December 6, 2016
Expectations for Carson at HUD
Dr. Ben Carson
The Christian Science Monitor quoted me in What Could US Cities Expect From Ben Carson as HUD Secretary?
Ben Carson, a former neurosurgeon and erstwhile rival of Donald Trump, was nominated Monday by the president-elect to lead the Department of Housing and Urban Development (HUD).
If confirmed by the Senate to be secretary of HUD, Carson would oversee a department dedicated to developing and enacting policies on housing, focusing on building community in lower-income neighborhoods, providing financial assistance for homeowners, and preventing racial discrimination in local housing policies.
Reactions to the nomination have fallen largely along party lines, with many Democrats criticizing Carson’s lack of experience, having never held public office before – inexperience that also makes it hard to predict his potential priorities in a Trump administration. But he has been a frequent critic of social welfare programs, saying that church- and community-based initiatives are a better vehicle than government programs for assisting Americans in poverty.
“I am thrilled to nominate Dr. Ben Carson as our next secretary of the US Department of Housing and Urban Development,” Trump said in a statement released by his transition team. “Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities. We have talked at length about my urban renewal agenda and our message of economic revival, very much including our inner cities.”
Trump and Carson had discussed the job before Thanksgiving, but Carson initially expressed reluctance to take a position on the cabinet, despite his campaign for the US presidency, because of his lack of experience in a political office. Since then, Carson has evidently overcome those reservations.
“I feel that I can make a significant contribution particularly by strengthening communities that are most in need,” Carson said in the statement.
Carson is the first African-American pick for Trump’s cabinet, and would likely be confirmed by the Republican-controlled Senate.
Carson’s communication skills give him “the ability to bring the message of poverty alleviation to people nationwide and I hope he would quickly learn the importance of HUD and would try to make it better, stronger, more efficient” Robert C. Moss, the national director of government affairs at CohnReznick, a public accounting firm, tells The Christian Science Monitor in an email.
“Carson is a very skilled speaker, maybe one of the best we’ll see in this role,” writes Mr. Moss, who specializes in affordable housing, “and if he hits on the right direction and takes the message around the country, he could help make the case for affordable housing.”
Trump’s campaign did not focus much on housing or urban development, other than to describe the state of poor “inner city” African-Americans and Hispanics as “disastrous” on multiple occasions. Many critics of Carson say that the former Republican presidential candidate ran on a platform of shrinking the role of government agencies like HUD, putting him at philosophical odds with the very department he will be in charge of.
HUD was created in 1965 in order to build stronger communities and create affordable housing for Americans with low incomes. The department was given the responsibility of enforcing the Fair Housing Act of 1968, which outlawed most forms of housing discrimination, including racial, religious, or based on family status.
African-Americans, in particular, have experienced decades of housing discrimination, says Professor Reiss.
“Redlining, the practice of refusing to provide credit in minority communities, was implemented on a national scale since the beginning of the New Deal, by government agencies like the Federal Housing Administration,” he says. “Such policies continued on for decades. These policies led, in part, to the disinvestment in cities through the 1960s that impacted African-American communities most of all.”
But some of the HUD’s recent rules have come under criticism for “social engineering.” One particular policy Carson has publicly opposed is the Affirmatively Furthering Fair Housing (AFFH) rule adopted by the Obama administration, which requires cities to monitor and report on any housing patterns of racial bias, in an effort to promote less segregated neighborhoods.
“The purpose of the AFFH rule is to reduce segregation which had been caused in part by the federal government’s own actions,” David Reiss, the academic program director for the Center for Urban Business Entrepreneurship at Brooklyn Law School, tells the Monitor in an email. The secretary of HUD “can signal that fair housing allegations and violations will be taken seriously or not. If Carson is confirmed, it will send a strong signal that local governments do not need to worry about the Affirmatively Furthering Fair Housing rule for the foreseeable future.”
December 6, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- The Federal Housing Administration will raise the ceiling and floor of their loans in 2017. This shift comes after an increase in housing prices throughout the U.S.
- Public Housing residents must shift their habits. The U.S. Department of Housing and Urban Development’s secretary, Julian Castro, announced that public housing will now be a smoke free environment.
