February 24, 2014
Long-Term Homeownership Affordability
Amnon Lehavi has posted Can the Resale Housing Market Be Split to Facilitate Long-Term Affordability? to SSRN. The paper argues that
a comprehensive affordable housing policy requires the formal splitting of the homeownership market into (at least) two distinct segments: one designated for the general public and following a conventional pricing mechanism through free market supply and demand, and the other designated for eligible households and controlling both initial supply and subsequent resale of housing units through regulated affordability-oriented pricing mechanisms.
While regulation of the pricing of affordable housing units during their initial allocation is a standard feature of housing policy–whether such affordable units are produced by a public authority or a private developer–regulation of pricing upon resale to subsequent buyers has received less attention as a matter of both theory and practice, thus leaving a substantial gap in
design mechanisms aimed at promoting a sustainable affordable housing policy.(1)
This is not really a new argument, but the paper takes the position that existing efforts to regulate resales of affordable housing in the homeownership market can be scaled up significantly. The paper does not take on some of the bigger questions that this position implicates — for instance, should scarce homeownership dollars be spent on rental housing instead — but it does develop a concrete proposal:
This paper seeks to enrich policy design options by introducing two alternative cap-on-resale mechanisms for the affordable housing segment: “Mixed Indexed Cap” (MIC) and “Pure Indexed Cap” (PIC). It explains how such models could be utilized to attain a policy goal of promoting long-term social mobility, allowing multiple low- and modest-income households to engage in capital building by sequentially enjoying increments of appreciation of properties in the affordable housing segment.
In so doing, the paper addresses a series of challenges posed by the design of a cap-on-resale mechanism: Could such a mechanism ensure that the homeowner is granted a fair return upon resale, providing the owner with proper incentives to invest efficiently in the property during the tenure, while setting up a resale rate that would make the unit truly affordable for future homebuyers? (1)
New York Ciy has experimented with affordable homeownership and has not come up with an ideal solution to the problem of affordability upon resale. Given the renewed focus on affordable housing policy in NYC, this attention to affordable homeownership policy is most welcome.
February 24, 2014 | Permalink | No Comments
February 22, 2014
The Court of Appeals of Ohio Upholds Foreclosure Judgment Against Homeowner for Failing to Challenge Bank’s Standing During Trial
In October 2013, the Court of Appeals of Ohio in Wells Fargo Bank N.A., v. Arlington affirmed a trial court’s judgment in favor of the plaintiff bank in a foreclosure action because the homeowner did not properly challenge the bank’s standing to start the foreclosure action during the trial.
In 2006, Dean Arlington (“Defendant”) bought a home in Ohio with a mortgage from Taylor, Bean & Whitaker Mortgage Corp (“TBW”) and MERS. In 2007, MERS sold the mortgage to Wells Fargo Bank, N.A (“Plaintiff”) and in January 2008, Plaintiff initiated a foreclosure action against Defendant. In August 2008, Defendant filed an answer to the foreclosure and Plaintiff moved for summary judgment, but the Court denied Plaintiff’s motion. The case was stayed for three years due to bankruptcy notice. After the bankruptcy stay was lifted, Plaintiff filed a second motion for summary judgment on March 24, 2011. The trial court granted the motion for summary judgment in June 2011 and entered the decree of foreclosure. Defendant first filed a notice of appeal in June 2011 and filed an Emergency Motion for Relief from Judgment in October 2011. Defendant later voluntarily dismissed the appeal in November 2011.
In Defendant’s emergency motion, he argued that the trial court should vacate the foreclosure decree because Plaintiff did not have standing to bring the foreclosure action. The trial court denied the motion in October 2011 and Defendant did not appeal the judgment. One year later in October 2012, the Ohio Supreme Court issued Fed. Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13. In January 2013, Defendant filed a motion to vacate the trial court’s June 2011 judgment, citing the Schwartzwald case to argue that Plaintiff did not have standing when it filed the complaint in foreclosure. The trial court denied the motion to vacate in March 2013 and Defendant appealed claiming two assignments of error: 1) that the trial court abused its discretion for denying Defendant’s motion to vacate, and alternatively 2) whether the jurisdiction is void for lack of jurisdiction.
