Tag Archives: mortgage

The Advantages of ARMs

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photo by Kathleen Zarubin

The Wall Street Journal quoted me in Why Home Buyers Should Consider Adjustable-Rate Mortgages (behind paywall). It opens,

With interest rates on the rise, it may be time for home buyers to take a fresh look at some alternatives to the 30-year, fixed-rate mortgage, which has dominated the mortgage market since the financial crisis.

While many out-of-the-mainstream loans got a black eye in the subprime debacle, today’s versions have been shorn of the toxic features—such as negative amortization and prepayment penalties—that tripped up many borrowers during the housing bubble a decade ago.

Plan to move

Experts say today’s adjustable-rate mortgages, or ARMs, as well as interest-only loans, are especially suitable for borrowers who expect to move before any rate increases can wipe out the savings in the early years. They’re also useful for sophisticated borrowers wrestling with uneven income, borrowers who expect their income to rise, or borrowers who are willing to bet they can invest their mortgage savings for a greater return elsewhere.

“Many of the mortgage products that some may have thought slipped into extinction, such as interest-only loans, do still exist today, but in far less volume” than in the heyday of the subprime era, says Bill Handel, vice president of research and product development at Raddon Financial Group, consultant to the financial-services industry.

Adds David Reiss, a law professor and academic program director at the Center for Urban Business Entrepreneurship at Brooklyn Law School: “The benefits of non-30-year, fixed-rate mortgages are legion.”

A sweet spot

Many borrowers can find a sweet spot, for example, in the so-called 7/1 adjustable-rate mortgage, which carries a fixed rate for seven years before starting annual adjustments. With a typical rate of 3.75%, the monthly payment on a $300,000 loan would be $1,389, compared with $1,449 for a 30-year, fixed-rate loan at 4.1%, saving the borrower $5,040 over seven years.

Even if the loan rate then went up, it could take two or three years for higher payments to offset the initial savings, making the mortgage a good choice for a borrower likely to move within 10 years. Once annual adjustments begin, they are generally calculated by adding a fixed margin to a floating rate, such as the London interbank offered rate.

“ARMs are very underutilized,” says Mat Ishbia, president of United Wholesale Mortgage, a lender in Troy, Mich. He expects the 7/1 ARM to account for 15% of new mortgages within the next few years, up from less than 5% today. Historically, ARMs become more popular as interest rates rise, making savings from the loan’s low initial “teaser rate” more attractive, he notes.

Manafort’s Real Estate Deals

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Paul Manafort

WNYC quoted me in Paul Manafort’s Puzzling New York Real Estate Purchases. The story opens,

Paul J. Manafort, the former Trump campaign manager facing multiple investigations for his political and financial ties to Russia, has engaged in a series of puzzling real estate deals in New York City over the past 11 years.

Real estate and law enforcement experts say some of these transactions fit a pattern used in money laundering; together, they raise questions about Manafort’s activities in the New York City property market while he also was consulting for business and political leaders in the former Soviet Union.

Between 2006 and 2013, Manafort bought three homes in New York City, paying the full amount each time, so there was no mortgage.

Then, between April 2015 and January 2017 – a time span that included his service with the Trump campaign – Manafort borrowed about $12 million against those three New York City homes: one in Trump Tower, one in Soho, and one in Carroll Gardens, Brooklyn.

Manafort’s New York City transactions follow a pattern: Using shell companies, he purchased the homes in all-cash deals, then transferred the properties into his own name for no money and then took out hefty mortgages against them, according to property records.

Buying properties using limited liability companies – LLCs – isn’t unusual in New York City, nor is borrowing against a home to extract money. And there’s no indication that Manafort’s New York real estate borrowing spree has come to the attention of investigators. In an emailed statement, Manafort said: “My investments in real estate are personal and all reflect arm’s-length transactions.”

Three Purchases, Lots of Questions

Manafort’s 2006 purchase of a Trump Tower apartment for all cash coincided with his firm’s signing of a $10 million contract with a pro-Putin Russian oligarch, Oleg Deripaska, that was revealed last week in an investigative report by The Associated Press.

For the Carroll Gardens home, a brownstone on Union Street, Manafort recently borrowed nearly $7 million on a house that was purchased four years ago for just $3 million. The loans – dated January 17, three days before President Trump’s inauguration – were made by a Chicago-based bank run by Steve Calk, a Trump fundraiser and economic advisor.

