures Act (“RESPA”), the Home Ownership Equity Protection Act (“HOEPA”) and state law by commencing foreclosure proceedings against Plaintiffs’ home.
After consideration of the plaintiff’s assertions, the court concluded that the complaint failed to state a claim upon which relief could be granted.
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July 19, 2014 | Permalink | No Comments