- The National Housing Conference released its 2015 “Paycheck to Paycheck” report, which reports how the gap between housing and wages has increased.
- The National Bureau of Economic Research released a working paper, Housing Booms and Busts, Labor Market Opportunities, and College Attendance, which reports a correlation between the state of the housing market and college attendance.
- CoreLogic released its August 2015 National Foreclosure Report, showing that, since August 2014, there has been a decrease in the amount of foreclosures.
- Center on Budget and Policy Priorities released “How Housing Vouchers Can Help California’s Rental Crisis”.
Tag Archives: California
Thursday’s Advocacy & Think-Tank Round-Up
- Enterprise Community Partner’s and other affordable housing advocates have launched #CapsHurtCommunities, a campaign to raise spending caps imposed and restore critical funding. They are urging organizations and concerned citizens to reach out to Congress while the members on recess – asking them to support tax extenders legislation and fully fund affordable housing. The Summer Advocacy Tool Kit contains a variety ideas for creating awareness around the issue.
- The Make Room Campaign’s mission is to raise awareness around the rent affordability crisis currently being played out in homes across the U.S. The Campaign has a novel approach – celebrity concerts, held on the 1st, (when the rent is due) in rent burdened living rooms. In July, Grammy Award winning Artist Timothy Bloom held a concert in the Paterson NJ (See, NJ Factsheet) home of the five member Montgomery family, which spends more than half its income on rent and despite holding three jobs, is behind on bills and cannot afford a vehicle. Last Month’s concert was in the Los Angeles, CA (See, CA Factsheet) home of the Duartes where Carly Rae Jepson performed her hit song, “Call Me Maybe.”
- National Association of Realtors’ Pending Home Sales Index took a dip in June, after five months of increases. on the other hand, when compared to June of 2014, it reflects an 8.2% increase.
Bank Break-ins
Chris Odinet has posted Banks, Break-Ins, and Bad Actors in Mortgage Foreclosure to SSRN. The abstract reads,
During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles began cropping up in newspapers and media outlets across the country recounting stories of people who had fallen behind on their mortgage payments returning home one day to find that all of their belongings had been taken and their homes heavily damaged. These homeowners soon discovered that it was not a random thief that was the culprit, but rather property management contractors hired by the homeowners’ mortgage servicer.
The issues arising from these practices have become so pervasive that lawsuits have been filed in over 30 states, and legal aid organizations in California, Florida, Michigan, Nevada, and New York report that complaints against lender-engaged property managements firms number among their top grievances. This Article analyzes lender-engaged property management firms and these break-in foreclosure activities. In doing so, the paper makes a three-part call to action, which includes the implementation of bank contractor oversight regulations, the creation of a private cause of action for aggrieved homeowners, and the curtailment of property preservation clauses in mortgage contracts.
This is a timely article about a cutting edge issue. All too often I have heard pro-bank lawyers claim that banks almost never foreclose improperly. The news reports and lawsuits discussed in this article counter that claim. And yet, I hope that some empirically-minded person could quantify the frequency of such misbehavior to better inform policymakers going forward.
Airbn-Beffudled
MainStreet quoted me in Is Airbnb Making It Impossible For You To Rent That Dream Apartment?. It opens,
The accusation is blunt: Airbnb, say some, is sucking up apartment units that otherwise would be available to renters. In San Francisco, that claim is spoken so loudly – by so many politicians – a city agency just filed a report on it.
Similar claims are heard in Santa Monica, Calif., in Manhattan and some Brooklyn neighborhoods, a few areas in Seattle and also a sliver of Boston and adjacent Cambridge. True? False? Is that Airbnb host putting vacationers up in what should be your prime Greenwich Village flat?
Some think such accusations are just distracting from the main issue at hand: housing inventory shortages.
“It’s a diversion,” says Richard Green, the Lusk Chair in Real Estate at the University of Southern California. “Politicians are not dealing with what they should be dealing with to address housing unavailability so they are singling out Airbnb.” His nuanced point is that in most markets the number of Airbnb units is trivial and so whatever impact it has on apartment availability is minimal.