The Court of Appeals of Ohio overruled both of Defendant’s assignments of error. The Court of Appeals rejected Defendant’s standing argument under Schwartzwald and held that it did not apply to the facts of this case. The Court of Appeals further held that Defendant’s standing argument was barred by res judicata because he had failed to challenge Plaintiff’s standing in the trial court. The Court therefore held that Plaintiff had standing to initiate the foreclosure action, denied Defendant’s motions and affirmed the trial court’s judgment against Defendant.
February 22, 2014 | Permalink | No Comments
Federal District Court of Nevada Dismisses Homeowners’ Lawsuit Against Banks for not Pleading Enough Facts
In October 2013, the Federal District Court of Nevada in Prince v. Loop Capital Markets, LLC held that Plaintiff homeowners had failed to plead enough facts in their complaint against Defendants Wells Fargo Bank, N.A. and Bank of America, N.A. and dismissed Plaintiffs’ complaint with prejudice.
In August 2009, Thomas Prince and, his wife, Sarah Prince (“Plaintiffs”) bought a home in Las Vegas with a mortgage from New Line Mortgage, Div. Republic Mortgage Home Loans, LLC (“New Line”) as the lender on the deed and Equity Title of Nevada (“Equity”) as the deed trustee. MERS was listed as the nominee for New Line. In August 2012, MERS securitized and pooled the mortgage and sold it as a security to Bank of America, N.A.. Bank of America and Wells Fargo Bank, N.A. (“Defendants”), later initiated a foreclosure action against Plaintiffs, and Plaintiffs later sued Defendants. Plaintiffs sued the Defendants for intentional misrepresentation and negligent misrepresentation in the Defendants’ purchase of Plaintiffs’ mortgage, and sought to stop the foreclosure action. In March 2013, Defendants moved to remove the case from state to federal court and made a motion to dismiss the complaint for failure to state a claim upon which relief could be granted.
The District Court granted the Defendants’ motion to dismiss and held that Plaintiffs’ complaint failed to plead intentional and negligent misrepresentation with specificity under Federal Rules of Civil Procedure Rule 9(b). The Court found that the complaint did not identify a false or misleading statement by Defendants or explain why any alleged statements by Defendants were false. The Court also found that Plaintiffs did not identify the “who, what, when, where, or how of the alleged misconduct” and instead referred to a blanket statement that the discovery in the case revealed that the alleged misconduct occurred. The Court also denied Plaintiffs’ request to amend the complaint to change its argument that the securitization of the mortgage in this case inherently changed the existing legal relationship between the parties to the extent that the original parties ceased to occupy the roles that they did at closing. The Court found that case precedent held that “securitization of a loan does not in fact alter or affect the legal beneficiary’s standing to enforce the deed of trust.” The Court therefore denied Plaintiffs’ request to amend the complaint and granted Defendants’ motion to dismiss with prejudice.
February 22, 2014 | Permalink | No Comments
February 21, 2014
Reiss on Single Family Rental-Backed Bonds
Law360 Quoted me in Newest Property-Secured Bonds Invite Scrutiny (behind a paywall). It reads in part,
The Blackstone Group LP’s recent groundbreaking move to sell bonds secured by single-family rental homes may have created the next securitization blockbuster, but attorneys say the product could attract the same type of litigation that has plagued the commercial and residential mortgage-backed securities markets.
Blackstone is among a growing group of entities that amassed large numbers of foreclosed homes after the crisis and are turning them into profitable rentals. Now some are hoping to take that profitability one step further, extending loans secured by these single-family homes and securitizing them.
This process offers benefits both to players like Blackstone and to smaller landlords that own groups of single-family rentals and can’t get traditional lenders to lend against their assets. Blackstone’s debut product — sold to a syndicate led by Deutsche Bank AG — has been very well-received, but attorneys caution that many questions remain unanswered, and REO-to-rental-backed bonds could pose litigation risks.
* * *
Blackstone’s $480 million deal, in which it pooled 3,200 homes owned by its portfolio company Invitation Homes and used them to secured a single loan that it then securitized, made waves as the first of its kind.
Several other opportunistic real estate investment companies, including American Homes 4 Rent and Colony Capital LLC, are expected to follow suit, but they are treading lightly as the new product is assessed by the market and investors.
* * *
The homes themselves may also be subject to condemnation or landlord-tenant litigation that could encumber the overall loan indirectly by affecting the value of the collateral, according to David Reiss, a real estate finance professor at Brooklyn Law School.
