November 10, 2016
Home Mis-Inspector
REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category. Please vote here if you like what you read.
Realtor.com quoted me in Yikes! What If Your Home Inspector Missed Something Huge? It opens,
Your offer has been accepted, and there’s just one more obstacle between you and your new home: the inspection. It can be a stressful event for both buyers and sellers as they wait for the report, hoping no major issues will surface that could sideline the deal.
But what if you make it through that day, let out a big sigh of relief, seal the deal, and then a few weeks or months later find an issue in your new home—a bat infestation, a leaky roof, a CDC-level mold problem—that the home inspector didn’t catch? Just how much peace of mind does a home inspection really buy you?
Find out how you can protect yourself.
Sadly, there’s no insurance home buyers can take out to protect themselves from a faulty inspection. As such, the most important step home buyers can take to prevent that scenario is to select a reputable inspection company.
Make sure you choose a firm that has been in the residential inspection business for a while and has a strong reputation (real estate agents and lenders often have recommendations).
But most important, your home inspector should have adequate insurance.
Keith Balsiger, president of Balsiger Insurance in Las Vegas, says buyers should ask for a current certificate of insurance that shows the inspection company has both general liability insurance and professional liability insurance (also known as errors and omissions insurance). This is what would potentially cover you as a buyer if there was a major “miss” on the part of the inspection.
If you want to be extra safe, you can call the insurance agency of the inspection company to confirm the coverage on the certificate is still valid.
You also want to closely examine the terms of the liability insurance. David Reiss, professor of law at Brooklyn Law School, says some contracts will state that the company is liable only for the cost of the inspection, which won’t be much solace if you find yourself on the hook for repairs that could cost hundreds of thousands of dollars.
“Ideally, you would not want there to be any limit on the inspector’s liability in case he or she was negligent in doing the inspection,” says Reiss. At the very least, make sure the limit exceeds the cost of the inspection alone.
Why buyers should attend the home inspection
As an added safeguard, buyers should be physically present during the inspection. If an inspector balks at this idea, that’s a red flag. Make sure to find out what is covered by the inspection, and if there’s anything you want the inspector to scrutinize in particular (say, you know the boiler is old or the basement has water stains, suggesting flooding issues), state that upfront.
“It’s a buyer’s job to make the most of the home inspection,” says Bryant Dunivan Jr., a real estate and consumer protection attorney in Brandon, FL. Here are some things to watch for during the inspection:
- The inspector is working off a checklist of items that was in the contract.
- Major systems (air conditioning, heating, water, etc.) are tested.
- The inspector actually enters attic and crawl spaces.
- A report complete with pictures is provided.
What to look out for in a home inspection
Robert Pellegrini Jr., president of PK Boston, a real estate law firm based in Boston, says a typical red flag disclaimer on the inspection report is a statement that there was a problem with “access” to roofs, eaves, and areas behind locked or blocked doors or crawl spaces.
“That serves to absolve the inspector of any liability,” Pellegrini says.
Urge the home seller to remove all barriers that might prevent an inspector from doing a thorough job. Some home buyers even take the process into their own hands and hire drones or robots to view inaccessible areas.
Uh-oh! You’ve closed, but there’s a problem
No matter how many precautions you take, the nightmare scenario does happen: You move in and then discover a problem. A big one. Can you bring it up with the seller? After all, sellers are required to disclose any known issues about the home.
Well, here’s the rub: Proving the seller knew about something after the fact is nearly impossible, and the legal cost involved in trying to prove it is often too steep to make an attempt.
Which brings us back to the home inspector. If you encounter a problem, bring it up with your inspector. As long as you used one with decent liability insurance that covers more than just the cost of the inspection, odds are decent you’ll be compensated for any damages. Again, you’ll have to prove it. For example, if the inspector said the roof was in good condition, but there was a leak months later during a big storm, you would have to prove that nothing happened in the intervening time that damaged the roof.
“Bottom line: You would probably need pretty clear facts on your side to win,” Reiss says.
November 10, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- An article titled, “Why Housing is the Political Issue Candidates Aren’t Talking About,” analyzes the American housing issues that continue to make it hard for Americans to purchase homes.
- Incomes are rising and homeowners are sparing no cost to renovate their homes. An article titled, “Homeowners will Spend a Record Amount on Home Renovations Next Year,” estimates that homeowners will spend 327 billion dollars to renovate their homes.
November 10, 2016 | Permalink | No Comments
November 9, 2016
Housing Finance Reform, Going Forward
President-Elect Trump
Two high-level officials in the Treasury Department recently posted Housing Finance Reform: Access and Affordability Going Forward. It highlighted principles that should guide housing finance reform going forward. It opened,
Access to affordable housing serves as a cornerstone of economic security for millions of Americans. The purchase of a home is the largest and most significant financial transaction in the lives of many households. Access to credit and affordable rental housing defines when young adults start their own households and gives growing families options in choosing the quality and location of their homes. Homeownership can be an opportunity to build wealth, placing a college education within reach and helping older Americans attain a secure retirement. Whether they are aware of it or not, some of the most momentous decisions American families make are shaped by how the housing finance system serves them.