Nine current and former law enforcement and real estate experts told WNYC that Manafort’s deals merit scrutiny. Some said the purchases follow a pattern used by money launderers: buying properties with all cash through shell companies, then using the properties to obtain “clean” money through bank loans. In addition, given that Manafort is already under investigation for his foreign financial and political ties, his New York property transactions should also be reviewed, multiple experts said.

One federal agent not connected with the probes, but with experience in complex financial investigations, said after reviewing the real estate documents that this pattern of purchases was “worth looking into.” The agent did not want to speak for attribution. There are active investigations of Manafort’s Russian entanglements by the FBI, Treasury, and House and Senate Select Committees on Intelligence. Manafort has denied wrongdoing and has called some of the allegations “innuendo.”

Debra LaPrevotte, a former FBI agent, said the purchases could be entirely legitimate if the money used to acquire the properties was “clean” money. But, she added, “If the source of the money to buy properties was derived from criminal conduct, then you could look at the exact same conduct and say, ‘Oh, this could be a means of laundering ill-gotten gains.’”

Last spring, the Obama Treasury Department was so alarmed by the growing flow of hard-to-trace foreign capital being used to purchase real estate through shell companies that it launched a special program to examine the practice within its Financial Crimes Enforcement Network, or FinCen. The General Targeting Order, or GTO, required that limited liability company disclose the identity of the true buyer, or “beneficial owner,” in property transactions.

In February, FinCen reported initial results from its monitoring program: “about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report,” it said. The Trump Treasury Department said it would continue the monitoring program.

Friends and Business Partners

According to reports, Manafort was first introduced to Donald Trump in the 1970s by Roy Cohn, the former aide to Senator Joseph McCarthy who went on to become a prominent and controversial New York attorney.

Long active in GOP politics, Manafort also worked as a lobbyist for clients who wanted something from the politicians he helped elect. His former firm – Black, Manafort, Stone and Kelly – represented dictators like Ferdinand Marcos of the Philippines and Mobuto Sese Seko of Zaire.

In the 2000s, Manafort created a new firm with partner Rick Davis. According to the recent investigative report by The Associated Press, Manafort and Davis began pursuing work in 2005 with Oleg Deripaska, one of the richest businessmen in Russia. Manafort and Davis pitched a plan to influence U.S. politics and news coverage in a pro-Putin direction, The AP said.

“We are now of the belief that this model can greatly benefit the Putin government if employed at the correct levels with the appropriate commitment to success,” Manafort wrote in a confidential strategy memo obtained by The AP.

In 2006, Manafort and Davis signed a contract to work with Deripaska worth $10 million a year, The AP reported.

Also that year, a shell company called “John Hannah LLC” purchased apartment 43-G in Trump Tower, about 20 stories down from Donald Trump’s own triplex penthouse. Manafort confirmed that “John Hannah” is a combination of Manafort’s and Davis’s respective middle names.

The LLC was set up in Virginia at the same address as Davis Manafort and of a Delaware corporation, LOAV, Ltd., for which there are virtually no public records. It was LOAV that signed the contract with Deripaska – not the “public-facing consulting firm Davis Manafort,” as the AP put it.

A lawyer for John Hannah LLC signed the deed on apartment 43-G for $3.675 million in November of 2006. But Manafort’s name did not become associated formally with the Trump Tower apartment until March of 2015, three months before Trump announced he was entering the presidential race in the lobby 40 stories down. On March 5, John Hannah LLC transferred the apartment for $0 to Manafort. A month later, he borrowed $3 million against the condo, according to New York City public records.

A year later, Manafort was working on Trump’s campaign, first as a delegate wrangler, then as campaign manager. Trump’s friend and neighbor had become a top advisor.

In a text message that was hacked and later obtained by Politico, Manafort’s adult daughter, Jessica Manafort, wrote last April: “Dad and Trump are literally living in the same building and mom says they go up and down all day long hanging and plotting together.”

In August 2016, The New York Times published a lengthy investigation of Manafort, alleging he’d accepted $12.7 million in undisclosed cash payments from a pro-Putin, Ukrainian political party between 2007 and 2012. Manafort resigned as campaign manager, but according to multiple reports, didn’t break off ties with Trump, who remained his upstairs neighbor.

The White House press secretary, Sean Spicer, said last week that Manafort “played a very limited role for a very limited period of time” in the Trump campaign.