The San Francisco government report does not disagree: “the Budget and Legislative Analyst estimates that between 925 and 1,960 units citywide have been removed from the housing market from just Airbnb listings. At between 0.4 and 0.8%, this number of units is a small percentage of the 244,012 housing units that comprised the rental market in 2013.”
Read the San Francisco report. It said that under 1% of apartments have been removed from rental channels due to Airbnb. How important is that? What does it mean?
What is unique about San Francisco – also Manhattan and a few other places – is that apartment vacancy rates are fiercely low. In a recent survey, it stood at 4.1% in San Francisco and that means this is the type of town where would-be renters get in line early whenever a decent unit goes up for rent. Add back in those Airbnb units and, yes, that might be a happy day for some tenants. But not many.
The other unique feature: San Francisco, Manhattan and a very few other places attract large tourist populations, especially Millennials, and that has been a sweet spot for sharing economy rentals. Take tight supply, add in high hotel prices and a flood of tourists and there is the recipe for cries about any apartment that seems to be lost to the longterm tenant market.
In a lot of markets – from Phoenix to Houston – vacancy rates are already high, tourist numbers are low and nobody really thinks Airbnb is having any impact on local rentals.
But in some cities it just may be. Harry Campbell, TheRideShareGuy.com, said of Airbnb: it is “having a huge impact in coastal communities [of Los Angeles] like Venice/Santa Monica where mid level chain hotels can run upwards of $300-$400 a night. It just doesn’t make much sense for landlords to rent their apartments out traditionally when the profits are so much higher using Airbnb.” (Santa Monica, in mid May, enacted legislation banning short-term rentals such as Airbnb. Nobody knows how it will be enforced or if it will withstand legal challenges.)
At least one Portland, Ore. Airbnb host emailed Mainstreet to admit that two apartment units that had been rented to regular tenants are no longer. Explained that host: “From the point of view of a former landlord, the Airbnb experience is far superior. Airbnb guests are, on the whole, responsible, considerate and never late with rent since this is collected in advance by Airbnb.”
Either way, however, the calculus is not one-sided, not even in those premium markets like San Francisco. Green added: “You could also say that Airbnb is increasing the stock of affordable housing units by letting some keep their apartments by occasionally renting them out. It’s entirely possible Airbnb produces as many units as it loses.”
In that regard, listen to Kip (last name withheld) — a self-described 60+ woman living alone in Beverly Hills in a two bedroom apartment. A few times a month, said Kip, she rents it out through Airbnb. “That helps me with the cost of living,” she said. She stressed she would never take in a roommate but is happy with having guests a few nights a month. “It’s helped me boost my flagging income,” she said.
Christopher Nulty, an Airbnb spokesperson, had fighting words in response to the San Francisco report in particular.
“This comes from the same people who want to ban new housing in the Mission [a San Francisco neighborhood], ban home sharing and make San Francisco more expensive for middle class families,” he said. “Home sharing is an economic lifeline for thousands of San Franciscans who depend on the extra income to stay in their homes.”
So, who’s telling the truth?
“When evaluating claims about Airbnb, it is important to keep in mind whose ox is being gored,” said David Reiss, a professor at Brooklyn Law School. His point: In some cases, maybe Airbnb brings some harm. In other cases, it does good. Matters just aren’t simple or black and white.
Friday’s Government Reports Round-up
- Budgetary Impact of Major Federal Programs that Guarantee Mortgages—Congressional Budget Office’s January 2015 Baseline
- California Assembly Democrat’s Proposal to Create More Affordable Housing in California
- Dr. Michael Stegman, Counselor to the Treasury Secretary for Housing Finance Policy, Remarks before the Third Annual Goldman Sachs’s Housing Finance Conference
- Fannie Mae: Housing Forecast February 2015
Reiss on $1.5B S&P Settlement
Westlaw Journal Derivatives quoted me in S&P Settles Fraud Suits for $1.5 Billion. The story reads in part,
Standard & Poor’s has agreed to pay $1.5 billion to settle lawsuits filed by the U.S. Department of Justice, 19 states and a pension fund that accused the ratings agency of damaging the economy by inflating credit ratings in the years leading up to the 2008 financial crisis.