Financial reform has sought to reorient financial institutions to their core mission of supporting the real economy. The great unfinished business of financial reform is refocusing the housing finance system toward better meeting the needs of American families. How policymakers address this challenge will be the critical test for any model for housing finance reform. The most fundamental question any future system must answer is this: Are we providing more American households with greater and more sustainable access to affordable homes to rent or own? It is through this lens that we will assess the performance of the current marketplace and evaluate a set of policy considerations for addressing access and affordability in a future system. (1-2)
These principles of access and affordability have guided federal housing finance policy for quite some time, particularly in Democratic administrations. They now appear to fallen by the wayside as Republicans control both the Executive and Legislative branches.
President-Elect Trump has not yet outlined his thinking on housing finance reform. And the Republican Party Platform is somewhat vague on the topic as well. But it does give some guidance as to where we are headed:
We must scale back the federal role in the housing market, promote responsibility on the part of borrowers and lenders, and avoid future taxpayer bailouts. Reforms should provide clear and prudent underwriting standards and guidelines on predatory lending and acceptable lending practices. Compliance with regulatory standards should constitute a legal safe harbor to guard against opportunistic litigation by trial lawyers.
We call for a comprehensive review of federal regulations, especially those dealing with the environment, that make it harder and more costly for Americans to rent, buy, or sell homes.
For nine years, Fannie Mae and Freddie Mac have been in conservatorship and the current Administration and Democrats have prevented any effort to reform them. Their corrupt business model lets shareholders and executives reap huge profits while the taxpayers cover all loses. The utility of both agencies should be reconsidered as a Republican administration clears away the jumble of subsidies and controls that complicate and distort home-buying.
The Federal Housing Administration, which provides taxpayer-backed guarantees in the mortgage market, should no longer support high-income individuals, and the public should not be financially exposed by risks taken by FHA officials. We will end the government mandates that required Fannie Mae, Freddie Mac, and federally-insured banks to satisfy lending quotas to specific groups. Discrimination should have no place in the mortgage industry.
Turning those broad statements into policies, we are likely to see some or all of the following on the agenda for housing finance reform:
- a phasing out of Fannie Mae and Freddie Mac, perhaps via some version of Hensarling’s PATH Act;
- a significant change to Dodd-Frank’s regulation of mortgage origination as well as a full frontal assault on the Consumer Financial Protection Bureau;
- a dramatic reduction in the FHA’s footprint in the mortgage market; and
- a rescinding of Obama’s Affirmatively Furthering Fair Housing Executive Order.
Some are already arguing that Trump and Congress will take a more pragmatic approach to reforming the housing finance system than what is outlined in the Republican platform. I think it is more honest to say that we just don’t know yet what the new normal is going to be.
November 8, 2016
Domestic Violence and Housing Discrimination
REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category. Please vote here if you like what you read.
DomesticShelters.org quoted me in Abuse Survivors Not Welcome. It opens,
There are lots of barriers survivors of domestic violence face when searching for housing. Sandra Park, an ACLU attorney at the Women’s Rights Project who focuses on the rights of domestic violence survivors, shares one example.
Park worked with a woman called Hope who seemed to be on track to rent an apartment. Hope placed a deposit and the property management company gave her an application that asked for the social security numbers of her children. Due to her history as a domestic violence survivor, Hope had changed her own social security number and her identity. She had full custody of her children and their father had no visitation rights.
The property management company said they would run a check on the children’s social security numbers—a move that Hope feared could alert her abuser to her location. She refused to give the numbers and was turned down for the apartment. She turned to the ACLU, which filed a Fair Housing Act complaint on her behalf. Ultimately, the management company compensated Hope and changed its policy.
Discrimination Is Real
Research confirms that survivors of domestic violence are sometimes discriminated against when they look for housing. A study done by the Washington, D.C.-based Equal Rights Center found that advocates searching for housing on behalf of a domestic violence victim were either denied housing or offered less advantageous terms, compared to comparable people with no connection to domestic violence.
For example, the domestic violence advocates might be told that they had to meet a landlord in person, or that their move-in date was too soon, or that they would receive a call back with more information while another caller was given the information right away. In some cases the call back never came.
Another study, by the Anti-Discrimination Center of Metro New York and conducted in a similar fashion, found that 27.5% were flatly refused housing or failed to receive follow up.
Potential Problems
There are various reasons landlords might hesitate to rent to a domestic violence survivor:
● The landlord may be uncomfortable dealing with a survivor
● The landlord may believe the abuser will cause issues
● The survivor may have bad credit because the abuser ruined their credit history
● The survivor may have a history of eviction that’s linked to the domestic violence
● The survivor may have a criminal conviction for conduct stemming from self-defense
What Can Survivors Do?
It may help to be honest with your potential future landlord. “If you have negative criminal, credit or tenancy records because of domestic violence and you know the landlord is going to run that kind of check, it can go a long way to be up front and explain why you have that history,” Park says. “In some cases it makes sense to try to provide that information to the landlord, so when the check comes back they don’t throw away your application.”