Davis did not return WNYC’s calls for comment, but in an email exchange with The AP, he disavowed any connection with the effort to burnish Putin’s image. “My name was on every piece of stationery used by the company and in every memo prior to 2006. It does not mean I had anything to do with the memo described,” Davis said.

Buy. Borrow. Repeat.

Trump Tower 43-G was not Manafort’s only New York property.

In 2012, another shell company linked to Manafort, “MC Soho Holdings LLC,” purchased a fourth floor loft in a former industrial building on Howard Street, on the border of Soho and Chinatown, for $2.85 million. In April 2016, just as he was ascending to become Trump’s campaign manager, Manafort transferred the unit into his own name and borrowed $3.4 million against it, according to publicly available property records.

The following year, yet another Manafort-linked shell company, “MC Brooklyn Holdings,” purchased a townhouse at 377 Union Street in Carroll Gardens for $2,995,000. This transaction followed the same pattern: the home was paid for in full at the time of purchase, with no mortgage. And on February 9, 2016, just after Trump won decisive victories in Michigan and Mississippi, Manafort took out $5.3 million of loans on the property.  (Some of these transactions were first reported by the blog Pardon Me For Asking, and by two citizen journalists at 377union.com.)

Though the deals could ultimately be traced to Manafort, his connection to the shell companies would not likely have emerged had Manafort not become entangled in multiple investigations.

Public records dated just days before Trump was sworn in as President show that Manafort transferred the Carroll Gardens brownstone from MC Brooklyn Holdings to his own name and refinanced the loans with The Federal Savings Bank, in the process taking on more debt. He now has $6.8 million in loans on a building he bought for $3 million, records show.

David Reiss, a professor of real estate law at Brooklyn [Law School], initially expressed bafflement when asked about the transactions. Reiss then looked up the home’s value on Zillow, a popular source for estimating real estate values. The home’s “zestimate” is $4.5 to $5 million.

Reiss said unless there is another source of collateral, it is extremely unusual for a home loan to exceed the value of the property. “I do think that transaction raises yellow flags that are worth investigating,” he said.

Can Downpayment Assistance Work?

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The HUD Inspector General issued a report on FHA-Insured Loan with Borrower-Financed Downpayment Assistance. Downpayment assistance has a long history of failure, a history that has led to big losses for the FHA and foreclosures for borrowers. The IG audited HUD’s oversight of FHA-insured loans that were originated with downpayment assistance. The Inspector General had already determined that “lenders allowed FHA borrowers to finance their own downpayments through an increase in their mortgage interest rate as part of programs administered through housing finance agencies.” (1)

The IG found that HUD

failed to adequately oversee more than $16.1 billion in FHA loans that may have been originated with borrower-financed downpayment assistance to ensure compliance with HUD requirements, putting the FHA Mortgage Insurance Fund at unnecessary risk. Between October 1, 2015 and September 30, 2016, HUD guaranteed nearly $12.9 billion in FHA loans that may contain questioned assistance. While governmental entities are not prohibited sources of downpayment assistance, the assistance provided through these programs did not comply with HUD requirements. FHA borrowers were required to obtain a premium interest rate and, therefore, repaid the assistance through higher mortgage payments and fees. Despite the prohibition against similar seller-funded programs, HUD’s requirements appeared to have enabled the growth of these questioned programs. In addition, HUD did not adequately track these loans and review the funding structure of these programs. Despite concerns raised by OIG, HUD failed to protect FHA borrowers against the higher mortgage payments and higher fees imposed on them, which increased the risks to the FHA Insurance Fund in the event of default. (1)

The Urban Institute’s Housing Finance Policy Center has criticized the IG’s report on methodological grounds. I will defer to the Urban Institute’s critique because they have done a lot of work in this area.

But I do think that the IG is right to pay careful attention to downpayment assistance programs. Historically, they have proven too good to be true. One of the FHA’s biggest failures resulted from the downpayment assistance program that was set forth in the American Dream Downpayment Assistance Act of 2003.

The IG recommends that HUD

(1) reconsider its position on questioned borrower-financed downpayment assistance programs,

(2) develop and implement policies and procedures to review loans with downpayment assistance,

(3) develop requirements for lenders to review downpayment assistance programs,

(4) require lenders to obtain a borrower certification that details borrower participation,

(5) ensure that lenders enter all downpayment assistance data into FHA Connection, and

(6) implement data fields where lenders would be required to enter specific downpayment assistance information. (1)

The IG’s procedural recommendations all seem reasonable enough, whether you agree or disagree with the folks at the Urban Institute.

