February 20, 2014
Reiss on Mortgage Availability
The Consumer Eagle quoted me in Will Mortgages be Harder to Get in 2014? It reads in part,
David Reiss, Professor of Law at Brooklyn Law School, also sees some benefit in more conservative guidelines. “The QM rules and ability-to-repay rules legislate commonsense things like making sure people can repay loans that they take out, which was something that was given up not only in the last boom but in the boom that preceded it. So from the consumer perspective, you now know that when you get a mortgage you’re probably going to be able to pay it back,” Reiss says. “Some consumers and some people in the industry would say let people make their own decisions with minimal consumer protection regulation, but we had a phase of that and it ended poorly for all of us.”
Borrowers who are self-employed or have irregular income may have a harder time qualifying for a loan under the new rules. Reiss notes that those who are ineligible for a QM may still be able to get a non-qualified mortgage. “What we haven’t seen is what this non-QM market is going to look like in 2014 and beyond,” Reiss says. “It’s a new market.”
Members of the banking industry have expressed concerns about the changes. In recent testimony before the House Committee on Financial Services, William Emerson, CEO of Quicken Loans and vice chair of the Mortgage Bankers Association, said the rules “are likely to unduly tighten mortgage credit for a significant number of creditworthy families who seek to buy or refinance a home” and “may impair credit access for many of the very consumers they are designed to protect.”
Reiss notes that consumer protections are always a compromise. “Regulators want to be conservative to protect consumers, but they also don’t want to keep people who would pay back their loans from getting credit,” he says. “There’s always a dance.”
February 20, 2014 | Permalink | No Comments
Calling All RE Law Profs!
I have been asked to post this announcement by Rutgers Professor Jay Soled. He indicated that they were very interested in hearing from law professors who do research in this area.
Paul V. Profeta Chair in Real Estate
The Finance and Economics Department of the Rutgers Business School at Newark and New Brunswick, Rutgers University invites nominations and applications for the inaugural holder of the Paul V. Profeta Chair in Real Estate. The School and University are strongly committed to recruiting an accomplished scholar necessary to lead the school’s ambition to be a leader in research and teaching in Real Estate. The successful candidate will become the Founding Executive Director of the Rutgers Center for Real Estate Studies. The center is envisioned to facilitate scholarship activities and promote the education of real-estate issues in its various degree granting and continuing education programs. The Finance and Economics Department has 35 full-time faculty members. The Rutgers Business School offers BS, MBA, Masters of Quantitative Finance, and Ph.D. programs that include finance and applied economics concentrations. Please submit your application (cover letter, three names of your letter writers, research paper[s], and CV) electronically at https://www.business.rutgers.edu/faculty-research/teaching-opportunities. The search will continue until the position is filled.
February 20, 2014 | Permalink | No Comments
February 19, 2014
Reiss in Bloomberg on CS Lawsuit
Bloomberg quoted me in Credit Suisse Waits for $11 Billion Answer in N.Y. Fraud Suit. It reads in part,
As Credit Suisse Group AG (CSGN) sees it, time has run out on New York Attorney General Eric Schneiderman’s pursuit of Wall Street banks for mortgage fraud that helped trigger the financial crisis.
Schneiderman sued Credit Suisse in 2012 as part of a wide-ranging probe into mortgage bonds. He claimed Switzerland’s second-largest bank misrepresented the risks associated with $93.8 billion in mortgage-backed securities issued in 2006 and 2007.
Credit Suisse asked a Manhattan judge in December to dismiss Schneiderman’s case, as well as his demand for as much as $11.2 billion in damages. The bank argued that New York, by waiting so long to file the lawsuit, missed a three-year legal deadline for suing. The state countered that it had six years to file its complaint.
If the bank wins, Schneiderman will face a new roadblock as he considers similar multibillion-dollar claims against a dozen other Wall Street firms. The judge in New York State Supreme Court could rule at any time.
“It would obviously tilt everything in the favor of Credit Suisse and similarly situated financial institutions,” said David Reiss, a professor at Brooklyn Law School, hindering New York’s remaining efforts to hold banks accountable for mistakes that spurred a recession.