December 6, 2016 | Permalink | No Comments
December 5, 2016
Mnuchin and Housing Finance Reform
Sabri Ben-Achour of Marketplace interviewed me in Choice of Mnuchin Troubles Housing Activists. (The audio is available at the link at the top of the linked page.) The summary of the story reads as follows:
Donald Trump has tapped financier, Hollywood producer and hedge fund manager Steven Mnuchin as Treasury Secretary. In that role, Mnuchin would have quite a lot to say about housing, finance and policies related to mortgage lending. Mnuchin has been involved in lending before, and it didn’t go well for many homeowners.
At issue specifically is his an investment in a failing mortgage lender in 2009 called IndyMac in California. Mnuchin and other investors renamed it OneWest, and it proceeded to foreclose on tens of thousands of homes nationwide. Critics say the company could have kept some portion of those people in their homes.
The story reads in part,
“I think the really big place where the Treasury Secretary can have an impact is on housing finance reform and, really, what we should do with Fannie and Freddie.” David Reiss is a Professor of Law at Brooklyn Law School.
December 5, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- A Delaware federal judge decided not to hear a potential class action suit regarding “real estate funds and a ‘Ponzi-like’ scheme.”
- New Jersey filed a suit against local New Jersey residents that defrauded New Jersey citizens of their funds regarding their pending foreclosures.
- A New York Judge provided relief to a couple that had experienced several years of harassment from local banks claiming their home was in foreclosure when it was not.
December 5, 2016 | Permalink | No Comments
December 2, 2016
All About Mortgage Brokers
Bankrate.com quoted me in Mortgage Broker — Everything You Need To Know. It opens,
When you need a mortgage to buy or refinance a home, there are 3 main ways to go about applying — through a traditional brick-and-mortar bank, an online lender or a mortgage broker (either in-person or online).
Many people first think about shopping for a mortgage where they already have their checking and savings accounts, which is often a major bank or a local credit union. And applying online with a traditional bank or online-only lender has become more common.
But while borrowers are probably the least familiar with using a mortgage broker, it comes with many benefits.
Here’s everything you need to know about using a mortgage broker.
Working with a mortgage broker
A mortgage broker connects a borrower with a lender. While that makes them middlemen, there are several reasons why you should consider working with a broker instead of going straight to a lender.
For starters, brokers can shop dozens of lenders to get you the best pricing, says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage” and mortgage advisor with C2 Financial Corp. in San Jose, California.
Fleming says the price he charges for certain lenders or banks is very often better than the price a consumer could get by going directly to the same lender.
“When the lender outsources the loan origination and sales function to a broker, they offer to pay us what they would otherwise pay to cover their internal operations for the same function,” Fleming says.
“If we are willing to work for less than that—and that is usually the case—then the consumer’s price through a broker ends up being less than if they went directly to the lender,” he explains.
Further, “A broker is legally required to disclose his compensation in writing — a banker is not,”says Joe Parsons, senior loan officer with PFS Funding in Dublin, California, and author of the “Mortgage Insider blog.”
Variety is another benefit of brokers. It can help you find the right lender.
“Some may specialize in particular property types that others avoid. Some may have more flexibility with credit scores or down payment amounts than others,” says David Reiss, a law professor who specializes in real estate and consumer financial services at Brooklyn Law School in New York and the editor of REFinBlog.com.
In addition, brokers offer one-stop shopping, saving borrowers time and headaches.
“If you are turned down by a bank, you’re done — you have to walk away and begin again,” Fleming says. But “If you are turned down by one lender through a broker, the broker can take your file to another lender,” he adds. The borrower doesn’t need to do any extra work.
A broker’s expertise and relationships can also simplify the process of getting a loan.
Brokers have access to private lenders who can meet with you and assess whether or not you have the collateral, says Mike Arman, a retired longtime mortgage broker in Oak Hill, Florida.
Private lenders, which include nonbank mortgage companies and individuals, can make loans to borrowers in unconventional situations that banks can’t or won’t because of Dodd-Frank regulations or internal policy.
You may get a better price on a loan from a broker as well.
Under the Consumer Financial Protection Bureau’s Loan Originator Compensation rule, brokers (but not bank lenders) must charge the same percentage on every deal, so they can’t raise their margin “just because” like a bank can, Fleming explains.