 

Three Paths to Housing Finance Reform

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photo by theilr

The Urban Institute’s Jim Parrott has posted Clarifying the Choices in Housing Finance Reform. It opens,

The housing finance reform debate has often foundered under the weight of its complexity. Not only is it a complicated topic, both in its substance and its politics, but the way that we talk about it makes the issues involved indecipherable to all but a few. Each proponent brings a different nomenclature, a different frame of reference, often an entirely different language, making it enormously difficult to sort through where there is agreement and where there is not.

As a case in point, three prominent proposals for reform have been put on the table in recent months: one offered by Lew Ranieri, Gene Sperling, Mark Zandi, Barry Zigas, and me (Promising Road Proposal); one offered by Ed DeMarco and Michael Bright (Milken Proposal); and one offered by the Mortgage Bankers Association (MBA Proposal). These proposals have been discussed and debated in many forums, each assessed for its respective merits, risks, and likelihood of passage in Congress, but each largely in isolation from one another. That is, they are not compared in any intelligible way, forcing those hoping to come to an informed view to choose among what appear to be entirely different visions of reform, without any easy way to make sense of the choice.

In this brief essay, I thus bring these three proposals together into a single framework, making it clearer what they share and where they differ. Once the explanatory fog is lifted, one can see that they actually share a great deal and that deciding among them is not prohibitively complex, but a matter of assessing two or three key differences. (1-2)

After a review of each proposal, Parrott finds that there are two critical differences between the three proposals.

  • Ginnie versus CSP. For the securitization infrastructure in the new system, Milken uses the Ginnie Mae infrastructure, while the MBA and our proposal both use the CSP.
  • What to do with Fannie and Freddie. The MBA would turn them into privately owned utilities that compete with other market participants over the distribution of the system’s non-catastrophic credit risk, Milken would turn them into lender-owned mutuals that do the same, and we would combine them with the CSP to distribute that risk and manage the system’s securitization.

With these distinctions in mind, the proposals can be much more easily compared across the criteria that should ultimately drive our decisions on housing finance reform:

  • Access to sustainable credit. Which best maintains broad access to mortgage loans for those in a financial position to be a homeowner at the lowest rates?
  • Protecting the taxpayer. Which best insulates taxpayers behind private capital, aligns incentives systemwide and addresses the too-big-to-fail risk that undermined the prior system?
  • Promoting healthy competition. Which best maximizes the kinds of competition that will improve options and services for consumers, lenders, and investors?
  • Ease of transition. Which provides the least disruptive, least costly path of reform? (7-8)

This is a very useful tool for understanding the choices that we face if we are to move beyond the limbo of Fannie and Freddie’s conservatorships.  One limitation is that Parrott does not address the Hensarling wing of the Republican Party which is looking to completely privatize the housing finance system for conforming mortgages. Given that Hensarling is the Chair of the House Financial Services Committee, he will have a powerful role in enacting any reform legislation.

I am not all that hopeful that Congress will be able to come up with a bill that can pass both houses in the near future.  But Parrott’s roadmap is helpful preparation for when we are ready.

What’s the CFPB Ever Done for Housing?

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TheStreet.com quoted me in What’s the CFPB Ever Done For Housing? Quite A Lot. It reads, in part,

The Consumer Financial Protection Bureau grew out of the housing market crash of 2008 and subsequent Dodd-Frank legislation. As a watchdog with teeth, the CFPB’s job is to protect homebuyers from the predatory mortgages that helped sink the economy nine years ago. And it worked.

In theory.

Problem is, for some would-be homeowners, the CFPB is an inconvenient middle-man, adding more red tape to an already impossible situation. In short, it isn’t perfect. But with the Trump administration threatening to tear the whole damn thing down, you’ve got to wonder, is the CFPB really doing more harm to the housing market than good?

How we got here

Pre-housing market crash, the mortgage lending world was a vastly different, Wild West sort of landscape. Dodd-Frank and the CFPB entered the scene, in part, for lending oversight in that uncontrolled housing market. For example, once not-uncommon ‘liar loans,’ which were largely based on the borrower’s word and not much else-for instance, someone saying they made $100,000 a year to qualify for a huge home even though they made $30,000-are now illegal thanks to Dodd-Frank and the CFPB. Mortgage companies cashing in at the expensive of uneducated buyers happened, and it happened a lot.

