January 11, 2017
Consumer Protection Changes in 2017
Business News Daily quoted me in 6 Big Regulatory Changes That Could Affect Your Business in 2017. It reads, in part,
It’s a new year and there’s a new incoming administration. That means there are likely some big-time regulation changes in the pipeline, not to mention changes that were already on the agenda. Some proposals will fail, while others will pass, but all of them could significantly affect your business in 2017 and beyond.
Top of the list this year are the potential repeal of the Affordable Care Act, the currently suspended change in Department of Labor overtime regulations, and minimum wage or paid sick leave efforts at local and state levels. However, there are a bevy of other potential changes on the horizon that the savvy entrepreneur should be aware of as well.
Here are some of the proposals we’re keeping an eye on this year, and how they might affect small businesses.
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3. Consumer Financial Protection Bureau (CFPB) arbitration rules
Proposed rules from the federal CFPB would prohibit what are known as mandatory arbitration clauses in financial products. Those clauses essentially prevent consumers from filing class-action lawsuits against the company in the event that something goes wrong. The rules would instead leave people to litigate on their own, a time-consuming, costly endeavor that often has very little payoff in the end.
“It is expected that the Obama administration will issue the final rule before President-elect Trump’s inauguration,” David Reiss, research director of the Center for Urban Business Entrepreneurship at the Brooklyn Law School, said. “Entrepreneurs with consumer credit cards should expect that they could join class actions involving financial products. They should also expect that credit card companies will be more careful in setting the terms of their agreements, given this regulatory change.”
Reiss added that the final adoption or rejection of these rules is also subject to the Congressional Review Act, which empowers Congress to invalidate new federal regulations. Even if the rules were adopted, Congress could ultimately reject them.
“Republicans have been very critical of the proposed rule, which they see as anti-business,” Reiss said.
January 11, 2017 | Permalink | No Comments
Wednesday’s Academic Roundup
- Effects of FHA Loan Limit Increases by ESA 2008: Housing Demand and Adverse Selection, Hwang, Miller, and Order.
- Public Investment and Housing Price Appreciation: Evidence from the Neighborhood Stabilization Program, Westrupp.
- Importance of Demographics for Housing in the OECD Economies, Arestis and Gonzalez-Martinez.
- Geographic Proximity and Managerial Alignment: Evidence from Asset Sell-Offs by Real Estate Investment Trusts, Glascock, Wang, and Zhou.
January 11, 2017 | Permalink | No Comments
January 10, 2017
The Cost of Selling Trump’s Empire
Politico quoted me in Selling His Empire Would Cost Trump Money. A Lot of It. It opens,
Donald Trump’s critics say the only way for him to keep his business interests separate from the public’s interest is to simply get out of business entirely, selling his companies and putting the proceeds into anonymous assets that someone else can manage.
But there’s nothing simple about it: unloading a real estate empire as large as Trump’s is a lengthy, complicated process fraught with ethical pitfalls, one that could end up costing a fortune.
“He has to make a choice,” said David Reiss, director of Brooklyn Law’s Center for Urban Business Entrepreneurship. “How much pain is he willing to take?”
Trump, who’s expected to lay out a plan to address conflicts of interest at a press conference Wednesday, heads a particularly difficult estate to unwind. Forbes has pegged his net worth at $3.7 billion in September, attributing most of that to real property holdings tangled in debt, partnership agreements, management contracts, branding deals and tax deferrals.
Ethics watchdogs say Trump’s cleanest break would be to sell his company to the public, but an initial public offering — especially one that folds in most or all of Trump’s scattered businesses — would be complicated, costly and time-consuming.
“The nature of the business doesn’t lend itself to going public,” said Jan Baran, co-chair of Wiley Rein’s election law and government ethics practice. “Rolling in all the real estate and the royalty contracts and all the other orphans like wineries and steaks, it’s a little hard to imagine any public companies that resemble what his business is, because it’s such a hodgepodge of things. It would take a while, it would take at least a year.”
What’s more, Baran noted, an IPO would require underwriters to raise capital and pull together an offering — raising new concerns about investment firms potentially currying favor with the new administration.
“Are the ethics complainers willing to let Goldman Sachs do the underwriting on this public offering?” he said. “Somebody’s got to put it together.”
Even if Trump chose to skip the IPO and just liquidate his assets via direct sales, he’d face a complex task — and a costly one.
“This would be an extraordinarily difficult situation,” said Neil Shapiro, a law partner at Herrick Feinstein in New York. “It would certainly be unprecedented in terms of somebody liquidating a portfolio of this size. We’re in uncharted territories here.”
The problems start with finding a buyer. The pool of people shopping for, say, a Fifth Avenue skyscraper is small, and only the buyer and seller can say for sure whether the price paid is fair. As such, selling a property raises nearly as many ethical quandaries for Trump as owning it. A buyer looking to curry favor with the next president might pay too much. Another might do Trump a favor by making a quick deal while paying too little.
January 10, 2017 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- The Federal Housing Authority reduced yearly insurance premiums on a great deal of mortgages. This reduction is slated to save homeowners at least $500 this year due to the “quarter of a percent” reduction.
- The U.S. Department of Housing and Urban Development is concerned about the housing and reading needs of underprivileged children across the U.S. The agency recently partnered with other organizations to ensure children in public housing have a “book rich” environment to promote reading and the value of an education.
January 10, 2017 | Permalink | No Comments
January 9, 2017
What Is a Promissory Note?
