People’s Credit Union v. Trump

photo by Janine and Jim Eden

Twenty-one consumer finance regulation scholars (including yours truly) filed an amicus brief in Lower East Side People’s Federal Credit Union v. Trump, No. 1:17-cv-09536 (SDNY Dec. 14, 2017). The Summary of the Argument reads as follows:

The orderly succession of the leadership of regulatory agencies is a hallmark of American democracy. Regulated entities, such as Plaintiff Lower East Side People’s Federal Credit Union (LESPFCU) rely on there being absolute clarity regarding who is duly authorized to exercise regulatory authority over them. Without such clarity, regulated entities cannot be certain if agency actions, including the promulgation or repeal of rules and informal regulatory guidance, are actual agency policy or mere ultra vires actions.

This case involves a controversy over who lawfully serves as the Acting Director of the Consumer Financial Protection Bureau (CFPB or the Bureau) following the resignation of the Bureau’s first Senate-confirmed Director. The statute that created the CFPB, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), is clear: the Deputy Director of the CFPB “shall . . . serve as acting Director in the absence or unavailability of the Director.” 12 U.S.C. § 5491(b)(5)(B). Thus, upon the resignation of the Director, the CFPB’s Deputy Director, Leandra English, became Acting Director and may serve in that role until a new Director has either been confirmed by the Senate or been recess appointed.

Despite the Dodd-Frank Act’s clear statutory directive, Defendant Donald J. Trump declined to follow either of the routes constitutionally permitted to him for appointing a Director for the Bureau. Instead, Defendant Trump opted to illegally seize power at the CFPB by naming the current Director of Office of Management and Budget (OMB), Defendant John Michael Mulvaney, as Acting CFPB Director. Defendants claim this appointment is authorized by the Federal Vacancies Reform Act of 1998 (FVRA), 5 U.S.C. § 3345(a).

As scholars of financial regulation, we believe that Deputy Director English’s is the rightful Acting Director of the CPFB for a simple reason: the only applicable statute to the succession question is the Dodd-Frank Act. In the Dodd-Frank Act, Congress expressly provided for a mandatory line of succession for the position of CFPB Director, stating that the Deputy Director “shall” serve as the Acting Director in the event of a vacancy. Congress selected this provision after considering and rejecting the FVRA during the drafting of the Dodd-Frank Act, and Congress’s selection of this succession provision is an integral part of its design of the CFPB as an agency with unique independence and protection from policy control by the White House. The appointment of any White House official, but especially of the OMB Director as Acting CFPB Director is repugnant to the statutory design of the CFPB as an independent agency.

The FVRA has no application to the position of CFPB Director. By its own terms, the FVRA is inapplicable as it yields to subsequently enacted statutes with express mandatory provisions for filling vacancies at federal agencies. This is apparent from the text of the FVRA, from the FVRA’s legislative history, and from the need to comport with the basic constitutional principle that a law passed by an earlier Congress cannot bind a subsequent Congress. Moreover, the FVRA does not apply to “any member who is appointed by the President, by and with the advice and consent of the Senate to any” independent agencies with a multi-member board. 5 U.S.C. § 3349c(1). The CFPB Director is such a “member,” because the CFPB Director also serves as a member of a separate multi-member independent agency: the Board of Directors of the Federal Deposit Insurance Corporation (FDIC).

Plaintiff LESPFCU is seeking a preliminary injunction against acts by Defendants Mulvaney and Trump to illegally seize control of the CFPB, and it should be granted. As will be shown, LESPFCU has a high likelihood of success on the merits given the strength of its statutory arguments that the Dodd-Frank Act controls the CFPB Directorship succession. Unless the Court grants LESPFCU’s request for a preliminary injunction, LESPFCU will suffer irreparable harm because it will be subjected to regulation by a CFPB that would be under the direct political control by the White House that Congress took pains to forbid. Moreover, without a preliminary injunction, Defendant Mulvaney will continue to take actions that may place LESPFCU at a competitive disadvantage by creating an uneven regulatory playing field that favors certain types of institutions. See, e.g., Jessica Silver-Greenberg & Stacy Cowley, Consumer Bureau’s New Leader Steers a Sudden Reversal, N.Y.TIMES, Dec. 5, 2017. Nor will the President’s rights be in any way limited by such a preliminary injunction: the President remains able to seek Senate confirmation of a nominee for CFPB Director. All the President is being asked to do is fish or cut bait and proceed through normal constitutional order. The granting of a preliminary injunction is also very much in the public interest as it enables the controversy over the rightful claim to the CFPB Directorship to be resolved through an impartial court and not through a naked grab of power by the President.