“The intent was to prevent originators from steering borrowers to high-cost loans in order to increase their commission,” Fleming notes.
You should also know that working with a broker won’t make your loan more expensive.
“The lender pays us, just like a cruise line pays a travel agent,” Fleming says.
Working with a traditional bank lender
Banks issue less than half of mortgages these days, according to the industry publication Inside Mortgage Finance. But working with a broker isn’t necessarily a slam dunk.
“A broker may claim that he offers more choices than a banker because he works with many lenders,” Parsons says. “In reality, most lenders offer pricing on their loans that is very similar.” Although, he notes, a broker may have available some niche lenders for unusual circumstances.
Reiss says that even if you’re working with a mortgage broker, it can be worthwhile to check out lenders on your own since no broker can work with every lender — there are simply too many. He suggests starting with lenders you already have a relationship with, but also looking at ads and reaching out directly to big banks, small banks and credit unions in your community.
It’s important to know your range of options, he notes.
For the same reason, you might want to shop around with a few different brokers.
December 2, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- The employment report showed solid gains in December despite the narrowing supply of workers in the labor market. Total nonfarm payroll employment increased by 178,000 from last month, while the unemployment rate decreased to 4.6%, according to the Bureau of Labor Statistics
- With just a few words uttered Wednesday during an interview on Fox Business, Steve Mnuchin, President-elect Donald Trump’s choice to lead the Department of the Treasury, sent the stocks of Fannie Mae and Freddie Mac soaring to heights not seen since June 2014.
- This paper, titled Cross-Sectional Patterns of Mortgage Debt During the Housing Boom: Evidence and Implications, addresses the reallocation of mortgage debt to low-income or marginally qualified borrowers plays a central role in many explanations of the early 2000s housing boom. It shows that such a reallocation never occurred, as the distribution of mortgage debt with respect to income changed little even as the aggregate stock of debt grew rapidly.
- This paper, titled Temporary Loan Limits As a Natural Experiment in Federal Housing Administration Insurance, addresses how The Economic Stimulus Act of 2008 dramatically but temporarily increased the mortgage loan amount eligible for insurance through the Federal Housing Administration (FHA). The authors use the implementation and expiration of these loan limits as a source of exogenous variation in the availability of FHA insurance to measure the impact on the overall mortgage market and conventional lending.
December 2, 2016 | Permalink | No Comments
December 1, 2016
Preparing for Surprise Closing Costs
The Wall Street Journal quoted me in Buying a Home? Prepare for Surprise Closing Costs. It opens,
Note to house hunters on a budget: A home’s sale price isn’t really the sale price—there are lots of closing costs and expenses that jack up the final number.
According to online real-estate listings site Zillow, buyers typically pay between 2% and 5% of the purchase price in closing costs. So if a home costs $300,000, that buyer can expect to pay between $6,000 and $15,000. Since the financial crisis, there’s more transparency on the part of lenders when disclosing the costs associated with a mortgage, so buyers know in advance how much they’ll need for the closing. But experts say that might not be enough.
Lender fees are only one part of the total cost of homeownership. Buyers must also pay appraisers, home inspectors and settlement agents, as well as the cost of title insurance, homeowners insurance and property taxes. And the fees don’t stop at the closing. Utilities, regular home maintenance and unexpected repairs add up as well—and can derail even the most experienced buyer.
* * *
Here are a few considerations to help you avoid surprises at the closing table.
Stash your cash. There is no real rule of thumb as to how much money buyers should put aside in addition to the balance of the purchase price and closing costs. But the more, the better. “You definitely want an emergency fund,” says David Reiss, a Brooklyn Law School professor who specializes in real estate. “Appliances have a habit of breaking right after you buy a house.”
Close on the last day of the month, or just before. One of the fees due at closing is prepaid interest, the daily interest charge accruing between the closing and the day on which your first mortgage payment is due. Closing on the last day of the month reduces this upfront cost.
Get an estoppel letter from the association. Your real-estate agent or attorney may obtain this letter, which lists the maintenance fee, when it’s due, any required escrows or membership fees and whether a special assessment has been levied. Review this letter carefully, and compare it with the purchase contract to make sure all fees are apportioned accurately between buyer and seller.
December 1, 2016 | Permalink | No Comments
