January 30, 2014
Reforming NYC’s Property Tax Regime
Andrew Hayashi has posted Property Taxes and Their Limits: Evidence from New York City to SSRN. There probably could not be a more obscure and dull topic than this to the general reader (and coming from me, as the author of this blog, that is saying something!). But for those of us who think about such things, this is an incredibly important topic that is at its heart fundamentally about fairness and treating like people alike.
Hayashi argues that
The property tax is the largest source of tax revenue for local governments. It is also an almost irresistible policy instrument for municipalities, which typically do not have control over any other tax with which to influence the urban landscape and the local distribution of income and wealth. The widespread use of the property tax for planning and redistribution means that virtually no jurisdiction straightforwardly calculates the tax liability for a property as a fixed percentage of its market value. Instead, property tax rates tend to vary with the use to which a property is put or the identity of its owner. As a consequence, many of the potential benefits of the property tax, such as ease of administration, transparency, the clear reflection of the costs and benefits of local services, and the intuitive fairness of imposing taxes in proportion to property wealth, are lost. (2, footnotes omitted)
He concludes
The property tax is a hated tax, but attempts to curtail its most offensive feature, the rapid increase in taxes that can accompany paper gains in property value, have had unintended distributional consequences that are hard to justify on policy grounds. In New York City, the caps are regressive and tend to benefit new homebuyers and sellers rather than current homeowners on fixed incomes. The caps should be replaced with a property tax circuit breaker [that limits increases for lower-income homeowners] or deferral system [that delays full payment until the property is conveyed]. (27)
This issue is even bigger than these selections suggest as there are big disparities in the tax burden among different types of property. For example similarly priced single family homes have a lower tax burden than coops or condos in multifamily properties. NYU’s Furman Center (with which Hayashi is affiliated) has studied these issues and, even better, has highlighted them as part of the De Blasio transition.
Property tax fairness is not a Republican or a Democratic issue — it is a good government issue. Hopefully, the De Blasio Department of Finance will take up this obscure but important issue. Fairness demands it.
January 30, 2014 | Permalink | No Comments
January 29, 2014
Reiss on Remodeling
RealtorMag quoted me in Stay Put and Remodel — or Move? about the relative advantages of renovating and moving. It reads in part:
A New Year ushers in new resolutions, which often includes changes on the home front, but deciding what to do with it can be tough for home owners, financially and emotionally.
As the real estate market rebounds and buyers increase in number, help your contacts make a well-informed decision on the direction they should take with their home. Your insight is valuable when customers are torn between selling in order to upgrade and remodeling their current space to add value and meet their needs. Even those who don’t list and sell with you now may do so later, and even refer friends and family because of your attentive service.
Here are seven key steps to help clients arrive at the best solution:
* * *
6. Compare the appraisal and remodeling costs with other neighborhood homes for future resale.
Even though home owners should base decisions in large measure on enjoyment and not wholly on resale value, it’s smart to have an idea of how changes will affect the house compared with others nearby, says real estate attorney and Brooklyn Law School Professor David Reiss.
It’s never smart to overbuild for an area. The type of improvement can also affect the value. Remodeling changes may add to the house’s worth without changing real estate taxes, while an addition will probably cause an uptick in taxes.
January 29, 2014 | Permalink | No Comments
Georgia Court Finds Chase Had Authority to Foreclose
The court in deciding Ball v. JP Morgan Chase Bank, N.A., 2013 U.S. Dist. LEXIS 146503 (M.D. Ga. 2013) granted the defendants’ motion for judgment on the pleadings.
Plaintiffs Johnny Frank Ball Jr. and Tempie Ball filed a suit in the Superior Court of Sumter County, Georgia, seeking to set aside the non-judicial foreclosure of their home. They also sought compensatory and punitive damages against Chase and the Freddie Mac for wrongful foreclosure and fraudulent and negligent misrepresentation.
The legal theory underlying the plaintiff’s causes of action was premised on the definition of a “secured creditor” in the Georgia Code. Plaintiffs maintained that Chase lacked authority to foreclose its property because only a “secured creditor” [a creditor who holds the promissory note] may initiate a non-judicial foreclosure, and only Chase held the security deed.
The court in assessing the validity of this argument rejected it as the Georgia Supreme Court recently rejected this very theory. Therefore, the court granted the defendants’ motion for judgment on the pleadings.
January 29, 2014 | Permalink | No Comments
Nevada Court Found Plaintiff’s Claim for Quiet Title Failed as a Matter of Law Based on Statute’s Express Language
The court in dealing with Beverly v. Weaver-Farley, 2013 U.S. Dist. LEXIS 146150 (D. Nev. 2013) ultimately dismissed the plaintiff’s claims. In her complaint, plaintiff alleged that pursuant to NRS 116.3116(2)(b), Wells Fargo’s first deed of trust was extinguished by the HOA’s foreclosure and sale of the underlying property.