Manafort’s Real Estate Deals

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.

Contract Selling Is Back, Big-Time

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.”

Consumer Protection, Going Forward

photo by Lawrence Jackson

Warren, Obama and Cordray

The New York Times quoted me in Consumer Protection Bureau Chief Braces for a Reckoning. It opens,

Mild-mannered, lawyerly and with a genius for trivia, Richard Cordray is not the sort of guy you picture at the center of Washington’s bitter partisan wars over regulation and consumer safeguards.

But there he is, a 57-year-old Buckeye who friends say prefers his hometown diner to a fancy political reception, testifying in hearing after hearing on Capitol Hill about the agency he leads, the Consumer Financial Protection Bureau. Republicans would like to do away with it — and with him, arguing that the agency should be led by a commission rather than one person.

And with a Republican sweep of Congress and the White House, they may get some or all of what they wish.

Mr. Cordray, a reluctant Washingtonian who has commuted here for six years from Grove City, Ohio, where his wife and twin children live, is the first director of the consumer watchdog agency, which was created in 2010 after Wall Street’s meltdown. By aggressively deploying his small army of workers — he has 1,600 of them — Mr. Cordray has turned the fledgling agency into one of Washington’s most powerful and pugnacious regulators.

The bureau has overhauled mortgage lending rules, reined in abusive debt collectors, prosecuted hundreds of companies and extracted nearly $12 billion from businesses in the form of canceled debts and consumer refunds. In September, it exposed the extent of Wells Fargo’s creation of two million fraudulent customer accounts, igniting a scandal that provoked widespread outrage and toppled the company’s chief executive.

And, according to Mr. Cordray, he and his team have barely scratched the surface of combating consumer abuse.

“We overcame momentous challenges — just building an agency from scratch, let alone one that deals with such a large sector of the economy,” Mr. Cordray said in an interview at his agency’s office here. “I’m satisfied with the progress we have made, but I’m not satisfied in the sense that there’s a lot more progress to be made. There’s still a lot to be done.”

But his future and the agency’s are uncertain. Democrats in Ohio are encouraging Mr. Cordray to run for governor in 2018, which would require him to quit his job in Washington fairly soon, rather than when his term ends in mid-2018. Champions of the agency are imploring him to stay, arguing that if he leaves, the agency is likely to be defanged, its powers to help consumers sapped.

Opponents of the bureau just won a big legal victory: The United States Court of Appeals for the District of Columbia Circuit said last month that the structure of the Consumer Financial Protection Bureau was unconstitutional, and that the president should have the power to fire its director at will.

The agency is challenging the decision — which was made in a lawsuit brought by the mortgage lender PHH Corporation that contests the consumer bureau’s authority to fine it — and that has temporarily stopped the decision from taking effect. But the ruling has kept alive questions about whether too much power is concentrated in Mr. Cordray’s job, and whether the agency should be dismantled or restructured.

Mr. Cordray, who also battled on behalf of consumers in his previous jobs as Ohio’s attorney general and, before that, its treasurer, is praised in some circles as enormously effective, wielding the bureau’s power to restructure some industries and terrify others.

The bureau has “helped save countless people across the country from abusive financial practices,” said Hilary O. Shelton, the N.A.A.C.P.’s senior vice president for advocacy and policy.

Even the regulator’s frequent foes — including Alan S. Kaplinsky, a partner at Ballard Spahr in Philadelphia, who says the agency often overreaches — acknowledge its impact.

“I’ve been practicing law in this area for well over 40 years, and there’s nothing that compares to it,” Mr. Kaplinsky said. “Every company in the consumer financial services market has felt the effects.”

The Consumer Financial Protection Bureau has nearly replaced the Better Business Bureau as the first stop for dissatisfied customers seeking redress. It has handled more than a million complaints, many of which it has helped resolve.

*     *    *

The housing crisis dominated the bureau’s early days. When Congress created the new overseer, it also dictated its first priority: making mortgages safer. The deadline was tight. If the bureau did not introduce new rules within 18 months, a congressionally mandated set of lending guidelines would automatically take effect.

The bureau made it with one day to spare.

It banned some practices that had fueled the crisis, like home loans with low teaser rates or no documentation of the borrower’s income, and steered lenders toward “qualified” loans with a stricter set of safeguards, including checks to ensure that customers could afford to repay what they borrowed.

After much grumbling — and many dire forecasts that the new rules would limit credit and harm consumers — mortgage lenders adjusted. They made nearly 3.7 million loans last year for home purchases, the highest number since 2007, according to government data.

