November 8, 2016
Domestic Violence and Housing Discrimination
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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
Monday’s Adjudication Roundup
- Wells Fargo has recently experienced a great deal of difficulty in the legal community. The bank can now add to their list of issues because state and federal prosecutors are examining their mortgage-backed security practices.
- A court in Florida edited the foreclosure rules in the state. A judge in Florida determined that the statute of limitations for foreclosure filing resets each time a mortgage payment is late.
- The Second Circuit is currently reviewing a case where the plaintiff is urging the court to mandate the “sell off roughly $542 million defaulted residential mortgage-backed securities.”
November 7, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- A paper by Colin Caines of the Board of Governors of the Federal Reserve System, titled Can Learning Explain Boom-Bust Cycles in Asset Prices? An Application to the US Housing Boom, argues that boom-bust behavior in asset prices can be explained by a model in which boundedly rational agents learn the process for prices. The key feature of the model is that learning operates in both the demand for assets and the supply of credit.
- John C. Williams of the Federal Reserve Bank of San Francisco delivers a speech titled, Measuring the Effects of Monetary Policy on House Prices and the Economy.
- The Freddie Mac Multi-Indicator Market Index for August was up 5.4% over the same month last year, driven by its purchase component, which had an 18.6% increase. August’s Multi-Indicator Market Index was 85.7, its highest level since August 2008. This was a 1.05% increase over July. The index has continually increased on a month-to-month basis since December 2011, except for October 2013 and January 2015.
- Purchases of new U.S. homes in September stayed close to an almost nine-year high, showing residential real estate was maintaining momentum heading into the quieter selling season. Sales climbed 3.1 percent to a 593,000 annualized rate from an August pace that was weaker than initially reported, Commerce Department data showed Wednesday. The median forecast in a Bloomberg survey called for 600,000 pace in September. Purchases in June and July were revised lower.
November 4, 2016 | Permalink | No Comments
November 4, 2016
The Jumbo/Conforming Spread
By David Reiss
Standard & Poor’s issued a research report, What Drives the Variation Between Conforming and Jumbo Mortgage Rates? It opens,
What drives the variation between the conforming and jumbo mortgage rates for the 30-year fixed-rate mortgage (FRM) product offered in the U.S. residential housing market? While credit and interest rate risk are the main factors at play, S&P Global Ratings explores how these risks relate to capital market execution and whether this relationship translates into additional liquidity risk. In our study, we compare the historical spreads between the two average note rates over time, and we also examine the impact of certain loan credit characteristics. Our data indicate that the rate difference grows in periods for which the opportunity for securitization declines as a viable exit strategy for lenders. (1)
S&P also finds that “[r]isk-based pricing trends also appear to influence the jumbo-conforming spread” and that “[t]he currently narrow spread suggests that a combination of g-fee increases and jumbo credit migration has, to some extent, counteracted the lack of liquidity in the non-agency market.” (1)
The report offers some concise background:
The 30-year FRM is a product unique to the U.S. residential housing market. Lenders in other countries typically offer adjustable-rate or balloon mortgages, which serve as the primary debt tools for housing finance. The 30-year FRM has not been globally adopted, partially because the long-term amortization schedule can saddle a lender with substantial interest rate risk in addition to potentially prolonged credit risk. However, the structure of the mortgage financing system in the U.S. provides an exit strategy: lenders can typically sell loan pools into a reasonably deep market if they are averse to the credit, duration, or convexity risks posed by these long-term assets.
In the U.S., the majority of mortgage financing is channeled through government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which have a mandate to buy mortgages for their own portfolios and securitize loan pools, which are subsequently sold to investors. Mortgages that are not financed via the GSEs are often either securitized in the non-agency market or held in institutional portfolios. Both agency and non-agency securitizations optimize funding sources and liquidity, thereby allowing homeowners to enjoy relatively low mortgage rates across the U.S. (1)
My main takeaways from the report are that (1) the decrease in securitization since the financial crisis has contributed to a wider spread between jumbo and conforming mortgages; (2) the high guaranty fee for conforming mortgages pushes down the spread between jumbo and conforming mortgages; and (3) the credit box appears to be loosening a bit, which should mean that jumbos will become available to more than the “super-prime” slice of the market.
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November 4, 2016 | Permalink | No Comments