“Just about everybody I talked to prior to 2008 thought the lending climate was out of control,” says Chandler Crouch, broker and owner of Chandler Crouch Realtors in Dallas-Fort Worth. “People were saying it couldn’t last. It just didn’t make sense. Lending requirements were too loose. Everybody, from Wall Street to the banks to the loan officers to the consumers, was being rewarded for making bad decisions. Lending needed to tighten.”

*     *     *

“The CFPB has been criticized for restricting mortgage credit too much with its Qualified Mortgage and ability to repay rules,” says David Reiss, a law professor at Brooklyn Law School who has practiced real estate law since 1998.

This was all done to ensure buyers could afford their home and not end up in foreclosure or short sale (and also avoid another economic collapse). These rules also bar lenders from predatory loans like massive balloon loans and shady adjustable rate mortgages.

*     *     *

Will no CFPB = housing hellscape?

Let’s say the Republicans get their way and the CFPB goes poof. What happens?

“You’d see an expansion of the credit box-more people would be approved for credit,” says Reiss. “To the extent that credit is offered on good terms, that would be a good development. I think you would see more potential homebuyers being approved for mortgages which would drive up home prices in the short term as there would be more competition.”

But then there’s the opportunity for those really bad loans to come swinging back, which harm homeowners would have in the past and also trigger fears of another housing collapse.

“Liar loans would definitely have a comeback if the CFPB and Dodd-Frank were dismantled,” says Reiss. “The Qualified Mortgage and ability to repay rules were implemented as part of the broader Dodd-Frank rulemaking agenda; without those rules, credit would quickly return to its extreme boom and bust cycle, with liar loans a product that would pick up steam just as the boom reaches its heights…We would bemoan them once again as soon as the bust hits its depths.”

Common Mortgage Myths

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image by Nevit Dilmen

Newsday quoted me in Don’t Fall For These 4 Common Mortgage Myths. It reads,

With the spring home buying season just around the corner, it’s a good time to separate fiction from fact.

Here are four common mortgage myths.

Myth: Home buyers must put down 20 percent.

Fact: “While that may have been true a long time ago, there are a number of alternatives. Federal Housing Administration-insured loans can have 3.5 percent down payments. Fannie Mae and Freddie Mac both have programs with 3 percent down payments. One major lender has come up with a program with a 1 percent-down mortgage, but there are some significant restrictions on who qualifies for that program,” says David Reiss, a law professor specializing in real estate at Brooklyn Law School.

Myth: My bank knows me, loves me and will give me a deal.

Fact: “Mortgage lending is regulated by nationwide underwriting standards that all lenders must follow. Since virtually all lenders obtain money to lend from the secondary mortgage markets, the mortgage rate one can obtain will be virtually the same regardless of the lender chosen,” says Warren Goldberg, president of Mortgage Wealth Advisors in Plainview.

Myth: Prequalification means you’re approved and will get the loan.

Fact: “Pre-qualification is not a binding agreement. Lenders may require additional information before issuing the loan. Pre-qualification gives you an idea of how much you can borrow before you start looking at homes and shows sellers that you’re committed and can afford the home,” says Bob Donovan, Bank of America’s divisional sales executive for the metropolitan region in Manhattan.

Myth: I’ll close in 30 days.

Fact: “That’s rare now. The turnaround from application to closing is about 50 days,” says Sam Heskel, CEO of Nadlan Valuation in Brooklyn.

 

Contract Selling Is Back, Big-Time

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The Chicago Reader quoted me in The Infamous Practice of Contract Selling Is Back in Chicago. It reads, in part,

When Carolyn Smith saw a for sale sign go up on her block one evening in the fall of 2011, it felt serendipitous. The now 68-year-old was anxiously looking for a new place to live. The landlord of her four-unit apartment building in the city’s Austin neighborhood was in foreclosure and had stopped paying the water bill. That month, she and the other tenants had finally scraped together the money themselves to prevent a shutoff and were planning to withhold rent until the landlord paid them back. Exhausted with this process and tired of dealing with “slumlords,” Smith wanted to buy a home in the neighborhood to ensure that she, her mother, Gwendolyn, and their dog, Sugar Baby, would have a stable place to live. But due to a past bankruptcy, Smith thought she would never be able to get a mortgage. So when she saw a house on her street for sale with a sign that said “owner financing,” she was excited. The next morning, she called the number listed and learned that the down payment was just $900—a sum she could fathom paying. “I figured I was blessed,” she says.

