I was interviewed by Indira Stewart on the TVNZ Breakfast show, the biggest morning news show in New Zealand, about New York City’s system of rent regulation (I serve as the Chair of the NYC Rent Guidelines Board). You can find the interview here.
Ernira Mehmetaj and I published The Promise and Perils of Shared Equity Financing in the ABA’s Probate and Property magazine. It opens,
It is the rare homeowner, or even lawyer, who thinks twice about why mortgages are part of so many real estate transactions. Real estate is expensive, and few have the money to pay for a home all in cash. As a result, people enter in transactions with mortgage lenders and are exposed to all of the risks that come along with that type of financing: default, late fees, foreclosure.
If you stripped away all of our history and our current practices in financing home ownership with mortgages, you might ask how could people with limited assets acquire something as expensive as a home? It turns out that there are all sorts of ways to slice and dice the rights and responsibilities of homeownership to offer households just the aspects they want and no more.
A new development, shared equity financing, will make us all think twice about mortgages. Its sharing of the risks and rewards of a home purchase will be attractive to many, but it also has its own share of perils that are unique to it.
I will be presenting on Non-Debt Financing for Home Purchase: Risks and Promises as part of the ABA’s Section of Real Property, Trust and Estate Law “Professors’ Corner.” It will take place at 12:30 PM (Eastern Time) on June 9th. The program is free for ABA members and non-members alike, although registration is required. Professor Shelby D. Green of Pace University’s Elisabeth Haub School of Law will moderate. The program description reads:
A new class of financing options is emerging, including non-debt or equity investment, either facilitating the initial purchase with no borrowing or enabling access to equity from existing homeownership. The presenter will discuss whether the surface appeal of these financing inventions may camouflage risks that if not disclosed and well-managed could portend disruption in the housing markets.
Update: The slides for the presentation can be found here.
In many ways, COVID-19 has changed the way we live for both the immediate future and long-term. Brooklyn Law School Dean Michael Cahill has been sitting down with members of the Brooklyn Law School faculty to discuss the legal ramifications of our response to COVID-19 and what a post-pandemic world may look like. Here is the link to our discussion of the effect of the pandemic on the real estate market and beyond: https://youtu.be/j9DFBOsU3qw.
Some readers may be interested in a free upcoming program on how to teach real estate securitization. The program is co-sponsored by the AALS Real Estate Transactions Section and the New York City Bar Association’s Structured Finance Committee.
You can attend by live stream webcast or in person. You can attend as much of the program as you have time to attend, and feel free to pop in and out of the webcast.
Law professors and leading practitioners will serve as panelist instructors. I will be moderating a panel on Servicing & Its Discontents. It should be a great program for those who teach in this area.
The Real Estate Transactions Section of the American Association of Law Schools has issued the following Call for Papers:
Access + Opportunity + Choice: Housing Capital, Equity, and Market Regulation in the Trump Era
The year 2018 marks the 10th anniversary of the 2008 housing crisis—an event described as the most significant financial and economic upheaval since the Great Depression. This year is also the 50th anniversary of the Fair Housing Act, which upended many decades of overt housing discrimination. Both events remind us of the significant role that housing has played in the American story—both for good and for bad.
Of the many aspects of financial reform that followed 2008, much of the housing finance-related work was centered around mortgage loan origination and creating incentives and rules dealing with underwriting and the risk of moral hazard. Some of these reforms include the creation of the qualified mortgage safe-harbor and the skin-in-the-game risk retention rules. But when it came to the secondary mortgage market, little significant reform was undertaken. The only government action of any serious importance related to the federal government—through the Federal Housing Finance Agency (FHFA)—taking over control of Fannie Mae and Freddie Mac. This major government intervention into the workings of the country’s two mortgage giants yielded takings lawsuits, an outcry from shareholders, and the decimation of the capital reserves of both companies. Despite Fannie and Freddie having both paid back all the bailout funds given to them, the conservatorship remains in place to this day.
In the area of fair housing, the past several years saw the Texas Department of Housing and Community Affairs v. Inclusive Communities case whereby the U.S. Supreme Court upheld (and narrowed the scope of) the disparate impact theory under the Fair Housing Act. We also saw efforts aimed at reducing geographic concentrations of affordable housing through the Obama administration’s promulgation of the affirmatively furthering fair housing rule.
Yet, meaningful housing reform remains elusive. None of the major candidates in the most recent presidential election meaningfully addressed the issue in their policy platforms, and a lack of movement in resolving the Fannie/Freddie conservatorship is viewed as a major failure of the Obama administration. Additionally, housing segregation and access to affordable mortgage credit continues to plague the American economy.
In recent months, the topics of housing finance reform and providing Americans with credit (including mortgage credit) choices have been a point of focus on Capitol Hill and in the Trump White House. Will these conservations result in meaningful legislation or changes in regulatory approaches in these areas? Will programs like the low-income-housing tax credit, the CFPB’s mandatory underwriting requirements, public housing subsidies, and the government’s role in guaranteeing and securitizing mortgage loans significantly change? Where are points of possible agreement between the country’s two major parties in this area and what kinds of compromises can be made?
