- 2015 Trying Times: Important Lessons to Be Learned from Recent Federal Tax Cases, Nancy A. McLaughlin & Stephen J. Small, Presented at Land Trust Alliance Rally 2015, Sacramento, CA, Friday October 9, 2015.
- Do People Shape Cities, or Do Cities Shape People? The Co-Evolution of Physical, Social, and Economic Change in Five Major U.S. Cities, Nikhil Naik, Scott Duke Kominers, Ramesh Raskar, Edward L. Glaeser & César Hidalgo, NBER Working Paper No. w21620 (Paid Access).
- Stabilising House Prices: The Role of Housing Futures Trading, Arzu Uluc, Bank of England Working Paper No. 559.
- Mortgage Debt and Entrepreneurship, Philippe Bracke, Christian A.L. Hilber & Olmo Silva, Bank of England Working Paper No. 560.
- Trend-Spotting in the Housing Market, Nikos Askitas, IZA Discussion Paper No. 9427.
- The Use of Bank Contractors in Mortgage Foreclosure: Contractual Considerations and Liability Concerns, Christopher K. Odinet, Real Property, Trust and Estate Law Section, American Bar Association, 29 Probate & Property (Jan./Feb. 2015).
- Sriracha Shutdown: Hot Sauce Lessons on Local Privilege and Race, Ernesto Hernandez Lopez, Seton Hall Law Review, Vol. 46, No. 1, 2015.
- A Farewell to ARMs? Three Regimes of Adjustable Rate Mortgages, Frank P. Stafford & Bing Chen.
- Is the FHA Creating Sustainable Homeownership?, Andrew Caplin, Joseph S. Tracy & Anna Cororaton, Real Estate Economics, Vol. 43, Issue 4, pp. 957–92, 2015 (Paid Access).
- Spaces for Sharing: Micro Units Amid the Shift from Ownership to Access, John Infranca, Fordham Urban Law Journal, Vol. 43, 2015, Forthcoming; Suffolk University Law School Research Paper No. 15-38.
- Out of the Frying Pan – in to the Fire: The Case of Adjustable Rate Mortgage for Funding of Homes of the Underprivileged, Muhammed Arsalan Aqeeq.
Tag Archives: Mortgage Debt
MERS Victorious
Montgomery County, PA Courthouse
The U.S. Court of Appeals for the Third Circuit ruled in favor of MERS in Montgomery County v. MERSCORP, (August 3, 2015, No. 15-1219) (Barry, J.). MERS, for the uninitiated,
is a national electronic loan registry system that permits its members to freely transfer, among themselves, the promissory notes associated with mortgages, while MERS remains the mortgagee of record in public land records as “nominee” for the note holder and its successors and assigns. MERS facilitates the secondary market for mortgages by permitting its members to transfer the beneficial interest associated with a mortgage—that is, the right to repayment pursuant to the terms of the promissory note—to one another, recording such transfers in the MERS database to notify one another and establish priority, instead of recording such transfers as mortgage assignments in local land recording offices. It was created, in part, to reduce costs associated with the transfer of notes secured by mortgages by permitting note holders to avoid recording fees. (4, footnote omitted)
I, along with others, had filed an amicus brief in this case. The court states that
We acknowledge the arguments of the Recorder and her amici contending that MERS has a harmful impact on homeowners, title professionals, local land records, and various public programs supported in part by the fees collected by Pennsylvania’s recorders of deeds. In this appeal, however, we are not called upon to evaluate how MERS impacts various constituencies or to adjudicate whether MERS is good or bad. Just as the Seventh Circuit observed in Union County, while the Recorder is critical of MERS in several respects, “[her] appeal claims only that MERSCORP is violating [state law] by failing to record its transfer of mortgage debts, thus depriving the county governments of recording fees. That claim—the only one before us—has no merit.” 735 F.3d at 734-35. (13)
MERS has had a lot of success in cases like this, but the fact remains that it was implemented in a flawed fashion with little to no input from a broad range of constituencies. Regulators and legislators should pay renewed attention to MERS to ensure that the ownership and servicing of residential mortgages are tracked in a way that protects consumers from abusive behavior by sophisticated mortgage market players who rely on opaque mechanisms like MERS.
Mortgaging the Future
The Federal Reserve Bank of San Francisco’s most recent Economic Letter is titled Mortgaging the Future? In it, Òscar Jordà, Moritz Schularick, and Alan M. Taylor evaluate the “Great Mortgaging” of the American economy:
In the six decades following World War II, bank lending measured as a ratio to GDP has quadrupled in advanced economies. To a great extent, this unprecedented expansion of credit was driven by a dramatic growth in mortgage loans. Lending backed by real estate has allowed households to leverage up and has changed the traditional business of banking in fundamental ways. This “Great Mortgaging” has had a profound influence on the dynamics of business cycles. (1)
I was particularly interested by the Letter’s Figure 2, which charted the ratio of mortgage debt to value of the U.S. housing stock over the last hundred years or so. The authors write,
The rise of mortgage lending exceeds what would be expected considering the increase in real estate values over the same time. Rather, it appears to also reflect an increase in household leverage. Although we cannot measure historical loan-to-value ratios directly, household mortgage debt appears to have risen faster than total real estate asset values in many countries including the United States. The resulting record-high leverage ratios can damage household balance sheets and therefore endanger the overall financial system. Figure 2 displays the ratio of household mortgage lending to the value of the total U.S. housing stock over the past 100 years. As the figure shows, that ratio has nearly quadrupled from about 0.15 in 1910 to about 0.5 today. (2)
An increase in leverage for households is not necessarily a bad thing. it allows households to make investments and to smooth their consumption over longer periods. But it can, of course, get to be too high. High leverage makes households less able to handle shocks such as unemployment, divorce and death. it would be helpful for economists to better model a socially optimal level of household leverage in order to guide regulators. The CFPB has taken a stab at this with its relatively new Ability-to-Repay regulation but we do not yet know if they got it right.
