Lingering Effects of Racially Restrictive Covenants

Image by US Census as modified by Ruhrfisch

The York Daily Record quoted me in York County Neighborhoods That Once Barred ‘Any Negro or Mongolian’ Still Do Harm. It opens,

When the Rev. David and Eulamae Orr moved into the Fayfield neighborhood in Springettsbury Township in 1963, they were the first to break the color barrier in the all-white suburban subdivision.

While the Orrs were a well-known and respected York-area black couple, owners of several business enterprises and active in civil rights, their purchase of the South Harlan Street home was uncommon enough at the time to draw headlines in local newspapers.

“My parents were very dignified about it,” Charles Orr, who inherited the home, said in a 1999 interview. “They simply said it was our right, that they had worked hard, that they always had wanted a larger, nicer house and were now able to afford it.”

The color barrier that the Orrs broke through, however, was multi-layered and resilient. People found other ways to keep minorities out of the white neighborhoods even after the Orrs had crossed the line. In fact, social and economic obstacles blocking access to fair housing for minorities remain today.

And urban planning experts say such racial barriers must come down if the city and the county of York are to reach their full potential.

Restrictions elsewhere in York County

By 1963, the 1947 Fayfield subdivision restriction prohibiting the occupancy of any Fayfield home “by any Negro, or any person of Negro extraction, excepting domestic servants …” had disappeared.

The same discriminatory restrictions against minority ownership were found in the 1931 subdivision plan for the proposed Wyndham Hills area. That covenant prohibited home ownership or occupancy by any “negro” or “Mongolian.”

Brooklyn Law School Professor David Reiss, Academic Program Director for The Center for Urban Business Entrepreneurship, explained the term “Mongolian” in that time period was used to refer to “various people of Asian descent, including those of Chinese and Japanese heritage.”

The Wyndham Hills deed restriction placed minority home ownership under its “Nuisances” clause along with operating a foundry, a slaughterhouse, bone-boiling “or other establishment offensive to the neighborhood.”

And, it wasn’t just in the middle- and upper-class York County suburbs either. Two city homes a block apart on West Kurtz Avenue and West Maple Street, for example, carried the same minority ownership restrictions.

That initial covenant restriction against minority home ownership in Fayfield was to be open to a vote among home owners in the neighborhood in 1952. Fayfield homeowners were to vote whether the prohibition against minority ownership was to be removed, rescinded, altered, changed or extended for definite periods of time or perpetuity.

If that vote ever took place, York County historical records don’t easily reveal any documentation of it.

Now illegal, but effects remain

Steve Snell, former president of Realtors Association of York and Adams Counties, said those covenants and restrictions — while apparently legal when written — became blatantly unlawful. He couldn’t be sure if Fayfield homeowners took any action against them or if they were quietly removed as houses in the neighborhood were resold.

These covenants and restrictions kept minorities concentrated in impoverished neighborhoods, primarily in the city of York. The effects of this concentration of poverty remain today, according to acclaimed urban planner David Rusk and others who have studied York. Those effects are seen in everything from the rate of homicide to the school dropout rate.

 

Cities With the Worst Rent

photo by Alex Lozupone

Realtor.com quoted me in Cities With the Worst Rent: Is This How Much You’re Coughing Up? It opens,

Sure, rents are too dang high just about everywhere, but people living in Los Angeles really have a right to complain: New analysis by Forbes has found that this city tops its list of the Worst Cities for Renters in 2018.

To arrive at these depressing results, researchers delved into rental data and found that people in L.A. pay an average of $2,172 per month.

Granted, other cities have higher rents—like second and third on this list, San Francisco (at $3,288) and New York ($3,493)—but Los Angeles was still deemed the worst when you consider how this number fits into the bigger picture.

For one, Los Angeles households generally earn less compared with these other cities, pulling in a median $63,600 per year. So residents here end up funneling a full 41% of their income toward rent (versus San Franciscans’ 35%).

Manhattanites, meanwhile, fork over 52% of their income toward rent, but the saving grace here is that rents haven’t risen much—just 0.4% since last year. In Los Angeles, in that same time period, rent has shot up 5.7%.

So is this just a case of landlords greedily squeezing tenants just because they can? On the contrary, most experts say that these cities just aren’t building enough new housing to keep up with population growth.

“It is fundamentally a problem of supply and demand,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “Certain urban centers like Los Angeles, San Francisco, and New York are magnets for people and businesses. At the same time, restrictive local land use regulations keep new housing construction at very low levels. Unless those constraints are loosened, hot cities will face housing shortages and high rents no matter what affordable housing programs and rent regulation regimes are implemented to help ameliorate the situation.”

