January 18, 2017
Hidden Mortgage Fees
TheStreet.com quoted me in Hidden Fees Cost Consumers Billions: Which Ones Are the Worst? It opens,
Consumers are notoriously combative over high product and sales fees, and who can blame them?
Fees for common items like mortgages, credit cards, bank accounts and online deliverables, among many others, can really add up, and do hit consumers hard in the pocketbook.
That goes double for so-called “hidden fees” – shadowy charges on goods and services that buyers usually don’t know about.
A new study by the Washington, D.C.-based National Economic Council shows that Americans lose “billions of dollars” from such hidden fees. Another study of communications firms like AT&T, Verizon and Comcast by the Consumer Federation of America pegs hidden fee costs at $60 billion annually.
Few hidden fees are favored by consumer advocates, but some are worse than others.
“My household bills look very much like those of a typical consumer – two cell phones, cable, broadband and landline telephone,” says Dr. Mark Cooper, the CFA’s Director of Research and author of the communications industry report. “Hidden fees – excluding the price of the service, taxes, and governmental fees – added about 25% to my total bill.”
Here’s a quick list:
* * *
Mortgage fees – Outside of the cable/telecom arena, the mortgage sector may well boast the most hidden fees. “When applying for a mortgage, a borrower can be hit with all kinds of obscure fees like processing fees, notary fees, courier fees, even fees for sending emails,” says David Reiss, a professor of law at Brooklyn Law School. ” Before paying the mortgage application fee, the borrower should ask whether any of the fees are waivable. If they are charged by the lender, as opposed to a third party like a government agency, they may very well be waivable.”
Consumers should be on the lookout for hidden fees, across the board. Some solid due diligence can keep a few more bucks in your pocket and strike a blow against companies with fee programs that operate in the shadows, time and time again.
But as of right now, those hidden fees are paying off for companies, and at U.S. consumers’ expense.
January 18, 2017 | Permalink | No Comments
Wednesday’s Academic Roundup
- This article titled, Foreclosure Sales and Recourse, documents the imbalance of foreclosure sales with respect to recourse laws applied to primary mortgages in the U.S. using geographic state borders as exogenous variation combined with individual transaction data located close to the border.
- A paper titled, Public Investment and Housing Price Appreciation; Evidence from the Neighborhood Stabilization Program, assesses impact of the Neighborhood Stabilization Program (NSP), a federal program designed to convert foreclosed properties into renovated affordable housing through public investment.
- This paper, titled Effects of FHA Loan Limit Increases by ESA 2008: Housing Demand and Adverse Selection, examines the impacts of changes in the Federal Housing Administration (FHA) insured loan limit in response to the Economic Stimulus Act (ESA) of 2008.
January 18, 2017 | Permalink | No Comments
January 17, 2017
Mnuchin, When No One Is Watching
Alexander Hamilton
My latest column for The Hill is Hamilton Acted in Good Faith. Will Steven Mnuchin Do The Same? It reads:
UCLA’s legendary basketball coach John Wooden famously said, “The true test of a man’s character is what he does when no one is watching.”
Steven Mnuchin, another leading citizen of Los Angeles, is now in the spotlight as President-elect Donald Trump’s nominee to lead the U.S. Department of the Treasury.
Running the Treasury Department requires financial know-how, which this former Goldman Sachs banker has in spades. But it also requires character, as a large part of the Treasury secretary’s job is to embody the good faith that the American people want the rest of the world to have in us.
In Alexander Hamilton’s Report Relative to a Provision for the Support of Public Credit, written just after he became the first U.S. Treasury secretary, he notes that the government must maintain public credit “by good faith, by a punctual performance of contracts. States, like individuals, who observe their engagements, are respected and trusted, while the reverse is the fate of those, who pursue an opposite conduct.”
OneWest’s actions during Mnuchin’s tenure as chief executive officer raise questions about whether Mnuchin has demonstrated the character necessary to be a worthy successor to Hamilton.