Before the recession, single-family homes were considered too expensive to be managed by a large institution like Blackstone or American Homes 4 Rent because of their geographic diversity and because it was hard to control property management on so many different homes, according to Reiss.
The financial crisis made distressed single-family homes cheaper and more attractive to opportunistic investors, and the low price may compensate for the other issues, he said.
“This is a new asset class, and it is not yet clear whether Blackstone has properly evaluated its risks,” Reiss said. “Time will tell whether these bonds will become a significant new category of asset-backed securities or whether the financial crisis presented a one-time financial opportunity for some firms.”
February 21, 2014 | Permalink | No Comments
February 20, 2014
Kansas Court of Appeals Finds that Wells Fargo’s Possession of Signed Promissory Note was Sufficient to Enforce and Foreclose
The court in deciding Wells Fargo Bank, N.A. v. Richards, 2013 Kan. App. 1160 (Kan. Ct. App. 2013) affirmed the lower court’s decision finding that Wells Fargo had standing to bring foreclosure action.
On January 25, 2013, the lower court filed its journal entry of judgment and dismissal, finding that defendant Richards had failed to controvert any of Wells Fargo’s allegations. The lower court found that Wells Fargo was holder of the note and mortgage; Richards was in default and Wells Fargo was entitled to judgment on the note and to foreclose the mortgage. The court reaffirmed its previous dismissal of Richards’ counterclaim, finding the “points, claims, and arguments” to be without merit.
Defendant, in this appeal, asserted five claims, (1) Wells Fargo lacked standing to bring the foreclosure action; (2) the district court erred in holding Wells Fargo’s possession of the promissory note he signed was insufficient to enforce and foreclose the mortgage it secures; (3) Wells Fargo did not experience/suffer a default; (4) there was no contract because the note and mortgage were split; and (5) that there was lack of due process.
The court examined the record and considered the arguments of the parties. After the consideration, the court held that there was no merit to any of defendant Richards’ arguments. Consequently, the court affirmed the lower court’s decision.
February 20, 2014 | Permalink | No Comments
Illinois Court of Appeals Upholds Lower Court Decision Finding that Wells Fargo had Standing to Foreclose
The court in deciding Wells Fargo Bank, N.A. v. Abatangelo, 2013 IL App (1st) 130423-U (Ill. App. Ct. 1st Dist. 2013) that Wells Fargo had standing to foreclose the mortgage.
Defendant, Peter Abatangelo, appealed the order of the circuit court granting summary judgment in favor of plaintiff, Wells Fargo Bank, on plaintiff’s foreclosure complaint. On appeal, Mr. Abatangelo contended that the court erred in granting summary judgment because (1) the mortgage contract did not properly assign the right to foreclose to Wells Fargo; and (2) the trial court improperly considered new arguments raised by Wells Fargo for the first time in a reply brief in support of their motion to dismiss.
After considering the defendant’s contentions the court ultimately affirmed the lower court’s ruling.
February 20, 2014 | Permalink | No Comments
Michigan Appeals Court Upholds Summary Judgment and Finds that Bank’s Purchase did not Violate MCL 600.3228
By Ebube Okoli
The court in deciding Bank of N.Y. Mellon Trust Co. Nat’l Ass’n v. Robinson, 2013 Mich. App. 2170 (Mich. Ct. App. 2013) upheld the lower court’s grant of summary judgment.
In this action for possession of a foreclosed property, defendants appealed as of the summary disposition that the lower court granted in favor of the plaintiff on the defendant’s counterclaims. After considering the defendant’s arguments the court affirmed the lower court’s ruling.
On appeal, the defendant raised two issues with regard to the underlying mortgage. First, the defendant argued that the plaintiff, through its predecessor, committed fraud in the execution of the mortgage. Second, the defendant alleged that the plaintiff did not have the right to foreclose because there was no evidence of record that the defendant’s note was assigned to plaintiff. The defendant also argued that the bank’s purchase violated MCL 600.3228, which required that a purchase by a mortgagee at a foreclosure sale be made “fairly and in good faith.”
After considering the defendant’s contentions the court ultimately affirmed the lower court’s ruling.
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February 20, 2014 | Permalink | No Comments