“It seems like the financial services industry has figured out how to adapt to this new regulatory regime,” said David Reiss, a professor at Brooklyn Law School who studied the effects of the bureau’s rule-making. “We’ve moved from the fox-in-the-henhouse market in the early 2000s, where you could get away with nearly anything, to this new model, where someone is looking over your shoulder.”

Dollar Homes

Packmatt

Realtor.com quoted me in Buy a House for a Buck? The Real Story Behind $1 Listings. The story reads, in part,

Hidden deep within the bowels of real estate listings are a few head-scratchers that would no doubt catch any bargain hunter’s eye. They’re homes for sale for the grand total of one crisp American dollar. So what’s the deal? Are they for real?

I decided to find out by actually clicking, and calling, and learning the stories behind these tempting facades. And it turns out, $1 listings can mean many things. Here’s what this lowball price is actually all about.

*     *     *

Possibility No. 3: It truly is for sale for $1, but…

The next four places for $1 that I check out are all rundown properties in Detroit. They range in description from “fire damage sold as is” (translation: a charred pile of lumber—pic below) to “bungalow with three bedrooms, one bathroom, basement and much more” (translation: “more” means plywood for windows and doors).

Still, some houses sit on decent lot sizes of 3,000+ square feet in neighborhoods that seem habitable at first glance. The listing agent won’t return my call, but I track down an agent willing to show me the various rundown homes. Though back taxes or liens on the property may jack up the price, I ask whether the house will really sell for $1. “Sure,” he says. “This is Detroit.”

Now that I’ve found a true $1 listing, should I hand over a George Washington for one of these fixer-uppers?

“When a house is being sold for a dollar, it means that the local real estate market has cratered,” says David Reiss, professor of law at Brooklyn Law School who focuses on real estate issues and community development. “Land has no value. Or even worse, it has negative value and buyers of $1 homes will end up getting snookered. Owning land comes with various mandatory expenses like real property taxes. It’s possible the true value is even lower than a dollar. In that case, you will see a lot of $1 houses staying on the market, as hard as that is to believe.”

Reiss further explains how the Motor City’s market cratered so deeply: “Real estate’s value typically comes down to location. If jobs have disappeared, if residents have disappeared, if services have disappeared—then value disappears.”

Beyond having zero worth, a $1 home is likely a gaping money pit. When the New York Times ran a piece on the subject in 2007, it found that “the houses often require hundreds of thousands of dollars in renovations.”

Though my search for $1 properties was a bust in the end, there once were $1 homes worth buying. “Think of New York City,” says Reiss. “Homes that were abandoned in the 1970s are now selling for seven figures.”

Bottom line? One-dollar listings may be a risky gamble, but, hey, you never know.

 

Thursday’s Advocacy & Think Tank Round-Up

  • Citylab finds that urban farmers and real estate developers are teaming up in an unlikely alliance to create housing which incorporates on site food production, the latest in trendy, locavore hip.
  • Enterprise Community Partners has launched a national sign on letter to oppose Cuts, lift spending caps and restore funding to the Home Investment Partnership Program (HOME). HOME, according to Enterprise, is “the only Federal Housing Program exclusively focused on providing states and localities flexible gap financing for affordable housing development” for the low and very low income populations (seniors, the disabled, etc.)
  • New York Times editorial argues that the relief promised to homeowners facing foreclosure only materialized for banks, who unloaded toxic loans on the government, and private equity firms, who are now purchasing loans back from the government, at a discount and continuing  to foreclose.
  • National Association of Realtors finds that most Zombie homes (think unoccupied – long term vacancy) are not foreclosures but owned free and clear of mortgages.

New York Times Criticizes $8.5b Foreclosure Settlement

The New York Times published a story announcing an $8.5 billion settlement with 10 major banks to settle about four million foreclosure actions. The money will be split in two, with $3.3 billion going directly to 3.8 million homeowners, and the rest going towards lowering interest payments and loan amounts. The settlement is controversial, however, because in addition to the payout the settlement will also end the federal government’s review of those foreclosures, and the money is going to be split evenly amongst consumers regardless of whether harm was actually determined. Some believe that the settlement is the result of a flawed and incompetent review process, which became so costly and slow that the government decided to give up on the review. Others think that the rough justice achieved by the settlement is the closest that regulators can come to making victims of unlawful foreclosures whole again. Former FDIC chairwoman Sheila Bair was quoted in the article stating that the government is “mak[ing] the best out of a very bad situation.”