A recently disclosed memo by lawyers at California’s Office of the Attorney General documents a pattern of bad faith toward homeowners with OneWest mortgages. The memo documents evidence of widespread wrongdoing that helped the bank and hurt the homeowners. The evidence includes the backdating of notarized and recorded documents in 99.6 percent of the examined mortgage files and unlawful credit bids and substitutions of trustees in 16.0 percent of those files.
These are not merely technical violations. They shortened the time that homeowners had to get their mortgages back in good standing and they violated a number of procedural protections for homeowners facing non-judicial foreclosures.
Non-judicial foreclosures give lenders the ability to bypass the courts so long as they strictly abide by the procedural protections set forth by statute. Non-judicial foreclosures can only maintain their legitimacy if lenders respect those procedural protections. This is because there is no judge to make sure that the procedural protections are being adhered to. Without them, a homeowner can be no more than a sheep being led to the financial slaughterhouse of an improper foreclosure.
Some bankers have argued that focusing on violations of mortgage terms is overly legalistic, and beside the point given the widespread defaults during the financial crisis. It isn’t. The violations documented in the memo benefited the bank and harmed homeowners by allowing foreclosures to occur faster than they would if the formalities were followed.
They also allowed the bank to avoid paying various taxes relating to the sale of foreclosed properties. Some of the violations documented in the memo can result in felony convictions, which shows just how seriously California views the procedural requirements relating to non-judicial foreclosures. Ultimately, California’s then-Attorney General (and now U.S. Senator) Kamala Harris, chose not to file this complex lawsuit, but the memo’s findings are disturbing nonetheless.
As Hamilton knew, acting in good faith, performing agreements as they are written and keeping promises lead to respect and trust, “while the reverse is the fate of those, who pursue an opposite conduct.” The American people deserve a leader at Treasury with those traits, one who cherishes the rule of law as the basis of a both a healthy market economy and a well-functioning democratic government.
Other nations expect that we meet this standard, too. If they see us as just another bully on the world stage, we will lose our ability to lead by example. Members of the Senate Finance Committee should ask Mnuchin whether his actions at OneWest met the standard set forth by Hamilton.
We won’t be in the rooms where important decisions happen, so we need to have confidence in how Mnuchin will act when he thinks that no one is watching.
January 17, 2017 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- Yesterday, HUD released its third set of revisions for implementing the Rental Assistance Demonstration (RAD) program. Since its creation, nearly 60,000 public housing units have completed conversion to Section 8 assistance under RAD, leveraging over $3.8 billion for construction and rehab. This third revision builds on the program’s success and lessons learned in order to ensure that the program’s pace continues and more properties can be preserved and transformed. HUD has published a list of key changes to RAD as well as a blackline version showing the changes made in Revision 3 from Revision 2.
- The Federal Register has published two HUD notices today regarding assessment tools for Affirmatively Furthering Fair Housing. The first notice announces that the Office of Management and Budget (OMB) has approved HUD’s request to renew the Assessment Tool for use by local governments that receive formula funding from HUD when conducting and submitting their own Assessment of Fair Housing. The second notice announces that the Assessment Tool for use by Public Housing Agencies (PHAs) receiving assistance under the United States Housing Act of 1937 has been approved by OMB. While this tool has been approved, PHAs are not required to conduct and submit an Assessment of Fair Housing until HUD provides them with data.
January 17, 2017 | Permalink | No Comments
January 16, 2017
To The Mountaintop!
In honor of Martin Luther King, Jr. day, the opening of his last speech, I’ve Been to the Mountaintop:
Thank you very kindly, my friends. As I listened to Ralph Abernathy and his eloquent and generous introduction and then thought about myself, I wondered who he was talking about. It’s always good to have your closest friend and associate to say something good about you. And Ralph Abernathy is the best friend that I have in the world. I’m delighted to see each of you here tonight in spite of a storm warning. You reveal that you are determined to go on anyhow.
Something is happening in Memphis; something is happening in our world. And you know, if I were standing at the beginning of time, with the possibility of taking a kind of general and panoramic view of the whole of human history up to now, and the Almighty said to me, “Martin Luther King, which age would you like to live in?” I would take my mental flight by Egypt and I would watch God’s children in their magnificent trek from the dark dungeons of Egypt through, or rather across the Red Sea, through the wilderness on toward the promised land. And in spite of its magnificence, I wouldn’t stop there.