The court found that, the first deed of trust was recorded in October 2004; also defendant Wells Fargo was assigned all rights under the first deed of trust in April 2009, a full month before the delinquent HOA assessment was recorded on the subject property. Thus, Wells Fargo’s lien meets the statutory requirements of NRS 116.3116(2)(b) as such survived the HOA sale. Therefore, the plaintiff took title to the property subject to the first deed of trust.
As an alternative argument, plaintiff contended that Section 3116(2)(c) carved out a limited exception to Section 3116(2)(b) that is applicable in this matter.
Plaintiff further contended that this section provided that the foreclosure of a delinquent HOA assessment lien extinguished the first security interest on the property if it related to charges incurred during the nine months prior to the foreclosure.
However, once again the court found that the plaintiff misconstrued the statute. The court found that the plain language of NRS 116.3116(2)(c) simply created a limited super priority lien for nine months of HOA assessments leading up to the foreclosure of the first mortgage, but it did not eliminate the first security interest. Based on the express language of the statutes, the court found that the plaintiff’s claim for quiet title failed as a matter of law. Accordingly, the court granted Wells Fargo’s motion to dismiss.
January 29, 2014 | Permalink | No Comments
January 28, 2014
Reforming the Fed
Peter Conti-Brown and Simon Johnson posted their policy brief, Governing the Federal Reserve System after the Dodd-Frank Act, on SSRN (also on the Peterson Institute for International Economics website). I have said before that the Fed is a “riddle, wrapped in a mystery inside an enigma” and I stand by that characterization. This policy brief is very helpful, however, in identifying the legal structure of the Federal Reserve System as well as the practical constraints and political forces that affect the workings of that legal structure.
The authors write that by statute, the chair of the Fed
decides almost nothing herself: The Federal Reserve System is supervised by a Board of seven presidentially appointed, Senate-confirmed governors, of whom the chair is but one. In practice, the chair has frequently had a disproportionate influence on the monetary policy agenda and also the potential to predominate on regulatory matters—working closely with the Fed Board’s senior staff. Even so, for the most significant decisions, the Board must vote, and the chair must rely on the votes of the other six governors (for Board matters) and in addition, on a rotating basis, the votes of five of the twelve Reserve Bank presidents (for monetary policy). On regulation and supervision issues, the chair can do little of consequence without the support of at least three other governors. (1)
The brief goes on to document other aspects of the Fed’s organizational structure and the practical politics of Fed decisionmaking. For those of us who have a hard time parsing how the Fed acts, this is a useful document.
The brief also argues for a new approach to Fed governance:
The Fed chair is arguably the most important economic appointment any president makes. After the crises, new statute, and bold decisions of recent years, this job has become even more important.
During its first 100 years of existence, the position of Fed chair has risen to exercise great potential power. By statute, an appointee can remain in office 20 years or more. A perceived “maestro” effect in which insiders and outsiders are discouraged from challenging the chair is no longer a model with broad appeal, if it ever was.
The Board of Governors could provide an effective counterweight to the chair. Indeed, such a counterweight is what Congress intended by requiring presidential appointment and Senate confirmation of the entire Board. In order to break the tradition of a chair-dominated board, governors need sufficient expertise and experience to engage with and in some instances counteract the chair and Fed staff.
A president’s choice for Fed chair matters enormously, but the choice for members of the Board also matters a great deal. Monetary policy remains a crucial criterion but not at the exclusion of regulatory policy. The Board is second to none—in the nation and indeed arguably in the world—in its responsibility for regulatory oversight over the financial system. The president, members of the Senate, and the general public ignore these considerations at significant peril to the financial system and the economy. (9)
The brief presents a powerful alternative to business as usual at the Fed. Hopefully, it will gain some traction.
January 28, 2014 | Permalink | No Comments
Maine Superior Court Denies Foreclosure Action Because Bank Failed to Strictly Follow Statutory Notice Requirement
In Bank of N.Y. Mellon v. McKenna, the Superior Court of Maine precluded a foreclosure action on a finding that the plaintiff bank failed to strictly follow the relevant statutory notice requirements.
In 2007, defendant Robert McKenna (“McKenna”) bought a home in Maine with a mortgage for $245,000.00 from First Magnus Financial Corporation (“First Magnus”) and MERS. In September 2008, MERS sold the mortgage to plaintiff Bank of New York, which had been acquired by plaintiff Bank of New York Mellon (“Mellon”) in July 2007. McKenna defaulted on the loan in April 2008. Mellon later bought McKenna’s loan from MERS in November 2012. In July 2013, Mellon initiated a foreclosure action against McKenna.
However, in this case the Maine Superior Court entered a judgment against Mellon. The Court found that Mellon failed to strictly comply with the notice and service requirements under Maine state law. Specifically, the Court noted that the relevant statute required a mortgagee to provide notice to all mortgagors and all cosigners who had a right to cure the mortgage default 35 days before the start of the foreclosure action. Here, the Court found that Mellon only served notice on Robert McKenna, and not his wife and co-defendant, Nancy McKenna. The Court found that the lack of notice to Nancy McKenna represented a failure to strictly follow the statutory requirements for foreclosure actions. The Court therefore entered a judgment in favor of McKenna.
January 27, 2014 | Permalink | No Comments