Call for Papers:
The Real Estate Transactions Section looks to explore these and related issues in its 2019 AALS panel program titled: “Access and Opportunity: Housing Capital, Equity, and Market Regulation in the Trump Era.” The Section invites the submission of abstracts or full papers dealing broadly with issues related to real estate finance, the secondary mortgage market, fair housing, access to mortgage credit, mortgage lending discrimination, and the future of mortgage finance. There is no formal paper requirement associated with participation on the panel, but preference will be given to those submissions that demonstrate novel scholarly insights that have been substantially developed. Untenured scholars in particular are encouraged to submit their work. Please email your submissions to Chris Odinet at firstname.lastname@example.org by Friday, August 3, 2018. The selection results will be announced in early September 2018. In additional to confirmed speakers, the Section anticipates selecting two to three papers from the call.
Rigel C. Oliveri, Isabelle Wade and Paul C. Lyda Professor of Law, University of Missouri School of Law
Todd J. Zywicki, Foundation Professor of Law, George Mason University Antonin Scalia Law School
David Reiss, Professor of Law and Research Director for the Center for Urban Business Entrepreneurship, Brooklyn Law School
Per AALS rules, only full-time faculty members of AALS member law schools are eligible to submit a paper/abstract to Section calls for papers. Faculty at fee-paid law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit.
All panelists, including speakers selected from this Call for Papers, are responsible for paying their own annual meeting registration fee and travel expenses.
Mashable quoted me in Sorry, Cards Against Humanity Can’t Stop Trump’s Wall. It opens,
As much as we may want to believe it, a card game company probably can’t save our country.
This week, owners of the irreverent (and kind of obnoxious, imo) Cards Against Humanity game unveiled their annual PR stunt and it has higher aspirations than last year’s pointless hole.
As part of the Cards Against Humanity Saves America campaign, it announced the purchase of “acres of land” on the U.S.-Mexico border and promised not to build a wall on it.
Going further, the company said that it had retained the services of legal representation specializing in property rights, “to make it as time-consuming and expensive as possible for the wall to get built.”
Sounds good, right? Guess there won’t be a wall!
Not so fast, patriots.
The government has a big ace up its sleeve when it comes to taking land from property owners. It’s called “eminent domain” and it’s right there in the constitution’s Fifth Amendment, below the part that people always talk about on lawyer shows. The Fifth Amendment states the government can’t take “private property be taken for public use, without just compensation.”
But it can still take land for public use, and it almost always does.
Government is mightier than the card game
The several law professors we talked to all came to the same forgone conclusion: the government will ultimately take that land from Cards Against Humanity.
“The power of eminent domain is considered to be a fundamental power of any government to use,” Professor of Law David Reiss at Brooklyn Law school said. And in this case, given the limited facts that were available to him, “ultimately the government would succeed.”
Over the past several decades, the judicial definition of eminent domain has expanded broadly. Historically, governmental use of eminent domain would fall under the umbrella of public use by using the acquired land to build a road or build a hospital. That’s changed in recent years, as the blanket phrase of “public use” has been used in eminent domain cases to include razing blighted urban areas or if the land could be seen as encouraging economic development.
Richard Epstein, Professor of Law at NYU, emphatically agreed that Cards Against Humanity would not stand much of a chance. Legally speaking, he saw, “the wall [will be seen] as a public good. There’s nothing you could do to resist them taking the land.”
Lynn E. Blais, Real Property Law Professor at the University of Texas at Austin, also thought that the government would easily win, but acknowledged how Cards Against Humanity could make an impact.
“They can’t stop the border wall for sure,” Blais said. Legally speaking, “it’s clearly for public use [but] they can challenge the process at every step if they want. That could take a long long time.”
And just as the company mentions in its announcement, it hopes to get in the way and meddle up Trump’s plans to build a wall, at least in that one plot of land it purchased. That delay tactic might prove exceptionally effective.
“They may not be looking to stop it, but merely to delay it. Delay can be very powerful. Sometimes delay can be as effective as winning the case,” Reiss said. “With enough money, it can be delayed for years.”
Did CAH fall down at the starting line?
A few of the legal experts we talked to were adamant that Cards Against Humanity, in openly alluding to the fact that they hoped to make the wall construction “as time-consuming and expensive as possible,” invariably hurt their chances to gain favor with a judge. Basically, in flipping Trump off through a land buy, they exposed their bias and they might not receive a full case because of it.
“I wonder if they shot themselves in the foot if they admitted this was a delay tactic. Some judges might few that negatively,” Reiss said. “Judges wouldn’t look kindly on admitting delay.”
Epstein was very certain that the company’s promotion would hurt their chances of winning any case the federal government might bring against it.
“They are tacitly admitting that the goal is to block the president,” he said. “It’s one one of the dumber ideas I’ve heard of.”
He was certain that it would only invalidate any defense Cards Against Humanity tried to bring up, seeing as how the company already showed its actual intent. Still, he thought of it as a sign of the times, saying, “One of the consequences from the president acting like a crackpot means you get crackpot solutions.”
Blaise, however, believed the opposite side of this argument, and thought that land owners can do whatever they damn well please.
I don’t think it matters why you don’t want the government to take your land. As a property owner, you get to be as irrational as you want,” she said.
So you’re saying there’s a public use chance…
Even though a prospective case doesn’t look too promising for Cards Against Humanity, it still has avenues it can take to launch a defense of their new land. According to the legal experts we talked to, the most promising defense would be on whether the wall is really for public use. This is given that “public use” in the Fifth Amendment is not terribly defined and that arguments could readily be made that a border wall with Mexico might be more harmful than good.
“Public use is now often an incredibly broad term,” Reiss said. And, should the case go to federal court, the government’s potential case would invoke border security or immigration policy, which Reiss thought a judge would probably find compelling evidence.