According to a statement issued Feb. 3 by S&P, a subsidiary of McGraw-Hill Cos, the ratings agency will pay $687.5 million each to the DOJ and the states. It also will pay $125 million to settle a lawsuit filed by California Public Employees’ Retirement System. Cal. Pub. Employees’ Ret. Sys. Moody’s Corp. et al., No. CGC-09-490241, complaint filed (Cal. Super. Ct., S.F. County July 9, 2009).
The parties filed a joint stipulation of dismissal with the U.S. District Court for the Central District of California on Feb. 4.
“After careful consideration, the company determined that entering into the settlement agreement is in the best interests of the company and its shareholders and is pleased to resolve these matters,” McGraw-Hill said in the statement.
S&P did not admit to any wrongdoing in agreeing to settle.
U.S. Attorney General Eric Holder announced the settlement for the Justice Department and states.
“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” he said in a statement.
* * *
David Reiss, a professor at Brooklyn Law School, also said the settlement closes an important chapter of the crisis.
“S&P would have faced a lot of unquantifiable risk if it had to admit wrongdoing in the settlement,” he said. “It is unclear that the Justice Department would have wanted to expose one of the three major rating agencies to such a risk because it could have destabilized the rating agency industry.”
Reiss added that the $1.5 billion settlement should have a deterrent effect.
”[It] likely gives ratings analysts some firm ground to stand on if they are pressured to lower their standards by others in their organizations,” he said. (1, 18-19)
The article also has a sidebar that reads,
Ratings agencies had avoided liability for their actions for quite some time based on the theory that they were First Amendment actors who dealt in opinions.
Recent cases have held that the rating agencies can be held liable for some of their ratings notwithstanding the First Amendment. United States v. McGraw-Hill Cos. et al., No. 13-CV-0779, 2013 WL 3762259 (C.D. Cal. July 16, 2013) and Federal Home Loan Bank of Boston v. Ally Financial Inc. et al., No. 11-10952, 2013 WL 5466631 (D. Mass. Sept. 30, 2013).
For instance, if the rating agency did not follow its own rating procedures, it could be held liable for fraud.
—David Reiss, Brooklyn Law School (18)
Are Billions Enough?
Jenner & Block has issued the Citi Monitorship First Report. By way of background,
The Settlement Agreement resolved potential federal and state legal claims for violations of law in connection with the packaging, marketing, sale, structuring, arrangement, and issuance of residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) between 2006 and 2007. As explained below, in the Settlement Agreement, Citi agreed to pay $4.5 billion to the settling governmental entities, acknowledged a statement of facts attached as Annex 1, and agreed to provide consumer relief that would be valued at $2.5 billion under the valuation principles set forth in Annex 2.2 As part of the Settlement Agreement, [Jenner partner] Thomas J. Perrelli was appointed as independent monitor (Monitor) to determine Citi’s compliance with the consumer relief and corresponding requirements of the Settlement Agreement. This is the first report assessing Citi’s progress toward completion of those obligations. (3, footnote omitted)
Because this is the first report, much of it sets the stage for what is to come. I was, however, struck by the section titled “Impact of Relief Provided:”
To evaluate fully the impact of the relief that is the subject of this report and authorized under the Settlement Agreement would require a variety of activities not contemplated by the settlement and not easily achievable (e.g., interviews with individual homeowners). Isolating the effect of this settlement, the National Mortgage Settlement, and other RMBS settlements from the broader housing market is also difficult.
One question frequently asked is whether the relief provided to borrowers and for which Citi has received credit would have been provided in any event (e.g., is this really additional?) On this question, the answer is mixed. Given ordinary accounting practices, loans for which foreclosure does not make economic sense are frequently written-off by financial institutions. In that circumstance, however, the banks may not release liens as a matter of routine, leaving borrowers with an ongoing burden and impeding potential efforts to redevelop the property. To get credit under the Settlement Agreement, Citi was required to release the lien, thus giving an additional benefit to the homeowner to allow him or her to make a fresh start and to remove any legal obstacles from the transfer of the property. (17, footnote omitted)
As I have noted before, it is hard to truly assess the restorative and retributive impacts of the ten and eleven digit settlements of litigation arising from the financial crisis. Are individuals appropriately helped? Are wrongdoers appropriately punished? Are current actors appropriately deterred? I find it bizarre that it is so hard to tell even when settlements are measured in the billions of dollars.