What in the World Is a Lis Pendens?

photo by Bjoertvedt

MoneyTips.com (via NBC news affiliate NewsWest 9) quoted me in Should I Worry About A Lis Pendens in A Title Report? It opens,

Is there anyone this side of a Supreme Court Justice who hasn’t signed off on a document without reading or understanding every single word and Latin phrase? When it comes to buying a house, it pays to know the phrase “lis pendens”.

lis pendens is the Latin term for a Notice of Pendency of Action. It means that a lawsuit is pending against the title of a property. The lis pendens is a public notice letting buyers know there is a dispute over the ownership of the property. It is filed in the county clerk’s office wherever the title of the actual property is listed.

Anyone willing to purchase property under a lis pendens is subject to the outcome of the lawsuit. This is why you should be worried if you discover a lis pendens on a title report, says David Reiss, a former private practice real estate attorney who is now the Academic Program Director at the Center for Urban Business Entrepreneurship (CUBE) at Brooklyn Law School.

“Depending on the underlying action that is the subject of the lis pendens, ownership of the property might be at issue. If one of the parties of the underlying litigation wins, they may own the property,” Reiss explains. And if they own it, that means you don’t.

For buyers, a lis pendens should throw up many red flags. Lenders are usually unwilling to finance a mortgage until the lis pendens has been removed from the title. In addition, while a property can still be sold while there is a lis pendens, title companies will not insure the property, and that alone should be a deterrent to purchasing.

A lis pendens can be placed on a property for a variety of reasons. It could be due to divorce proceedings, an inheritance issue over a property held in estate, taxes owed to the IRS, or the property could be about to go into foreclosure. There could even be criminal fines owed.

“A lis pendens can be time-consuming and aggravating at best,” says Denise Supplee, a realtor and Co-Founder and Director of Operations at Spark Rental. “That being said, it is possible to move beyond these. Depending on state laws, there are steps that can be taken to have these attached lawsuits removed. However, there may be a cost of an attorney and definitely a loss of time.”

Because a lis pendens can only be about the property itself and not about the parties who have an interest in the property, there are two ways the lis pendens can be expunged, says Reiss. The first is “if the lis pendens really has nothing to do with the property and should never have been there in the first place, you can fight it,” because a lis pendens is a powerful tool that is often subject to abuse. The second is if the parties involved ultimately resolve the lawsuit.

Understanding Private Mortgage Insurance (PMI)

photo by David Hilowitz

LendingTree quoted me in Guide to Understanding Private Mortgage Insurance (That’s PMI). It opens,

Part I: Basics of private mortgage insurance (PMI)

What is PMI?

If you’ve ever purchased a home without a large down payment, you may have faced the possibility of paying PMI, or private mortgage insurance. This financial product is a type of loan insurance typically bought by consumers when they purchase a house. However, the premiums paid toward PMI aren’t intended to protect the consumer. Rather, they provide protection for the lender, in case you stop making payments on your home loan.

As the Consumer Financial Protection Bureau (CFPB) notes, PMI is typically arranged by your lender during the home loan process and comes into play when you have a conventional loan and put down less than 20 percent of the property’s purchase price. However, private mortgage insurance is not just associated with home purchases; it can also be required when a consumer refinances his or her home and has less than 20 percent equity in it.

Generally speaking, PMI can be paid in three different ways — as a monthly premium, a one-time upfront premium or a mix of monthly premiums with an upfront fee.

There are also ways to avoid paying PMI altogether, which we’ll address later in this guide.

PMI versus MIP: What’s the difference?

While PMI is private mortgage insurance consumers buy to insure their conventional home loans, the similarly named MIP –  that’s mortgage insurance premium — is mortgage insurance you buy when you take out an FHA home loan.

MIP works kind of like PMI, in that it’s required for FHA (Federal Housing Administration) loans with a down payment of less than 20 percent of the purchase price. With MIP, you pay both an upfront assessment at the time of closing and an annual premium that is calculated every year and paid within your monthly mortgage premiums.

Generally speaking, the upfront component of MIP is equal to 1.75 percent of the base loan amount. The annual MIP premiums, on the other hand, are based on the amount of money you owe each year.

The biggest difference between PMI and MIP is this: PMI can be canceled after a homeowner achieves at least 20 percent equity in his/her property, whereas homeowners paying MIP in conjunction with a FHA loan that originated after June 13, 2013, cannot cancel this coverage until their mortgage is paid in full. You can also get out from under MIP by refinancing your FHA loan into a new, conventional loan. However, you’ll need to leave at least 20 percent equity in your home to avoid having to pay private mortgage insurance on the refi.

