October 29, 2013
Eminent Distraction?
The Urban Institute posted Eminent Domain: The Debate Distracts from Pressing Problems. The issue brief concludes
The negative indicators shared by municipalities that have considered the eminent domain solution (e.g., high unemployment, low incomes, high proportions of underwater homeowners, slower HPI recovery, etc.) indicate that their shared problems extend beyond housing. These cities have traditionally suffered from lack of investment, high crime rates, concentrated poverty, and other general barriers to opportunity. These factors contributed to their poor performance during and after the housing crash, and the relief efforts to date, both from lenders and policymakers, have been modest relative to the scale of the problem.
Yet it is unclear that seizing loans through eminent domain will produce the desired outcomes: preventing foreclosures and, thus, ensuring that the community fabric and the municipality’s economy remain intact. For example, Richmond is targeting performing loans in PLS, and while the eminent domain plan is designed to help underwater mortgage holders, investors assert that nearly a third of target loans are above water. In contrast, a much wider universe of nonperforming, underwater loans is in private-label and agency securities that are, arguably, at more immediate risk of default. Additionally, implementing eminent domain will likely have repercussions in the housing finance markets that will lead to higher interest rates and down payments.(14)
The conclusion then outlines “some less disruptive alternatives.” (14) I am not sure that I agree with all of the conclusions of the report. For instance, I doubt that there would be higher interest rates and down payments as a result of the use of eminent domain by municipalities. Lenders have notoriously short memories (for a survey of short lender memories, see This Time Is Different.) But this issue brief is important because it is not looking at the legality of the use of eminent domain — others have done that — but at the practicality of this approach. And it raises serious concerns that will need to be addressed by its proponents.
October 29, 2013 | Permalink | No Comments
October 27, 2013
California Northern District Court Dismissed Plaintiff’s Claims Due to Flawed Reliance on Non-California Law
The California Northern District Court in deciding Newbeck v. Washington Mutual Bank, et al., No. C 09-1599 CW (N.D. Cal., 2010), dismissed the plaintiff’s claims.
In reaching this conclusion, the California Northern District Court noted that plaintiff‘s reliance on non-California law was flawed.
The court further noted that the plaintiff, in using non-California law to analyze judicial foreclosures, was erroneous and misplaced. The court noted that the law cited also did not support a claim to set aside a non-judicial foreclosure.
October 27, 2013 | Permalink | No Comments
Eastern District of California Found That MERS Was Not Required to Register to do Business in California
The United States District Court, Eastern District of California, in deciding Bogdan v. Countrywide Home Loans, 09-1055 (E.D. Cal. 2010), found that MERS was not required to register to do business in California.
The Eastern District of California, after considering the plaintiff’s contentions, also dismissed the plaintiff’s fraud and unfair competition claims against MERS.
October 27, 2013 | Permalink | No Comments
Eastern District of California Dismisses Plaintiff’s Wrongful Foreclosure Claims Due to Plaintiffs’ Lack of Tender
The United States District Court, Eastern District of California in deciding the case of Small v. Mortgage Electronic Registration Systems, Inc., et al., No. 2:09-CV-0458 (E. D. Cal., 2010), concluded that dismissing the plaintiff’s wrongful foreclosure claims due to lack of tender by the plaintiffs was appropriate.
Plaintiffs filed their foreclosure action, naming three entities and two individuals as defendants, and alleged causes of action for unlawful foreclosure and unlawful eviction.
Defendants sought dismissal of plaintiffs’ complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that plaintiffs failed to state any cognizable claim. After considering the plaintiff’s claims, the court dismissed them due to lack of tender by the plaintiff.
October 27, 2013 | Permalink | No Comments
October 25, 2013
Reiss on Buying a Home
MainStreet.com interviewed me in Guess the Unexpected Best Time to Buy a Home. It reads in part,
Hunting for a new home during the holidays can have many hidden advantages for buyers, despite conventional wisdom.
While there is less inventory to choose from in the fall, house hunting in November and December also means there is less competition with other buyers out there. Sellers might also be willing to strike a better deal for potential home owners.
Home buyers can take advantage of sellers who are eager to sell. The end of the year is a great time to look above your price range and negotiate for a lower price, said Alison Bernstein, president of The Suburban Jungle Realty Group.
“Sellers want to clear inventory before the spring and will be open to price adjustments to make the sale,” she said.
Consumers can find the best prices after Thanksgiving and before the Super Bowl because most home owners do not want to wait until the winter months when the bulk of potential buyers disappear, Bernstein said.
Seeing a home during the winter months shows both the house and the neighborhood in its “true colors,” she said.
Many sellers could also have tax reasons to sell by the end of the year, said David Reiss, a professor at the Brooklyn Law School who teaches a course that covers residential real estate transactions. However, this could prove to be a double-edged sword for buyers.
It might motivate sellers to get a deal done quickly and to compromise easily on price or other terms. On the other hand, sellers may insist on draconian penalties if the buyer fails to close by the end of the year, he said.
“Buyers must tread very carefully in such circumstances, be confident that their lender will come through by the drop dead date and certain that they will not be held liable for the delays caused by others, such as sellers themselves or escrow agents,” Reiss said.
October 25, 2013 | Permalink | No Comments
October 24, 2013
Reiss on Countrywide Verdict
Law360 interviewed me in DOJ’s Countrywide Win Could Force More Bank Settlements (behind a paywall). The story opens
The U.S. Department of Justice’s victory in a case against Bank of America Corp.’s Countrywide subsidiary over a housing-bubble-era mortgage program shows the power of a 1980s fraud statute, and could further encourage banks to settle future financial crisis cases, attorneys say.
A federal jury in New York on Wednesday unanimously found that Countrywide Financial Corp. and one of its former executives defrauded Fannie Mae and Freddie Mac through a program designed to speed up mortgage issuing in 2007 and 2008.
The court victory was significant in part because of U.S. Attorney Preet Bharara’s use of the Financial Institutions Reform Recovery and Enforcement Act, a law that grew out of the 1980’s savings-and-loan crisis, to bring a case over the 2007-09 financial crisis. With a fairly low standard of proof and a 10-year statute of limitations, a jury’s verdict based on FIRREA bodes well for future government cases, said Brooklyn Law School professor David Reiss.
“This successful use of FIRREA makes it much more likely that financial institutions are going to settle with the government,” he said.
October 24, 2013 | Permalink | No Comments