I would move on by Greece and take my mind to Mount Olympus. And I would see Plato, Aristotle, Socrates, Euripides and Aristophanes assembled around the Parthenon. And I would watch them around the Parthenon as they discussed the great and eternal issues of reality. But I wouldn’t stop there.
I would go on, even to the great heyday of the Roman Empire. And I would see developments around there, through various emperors and leaders. But I wouldn’t stop there.
I would even come up to the day of the Renaissance, and get a quick picture of all that the Renaissance did for the cultural and aesthetic life of man. But I wouldn’t stop there.
I would even go by the way that the man for whom I am named had his habitat. And I would watch Martin Luther as he tacked his ninety-five theses on the door at the church of Wittenberg. But I wouldn’t stop there.
I would come on up even to 1863, and watch a vacillating President by the name of Abraham Lincoln finally come to the conclusion that he had to sign the Emancipation Proclamation. But I wouldn’t stop there.
I would even come up to the early thirties, and see a man grappling with the problems of the bankruptcy of his nation. And come with an eloquent cry that we have nothing to fear but “fear itself.” But I wouldn’t stop there.
Strangely enough, I would turn to the Almighty, and say, “If you allow me to live just a few years in the second half of the 20th century, I will be happy.”
Now that’s a strange statement to make, because the world is all messed up. The nation is sick. Trouble is in the land; confusion all around. That’s a strange statement. But I know, somehow, that only when it is dark enough can you see the stars. And I see God working in this period of the twentieth century in a way that men, in some strange way, are responding.
January 16, 2017 | Permalink | No Comments
Monday’s Adjudication Roundup
- The U.S. Securities and Exchange Commission has received a settlement offer from real estate developer Lobsang Dargey in a $136 million EB-5 fraud case playing out in Washington federal court, signaling a possible resolution to the high-profile case.
- Morgan Stanley, Credit Suisse AG and other megabanks on Wednesday urged a New York state judge to ditch multiple lawsuits over nearly $2 billion worth of residential mortgage-backed securities brought by a stand-in for defunct Belgian banking giant Fortis Bank NV/SA
- Moody’s Corp. said Friday it has agreed to pay $864 million in a settlement with the U.S. Department of Justice and 21 states over the ratings agency’s work on residential mortgage backed securities and other products whose crashes led to the financial crisis.
January 16, 2017 | Permalink | No Comments
January 13, 2017
Trust for Trump
US News & World Report quoted me in Here’s What We Know About Donald Trump’s Trust Fund. It opens,
With all the talk about how Donald Trump will be handling his vast business empire as he assumes the presidency, some questions were finally answered this week, and this much is clear: Donald Trump is putting his business assets in a trust.
“Through the trust agreement, he has relinquished leadership and management of the Trump Organization to his sons Don and Eric, and a longtime Trump executive, Alan Weiselberg,” says Sheri Dillon, a lawyer for the president-elect.
But what does that mean?
What is a trust to begin with? A trust is a legal structure with three main parties: The trustor, trustee and beneficiary. The trustor gives another party, the trustee, the right to manage the specified assets for the benefit of its designated beneficiaries.
“According to Trump, his sons, Donald Jr. and Eric, as well as a business associate, would be the trustees. After transferring the assets to the trust, Trump could then be a beneficiary of the trust,” says David Reiss, professor of law at Brooklyn Law School. “The trustees administer the affairs of the trust on behalf of the beneficiaries. The beneficiary receives the income from the trust or the property within the trust.”
Trump has previously said his children will be the primary financial beneficiaries of the trust, but Trump made it clear that he planned on returning to the Trump Organization when his presidency is over. At that point, it’s possible Trump could have a fat check waiting for him, depending on the trust’s structure.
“The trust’s income or property could be doled out on an ongoing basis or deferred to some future point in time, depending on the terms of the trust,” Reiss says.
January 13, 2017 | Permalink | No Comments