Which types of home loans require PMI? MIP?

If you’re thinking of buying a home and wondering if you’ll be on the hook for PMI or MIP, it’s important to understand different scenarios in which these extra charges may apply.

Here are the two main loan situations where you’ll absolutely need to pay mortgage insurance:

  • FHA loans with less than 20 percent down – If you’re taking out a FHA loan to purchase a home, you may only be required to come up with a 3.5 percent down payment. You will, however, be required to pay both upfront and annual mortgage insurance premium (MIP).
  • Conventional loans with less than 20 percent down – If you’re taking out a conventional home loan and have less than 20 percent of the home’s purchase price to put down, you’ll need to pay PMI.

*     *     *

Part V: Frequently asked questions (FAQs)

Before you decide whether to pay PMI – or whether you should try to avoid it – it pays to learn all you can about this insurance product. Consider these frequently asked questions and their answers as you continue your path toward homeownership.

Q. Is PMI tax-deductible?

According to David Reiss, professor of law and academic program director for the Center for Urban Business Entrepreneurship at Brooklyn Law School, PMI may be tax-deductible but it all depends on your situation. “The deduction phases out at higher income levels,” he says.

According to IRS.gov, the deduction for PMI starts phasing out once your adjusted gross income exceeds $100,000 and phases out completely once it exceeds $109,000 (or $54,500 if married filing separately).

Equifax and Your Mortgage

image by Mark Warner

HouseLoan.com quoted me in How Will The Equifax Data Breach Affect Your Ability To Get A Mortgage? It opens,

Like throwing a stone into a pond, the Equifax data breach has long-lasting repercussions. Already, because of what’s being considered one of the largest data breaches in recent history, 143 million consumers may be affected. Data compromised in the breach has the potential to impact any form of credit taken out in the U.S. — including mortgages, credit cards, and car loans.

WHAT ARE THE CONSEQUENCES OF THE EQUIFAX DATA BREACH?

The credit-reporting agency Equifax recently revealed that a data breach lasting from mid-May through July 2017 gave hackers access to their consumers’ names, Social Security numbers, addresses, birth dates, and, for some, driver’s license numbers. The Federal Trade Commission confirms that credit card numbers were stolen from an estimated 209,000 people and documents with personally identifying information for roughly 182,000 others. Hackers also accessed personal data for customers in the UK and Canada. Equifax says their agency didn’t discover the breach until July 29, 2017, after most of the damage was done.

Anyone who may be affected by the breach is encouraged to act fast, Lisa Lindsay, executive director of the collaborative group Private Risk Management Association (PRMA), which aims to raise awareness and educate agents and brokers, says. “Consumers will need to evaluate what they want to do next with regards to protection and what risk management options they want to take. Such as purchasing cyber and fraud insurance. Those impacted by the breach could be at risk for additional attacks.”

HOW WILL THE DATA BREACH AFFECT GETTING A MORTGAGE?

Buying a house may be the biggest financial decision you make. The last thing that you need is a credit setback — or disaster. Megan Zavieh, a Georgia attorney-at-law, explains that the full ramifications of the data breach have yet to be known because we don’t know who accessed private data or what they may ultimately do with it. But, she says, it could impact homebuyers significantly.

“If someone uses personal data to open new credit lines or take other typical identity theft actions, homebuyers could be in for a terrible surprise when they complete their home loan applications. Often, credit report correction following identity theft is a long process. And it could well prevent loans from closing if borrowers had identities stolen after the Equifax breach,” Zavieh says.

ADDING TO THE POST-EQUIFAX FRENZY, MANY PEOPLE ARE SEEKING TO FREEZE THEIR CREDIT IN THE WAKE OF THE BREACH.

David Reiss, Professor of Law and Academic Program Director of CUBE, The Center for Urban Business Entrepreneurship at Brooklyn Law School, says, “Those who are looking to refinance their mortgage or purchase a new home should be aware of how a credit freeze affects them. When they are ready to take the plunge and apply, they will need to contact the credit rating agencies where they had placed a freeze and lift the freeze temporarily.” Just as importantly, Reiss reminds buyers to put the freeze back in place after completing the mortgage process.

During the time when you’re buying a home and the freeze is lifted, you can place a 90-day fraud alert on your credit. Reiss explains that this should limit lenders from granting credit under your name without first verifying that you are the one who applied for the loan.

Blockchain and Real Estate

CoinDesk.com quoted me in Land Registry: A Big Blockchain Use Case Explored. It opens,

With distributed ledger technology being promoted as a benefit to everything from farming to Fair Trade coffee, use case investigation has emerged as a full-time fascination for many.