Her good fortune continued. A man on the other end of the line told her she was the very first one to inquire. The seller, South Carolina-based National Asset Advisors, called her several more times and mailed her paperwork to sign. Smith says she never met in person with anyone from National Asset Advisors or Harbour Portfolio Advisors, the Texas-based company that owned the home. But she says the agents she spoke with assured her that her credit was good enough for the transaction, despite the past bankruptcy. Next, they gave her a key code that allowed her to go in and look at the house, explaining that she’d be purchasing it “as is.” Smith thought the two-flat looked like a fixer-upper—the door had been damaged in an apparent break-in, and there was no hot-water heater, furnace, or kitchen sink—but given her poor luck with apartments of late, she felt she couldn’t pass up the chance to own a home. Both she and her mother, now 84, had been renting their whole lives; after pulling together the down payment, they beamed with pride when, in December 2011, they received a letter from National Asset Advisors that read “Congratulations on your purchase of your new home!”

But within a year, Smith discovered that the house was in even worse shape than she’d realized. In her first months in her new home, Smith estimates that she spent more than $4,000 just to get the heat and running water working properly, drinking bottled water in the meantime. Then the chimney started to crumble. Smith would hear the periodic thud of stray bricks tumbling into the alleyway as she sat in her living room or lay in bed at night; she began to worry that a passerby would be hit in the head and soon spent another $2,000 to replace the chimney. Public records show that the house had sat vacant earlier that year, and the city had ordered its previous owners to make extensive repairs.

Had Smith approached a bank for a mortgage, she likely would’ve received a Federal Housing Administration-issued form advising her to get a home inspection before buying. But as far as she recalls, no one she spoke to ever suggested one, and in her rush to get out of her old apartment, she didn’t think to insist.

The documents Smith signed with Harbour and National Asset Advisors required her to bring the property into habitable condition within four months, and with all the unexpected expenses, she soon fell behind on her monthly payments of $545.

Smith’s retirement from her job as an adult educator at Malcolm X College, in the spring of 2013, compounded the financial strain. Living on a fixed income of what she estimates was around $1,100 a month in pension and social security payments, she fell further behind, and the stress mounted.

“When we got to be two months behind, they would call me every day,” she remembers.

National Asset Advisors also began sending her letters threatening to evict her. That’s when Smith had a heart-stopping realization: She hadn’t actually purchased her home at all. The document she had signed wasn’t a traditional mortgage, as she had believed, but a “contract for deed”—a type of seller-financed transaction under which buyers lack any equity in the property until they’ve paid for it in full. Since Smith didn’t actually have a deed to the house, or any of the rights typically afforded home owners, she and her mother could be thrown out without a foreclosure process, forfeiting the thousands of dollars they’d already spent to rehabilitate the home.

“I know people always say ‘buyer beware’ ” she acknowledges. “But I’d never had a mortgage before, and I feel like they took advantage of that.”

What felt like a private nightmare for Smith has been playing out nationwide in the wake of the housing market crash, as investment firms step in to fill a void left by banks, now focused on lending to wealthier borrowers with spotless credit histories. In a tight credit market, companies like Harbour, which has purchased roughly 7,000 homes nationwide since 2010, including at least 42 in Cook County, purport to offer another shot at home ownership for those who can’t get mortgages. Such practices are increasingly common in struggling cities hard hit by the housing crash. A February 2016 article in the New York Times titled “Market for Fixer-Uppers Traps Low-Income Buyers” examined Harbour’s contract-for-deed sales in Akron, Ohio, and Battle Creek, Michigan. The Detroit News has reported that in 2015 the number of homes sold through contract-for-deed agreements in the city exceeded those sold through traditional mortgages.

*     *     *

Contract-for-deed sales also offered an attractive loophole from the growing set of regulations on traditional mortgages following the financial crisis. “In the same way that you saw [subprime lenders like] Countrywide get really big in the late 1990s,” says David Reiss, research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School, “one of the real attractions for the businesses operating in this space is that they are underregulated.”