Realtor.com quoted me in What Is a Promissory Note? What You’re Really Promising, Revealed. It opens,
If you get a mortgage to buy a home, you will end up signing something called a promissory note. So what exactly is a promissory note?
In the most basic terms, it’s a legal document you sign containing a written “promise” to pay a lender, says Scott A. Marcus, a shareholder in Becker & Poliakoff’s Real Estate Practice Group, in Fort Lauderdale, FL.
Promissory notes are a standard part of all real estate financing contracts and include basic information such as:
Promissory notes are an important yet often misunderstood part of the loan process.
“The worst mistake someone signing a promissory note can make is to sign a note without reading and understanding all of its terms,” says Marcus.
So let’s clear up a few common misconceptions, shall we?
Promissory note vs. a mortgage: What’s the difference?
Many home buyers mistakenly think that the mortgage—another contract they sign—is their promise to pay back the loan.
Well, they’re wrong! The promissory note is your promise to do that, plain and simple. The mortgage, on the other hand, is a contract that kicks in more when things go wrong.
In a nutshell, a mortgage (also called a deed of trust) is a pledge you sign to put up your property as collateral in case you default on your loan, according to David Reiss, professor of law at Brooklyn Law School and editor of REFinBlog.com.
In other words, if you suddenly find yourself unable to repay your home loan, your lender will eventually confiscate your property and sell it as a foreclosure to help it recoup its losses from lending you all that money.
January 9, 2017 | Permalink | No Comments
Monday’s Adjudication Roundup
- Clorox is not happy with an Illinois city. Clorox is suing University Park in Illinois for breach of promise regarding the reimbursement of rents paid. This alleged breach is a difference of 4 million dollars for the company.
- Washington Mutual Bank was the alleged target of a 10 million dollar mortgage fraud scheme. A New York publisher and mortgage broker is one of four listed as defendants to the alleged crime.
- Move Inc. sought help from the Ninth Circuit. Move Inc. asked the a panel of judges in the Ninth Circuit to rehear their 130 million dollar mismanagement of their real estate funds case against Citigroup; however, the panel of judges ruled in favor of Citigroup.
January 9, 2017 | Permalink | No Comments
January 6, 2017
Carson’s Call of Duty
Dr. Ben Carson
The Hill published my most recent column, Ben Carson’s Call of Duty as America’s Housing Chief:
Ben Carson, the nominee for secretary of the U.S. Department of Housing and Urban Development (HUD), has made almost no public pronouncements about housing policy. The one exception is a Washington Times opinion piece from 2015 in which he addresses an Obama administration rule on fair housing.
While Carson appears to agree with the Obama administration’s diagnosis of the problem of segregation, he attacks its solution. If he refuses to vigorously enforce the rule at HUD, it is still incumbent on him to address the underlying problem it was meant to address.
Carson acknowledges the history of structural racism in American housing markets. He notes that segregation was caused in part by the federal government’s reliance on “redlining,” which refers to the Federal Housing Administration’s mid-20th century practice of drawing a red line around minority communities on underwriting maps and then refusing to insure mortgages within those borders.
He also acknowledges that racially restrictive covenants played a significant role in maintaining segregation. Racially restrictive covenants were legally enforceable agreements among property owners to keep homes from being sold to members of various minority groups. African Americans were the group most often targeted by them.
These covenants were very common in the mid-20th century, until the Supreme Court ruled that they were not legally enforceable. Shockingly, the Federal Housing Administration continued to encourage their use, even after the Supreme Court’s ruling.
Carson also acknowledged that “the Fair Housing Act and other laws have greatly reduced explicit discrimination in housing” but that “significant disparities in housing availability and quality persist.”
All in all, Carson’s take on the history of American housing policy is consistent with the consensus view across the left and the right: the federal government promoted segregationist housing policies for a large part of the 20th century.
Where he veers sharply from the Obama administration is in crafting a solution. The Obama administration promulgated a rule pursuant to the Fair Housing Act that would require localities to affirmatively promote fair housing if they chose to take funds from HUD.
While Carson states that the Obama rule is based on a “tortured reading of Fair Housing law,” the statutory authority for it is pretty clear. The Fair Housing Act states that HUD is to administer housing programs “in a manner affirmatively to further the policies” of the law.
Carson has characterized the Obama administration rule as a “socialist experiment.” I think his characterization is just plain wrong, particularly because the federal government often ties the provision of federal funds to various policy goals.
Think, for instance, of how federal highway dollars were tied to lowering state speed limits to 55 miles an hour. Such linkages are hardly socialist experiments. They merely demonstrate the power of the purse, a long-time tool of the federal government. Even if Carson cannot be convinced of this, the debate over how to address this legacy of discrimination does not end there.
After all, Carson’s opinion identified a serious problem: segregation resulting from longstanding policies of the federal government. He then stated that he does not agree with the Obama administration’s approach to solving the problem. He concluded by stating, “There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens.” But he failed to identify a single policy to address the problems caused by those longstanding and discriminatory federal policies.
If confirmed, Carson must outline how the U.S. Department of Housing and Urban Development can address the legacy of structural racism in American housing markets. The text of the Fair Housing Act makes it clear that HUD must administer its housing programs in a manner that would affirmatively further the policies of the law.
The problem Carson faces is clear. The duty imposed upon him by the law is clear. What remains unclear is how he will fulfill that duty. He has both a legal and moral obligation to set forth his vision, if he is bent on rejecting that of President Obama.
January 6, 2017 | Permalink | No Comments