In this light, one popular blockchain use case that has remained generally outside scrutiny has been land title projects started in countries including in Georgia, Sweden and the Ukraine.

One could argue land registries seemed to become newsworthy only after work on the use case had begun. However, those working on projects disagree, asserting that land registries could prove one of the first viable beachheads for blockchain.

Elliot Hedman, chief operating officer of Bitland Global, the technology partner for a real estate title registration program in Ghana, for example, said that issues with land rights make it a logical fit.

Hedman told CoinDesk: “As for the benefit of a blockchain-based land registry, look to Haiti. There are still people fighting over whose land is whose. When disaster struck, all of their records were on paper, that being if they were written down at all.”

Hedman argued that, with a blockchain-based registry employing a network of distributed databases as a way to facilitate data exchange, the “monumental headache” associated with a recovery effort would cease.

Modern real estate

To understand the potential of a blockchain land registry system, analysts argue one must first understand how property changes hands.

When a purchaser seeks to buy property today, he or she must find and secure the title and have the lawful owner sign it over.

This seems simple on the surface, but the devil is in the details. For a large number of residential mortgage holders, flawed paperwork, forged signatures and defects in foreclosure and mortgage documents have marred proper documentation of property ownership.

The problem is so acute that Bank of America attempted foreclosure on properties for which it did not have mortgages in the wake of the financial crisis.

Readers may also recall the proliferation of NINJA (No Income, No Job or Assets) subprime loans during the Great Recession and how this practice created a flood of distressed assets that banks were simply unable to handle.

The resulting situation means that the property no longer has a ‘good title’ attached to it and is no longer legally sellable, leaving the prospective buyer in many cases with no remedies.

Economic booster

Land registry blockchains seek to fix these problems.

By using hashes to identify every real estate transaction (thus making it publicly available and searchable), proponents argue issues such as who is the legal owner of a property can be remedied.

“Land registry records are pretty reliable methods for maintaining land records, but they are expensive and inefficient,” David Reiss, professor of law and academic program director at the Center for Urban Business Entrepreneurship, told CoinDesk.

He explained:  “There is good reason to think that blockchain technology could serve as the basis for a more reliable, cheaper and more efficient land registry.”

Skinny Budget Sucker Punch

The Waco Tribune-Herald quote me in Cutting Habitat Could Hurt Local Economy. It reads,

Last summer, through a series of tragic events, one of our longtime church members faced the frightening possibility of homelessness. She had lived with her father for more than 50 years and, following his death, she learned of a crippling reverse mortgage on their home. She couldn’t pay off the mortgage and so she had to find a new place to live.

Our congregation sprang into action. More than 50 people contributed to the purchase of a mobile home, but it required extensive remodeling, so several church members worked over 300 hours to make it livable. One handyman devoted about three months to the project full-time.

On Sept. 21, we presented her with the keys to her new home during worship. It was one of the most uplifting moments I’ve had in 23 years of ministry. This congregation-wide labor of love brought us all closer to one another and closer to God. It was a demonstration of the love of Jesus Christ and it was transformative.

Home ownership changes lives and changes communities. I serve as a board member and volunteer for Waco Habitat for Humanity. Since 1986, Waco Habitat has built and sold 168 homes and completed another 414 home repairs and preservation projects. Over the past three decades, the economic impact of all these services exceeds $6.9 million in greater Waco. In a community that generally tracks about 15 percent higher than the state average for poverty rates and 20 percent lower than the state average for home ownership rates, this impact cannot be overstated. It’s transformative as well.

The “skinny budget” unveiled by the Trump administration on March 16 proposes reducing federal spending on housing programs and assistance by 13 percent. Among other cuts, it seeks to eliminate the Community Development Block Grant Program; Home Investment Partnerships Program; Self-Help Homeownership Opportunity Program; CDFI fund, which administers the New Market Tax Credit program at Treasury; and entire Corporation for National and Community Service, which implements the AmeriCorps program.

One reason I work with Habitat is because it offers a hand up, not a hand out. If these cuts are approved by Congress, they will devastate Habitat’s ability to offer that hand up. Other local housing agencies and organizations will see a similarly crippling effect.

Fortunately, this is just the first pass of the federal budget, and many members of Congress — including many Republicans — have already voiced opposition to it. For instance, Rep. Hal Rogers said: “While we have a responsibility to reduce our federal deficit, I am disappointed that many of the reductions and eliminations proposed in the president’s skinny budget are draconian, careless and counterproductive.”

David Reiss, director of academic programs at the Center for Urban Business Entrepreneurship, echoes this. “Terminating these programs out of the blue is like a sucker punch in the gut of countless communities across the country.”