* * *
Since the latest bonds cited in Schneiderman’s suit originated in 2006 and 2007, if the judge chooses the bank’s argument, the lawsuit may be dismissed. If the judge takes Schneiderman’s more expansive view, most or all of the suspect bonds may still be covered by the litigation.
“The entire case is time-barred,” Richard Clary, a lawyer for the bank, told Friedman at the December hearing. Lawyers for the state argued that such limits weren’t intended to apply to the attorney general.
“We’ve successfully resolved cases filed within six years,” Deputy Attorney General Virginia Chavez Romano said, citing last year’s JPMorgan accord. “It has been our decades-long practice.”
So far, New York’s courts have broadly interpreted the statute in finding a six-year period, Brooklyn Law School’s Reiss said. That may be changing as legal scholars and financial industry lawyers question its propriety.
“Having these incredibly long and ambiguous statutes of limitations is not particularly fair,” he said.
* * *
Friedman’s ruling in the Credit Suisse case may be crucial to Schneiderman’s probe of close to a dozen other banks, and whether he can sue them successfully.
New York agreed with the firms in October 2012 that any legal deadline for bringing fraud claims against them would be suspended while he continues his investigation, a person familiar with the matter said.
Such tolling agreements stopped the clock on any statute of limitations and ensured Schneiderman can bring fraud claims against banks for conduct going as far back as 2006, said the person.
Brooklyn Law School’s Reiss said the banks may have agreed to the delay to avoid forcing Schneiderman to file a “kitchen sink complaint with every possible allegation in it” just to beat the clock. Doing so also builds good will with regulators and may also facilitate a favorable settlement.
The agreements don’t necessarily mean that suits will be filed, the person said. If Schneiderman sues any of the banks, they may then assert the statute of limitations is three years, and not six, just as Credit Suisse has done.
* * *
This may be a more potent argument if Friedman rules for the Swiss bank in the pending case.
A three-year statute-of-limitations would mean they can’t be held responsible for transactions before 2009, while a six-year deadline would allow Schneiderman to reach back to 2006.
There’s “great uncertainty” about whether Schneiderman can move forward with the Credit Suisse case in light of the statute of limitations arguments, said James Cox, a corporate law professor at Duke University in Durham, North Carolina.
Reiss said that any ruling would probably be challenged all the way to the Court of Appeals in Albany, the state’s highest court.
February 19, 2014 | Permalink | No Comments
February 18, 2014
Ohio Court Finds that Bank of America had Standing to Foreclose and MERS had Authority to Assign
The court in deciding Bank of Am., N.A. v. Harris, 2013-Ohio-5749 (Ohio Ct. App., Cuyahoga County Dec. 26, 2013) found there was no merit to plaintiff’s appeal, and affirmed the lower court’s dismissal.
Defendant, Frederick Harris, appealed from the trial court’s decision granting summary judgment to plaintiff, Bank of America. Plaintiff argued that the trial court erred as a matter of law by granting summary judgment in favor of the plaintiff-appellee.
Plaintiff argued that Bank of America lacked standing to pursue the foreclosure because the bank was a party solely by virtue of a purported assignment from MERS. It argued that MERS had no authority to assign the mortgage to Bank of America, and thus, Bank of America had no standing to bring the suit.
The court rejected the plaintiff’s contentions, finding that the bank had standing to bring a foreclosure action because it was the real party in interest at the time that a foreclosure complaint was filed. The court also found that the bank had possession of the note, which was payable to bearer. Therefore, it was the current holder of the note and entitled to enforce it under R.C. 1303.31 and that after the merger, the bank stepped into the shoes of the absorbed company and had the ability to enforce. As such no further action was necessary to become a real party in interest.
February 18, 2014 | Permalink | No Comments
United States District Court for the District of Columbia Dismisses Case Due to Lack of Jurisdiction
The court in deciding Glaviano v. JP Morgan Chase Bank, N.A., 2013 U.S. Dist. 180582 (D.D.C. Dec. 27, 2013) dismissed the plaintiff’s claim due to lack of jurisdiction.