She says if you believe you’re facing discrimination, you might want to seek legal assistance. Nationally, the Fair Housing Act and the Violence Against Women Act both offer some protection.
The Fair Housing Act doesn’t prohibit discrimination based on domestic violence status. But it does prohibit discrimination based on gender. Since the majority of domestic violence victims are women, in some cases you can make the argument that discriminating against a female domestic violence survivor is discrimination based on gender.
The Violence Against Women Act does offer protection for domestic violence survivors. But it only applies to federally funded and Section 8 housing. If you are applying to a property and you’re covered under the Violence Against Women Act, you may want to notify your landlord about your protection. “Some landlords will not know about the Violence Against Women Act at all, so it can be helpful for them to be educated about that,” Park says.
Some state and local laws also prohibit housing discrimination based on domestic violence status. The National Housing Law Project lists state laws that offer this protection.
David Reiss, professor of law at Brooklyn Law School, recommends keeping careful records as you search for housing, in case you need evidence to prove discrimination.
“Save your texts, emails and voicemails. If you have evidence you want to protect don’t destroy it, save a copy. Once you start making noise that you think you’re being discriminated against people will be more cautious,” he warns.
November 8, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- The Massachusetts legislature is aware of the need for more affordable housing. As a result, the Baker administration awarded 3.4 million for more affordable housing in the Boston area.
November 8, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- When Everything is Small: The Regulatory Challenge of Scale in the Sharing Economy, Zale
- Health Care and Housing Crisis, Gilbert & Wade
- The Rise of the Homevoters: How the Growth Machine Was Subverted by OPEC and Earth Day, Fischel
- Political Borders and Bank Lending in Post-Crisis America, Chavaz & Rose
November 8, 2016 | Permalink | No Comments
November 7, 2016
Miami Vice?
REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category. Please vote here if you like what you read.
The BNA Banking Report quoted me in BofA, Wells Fargo Try to Squelch High-Risk City Bias Suits (behind a paywall). It opens,
Bank of America and Wells Fargo are hoping an Election-Day U.S. Supreme Court argument will help them sidestep allegations of biased lending practices and the massive liability that could follow (Bank of Am. Corp. v. Miami, U.S., No. 15-cv-01111, argument scheduled 11/8/16).
At issue is a 2015 federal appeals court ruling that reinstated a Fair Housing Act lawsuit by the city of Miami. The suit said Bank of America and Wells Fargo made discriminatory home loans that spurred widespread foreclosures while driving tax revenues down and city expenditures skyward.
The U.S. Supreme Court is set to hear arguments Nov. 8, with a focus on two questions – whether Miami has the right to assert such claims, and whether it can establish the critical “causal link” by tracing its problems to actions by the banks.
The case is high on the “must-watch” list of banks and consumer advocates. The court’s decision will affect a series of separate lawsuits against Bank of America and Wells Fargo by other cities that are now on hold and awaiting a decision in this case, as well as lawsuits against JPMorgan, Citigroup, and HSBC.
“There are suits all over the country raising these issues,” said Karen McDonald Henning, associate professor at the University of Detroit Mercy School of Law. “The potential exposure to banks could be enormous.”
The case also could clarify how the law is applied to address societal wrongs, Henning added in an assessment echoed by Mehrsa Baradaran, associate professor of law at the University of Georgia School of Law in Athens, Ga.
“This could really give the Fair Housing Act some teeth to do away with problems it was meant to remedy,” she said.
Fair Housing Act
According to Miami, Bank of America and Wells Fargo violated the Fair Housing Act in two ways. The city said the banks intentionally discriminated against minority borrowers by targeting them for loans with burdensome terms.
Miami also said the banks’ practices had a disparate impact on minority borrowers that resulted in a disproportionate number of foreclosures and exploitive loans in minority neighborhoods.
Bank of America did not immediately respond to a request for comment ahead of the argument. Wells Fargo spokesman Tom Goyda declined to comment.
Both banks have consistently defended their lending practices, citing efforts to boost community development and trying in some cases to take what Wells Fargo has called “a collaborative approach” when it comes to disputes.
But both banks say the lawsuits are off-base as a matter of law. In its petition to the U.S. Supreme Court in June, Bank of America said the plaintiffs are making demands “based on a multi-step theory of causation that would have made Rube Goldberg proud.”
Risk Goes Local
Even so, if Miami’s suit is allowed to go forward, it could expose global financial institutions to liability from local governments across the nation, said Professor David Reiss of Brooklyn Law School in New York.
That’s new, he said. Although the federal government and state attorneys general have reached multi-billion settlements with banks in the wake of the financial crisis, local governments haven’t had much of a role in those battles, Reiss told Bloomberg BNA.
But if Miami’s suit goes ahead, mortgage lenders could face significant litigation costs and monetary judgments under new theories of liability. “These new theories are independent of the theories relied upon by the federal government and the states and could therefore expand the overall liability of financial institutions from the same underlying set of facts,” Reiss said.
November 7, 2016 | Permalink | No Comments