Plaintiffs alleged that the defendants did not have “possession of the note” or a “documented property interest in the note and mortgage or deed of trust.” Plaintiff also alleged that the “deed of trust was void and ineffective due to fraud,” and that the trustee’s foreclosure sale was “void because the alleged beneficiary . . . never had standing to substitute the trustee.” They further claimed that the sale of their property at a foreclosure sale violated their due process rights under the U.S. Constitution. Based on these allegations, plaintiff sought an injunction against the foreclosure sale.
The court considered the plaintiff’s argument and found that the court lacked jurisdiction, as such the case must be dismissed. Because the plaintiff sought the equivalent of appellate review of state court rulings, the district court dismissed the suit for lack of jurisdiction under Rooker-Feldman. The court found that plaintiffs in this case also asked the federal district court to review state court rulings.
Accordingly, the complaint was dismissed for lack of jurisdiction and the motion for injunction was denied as moot due to dismissal of the case.
February 18, 2014 | Permalink | No Comments
Kansas Court of Appeals Finds Note Splitting Argument Lacked Merit
The court in deciding Wells Fargo Bank, N.A. v. Richards, 2013 Kan. App. 1160 (Kan. Ct. App. 2013) ultimately upheld the lower court’s decision.
The plaintiff [Chester E. Richards, Jr.], appealed the lower court’s decision which granted summary judgment to Wells Fargo.
Plaintiff had asserted (1) Wells Fargo lacked standing to bring the foreclosure action; (2) the lower 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) Richards was not afforded due process.
The court examined the record and considered the arguments of both the parties and held that there was no merit to any of the plaintiffs’ arguments. Consequently, the court affirmed the decision from the lower court.
February 18, 2014 | Permalink | No Comments
The State of the Foreclosure Crisis
By David Reiss
Rob Pitingolo of the Urban Institute issued State of the Foreclosure Crisis: Past the Peak but Not Recovered. It opens,
Much attention has been given to statistics that show new foreclosure activity nationally has slowed over the past few years. When it comes to metropolitan area markets, however, some have gotten worse, while others have stagnated. It is not simple enough to declare an end to the foreclosure and delinquency crisis when there are as many as a quarter (25%) of metro areas that have not yet begun their recovery. (1)
It continues,
the rate of 90 day or more delinquency steadily fell in 2010 and 2011, ending at 3.1% in September 2013. In contrast, the foreclosure inventory only turned the corner in mid -2012, and is still higher than the March 2009 level at 4.5%, around seven times the pre-crisis level. Historically, a foreclosure inventory under 1% is what we would expect in “normal” market conditions.” (1, footnote omitted)
It concludes, “attention must be paid to individual metropolitan housing markets. Some are in much better shape than others; and some have made great strides since the peak of serious delinquency in December 2009. However, it may be premature to declare the problem is “ending” until all metro area markets show signs of recovery.” (2) The report identifies the starkest differences in metro areas:
Three geographic regions were hard hit at the beginning of the foreclosure crisis: California metros, Florida metros, and “Rust Belt” metros (those in Midwest states like Ohio, Michigan and Indiana). All three of those regions have seen solid improvements since December 2009.
On the other hand, the Northeast has generally performed poorly in the past several years. Serious delinquency rates in major metropolitan markets like New York City, Philadelphia and Baltimore have all worsened since December 2009. Other metro areas in New York like Buffalo, Rochester and Syracuse have similarly struggled, as have metro areas surrounding New York like New Jersey and Connecticut. (5)
The report concludes with a call for a nuanced response to the current state of the foreclosure crisis: “communities need strong examples to build upon, rigorous data and analysis, and a commitment to evidence-based policymaking that strives toward the best fit between policy solutions and policy problems.” (6) This seems like the right call and the appropriate response to headlines that report the national trend without mentioning the variations among metro areas.
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February 18, 2014 | Permalink | No Comments