- An Extrapolative Model of House Price Dynamics, Edward L. Glaeser & Charles Nathanson, HKS Working Paper No. RWP15-012.
- Old Suburbs Meets New Urbanism, Nicole Stelle Garnett, Notre Dame Legal Studies Paper No. 1512.
- Credit Scoring and Loan Default, Rajdeep Sengupta & Geetesh Bhardwaj, International Review of Finance Vol. 15, Issue 2, pg. 139-167, 2015. (Paid access).
- Product Market Effects of Real Estate Collateral, Azizjon Alimov.
- Reforming REIT Taxation (Or Not), Bradley T. Borden, Houston Law Review, Vol. 52, 2015, Forthcoming; Brooklyn Law School, Legal Studies Paper No. 416.
- Age, Demographics, and the Demand for Housing, Revisited, Richard K. Green & Hyojung Lee, June 4, 2015.
Tag Archives: reform
Reiss on EB-5 Green Card Reform
Ellis Island
GlobeSt.com quoted me in Congress Moves to Revamp EB-5. It reads in part,
Last week Senate Judiciary Committee Chairman Chuck Grassley and ranking member Senator Patrick Leahy introduced bipartisan legislation to reauthorize and reform the EB-5 Regional Center program.
This did not come as a surprise to the commercial real estate industry, which has been watching the approaching Sept. 30, 2015 deadline with a mixture of dread and anticipation.
Simply put, the program has become an increasingly popular funding source for projects, David Cohen, a shareholder at Brownstein Hyatt Farber Schreck in Washington DC, tells GlobeSt.com.
“As the popularity of the EB-5 program has grown in the last few years, so too has the scope of the deals its being used to fund,” he says. “There is far more money at stake than there was even a few years ago.”
The changes proposed in the bill — officially called the American Job Creation and Investment Promotion Reform Act — touched upon some of the more controversial parts of the program. It proposes strengthening oversight by Department of Homeland Security and Securities and Exchange Commission oversight and putting in place measures that would discourage fraud. Overall, national security would have a greater focus this time around.
* * *
The EB-5 program “has a very interesting mix of policy goals, including immigration, community development and employment ones,” says David Reiss, a law professor at Brooklyn Law School and research director of the Center for Urban Business Entrepreneurship (CUBE).
It also has a great deal of flexibility – and many say too much flexibility, he continues. “For instance, companies have been able to characterize hot locations in Brooklyn and Manhattan as areas of high unemployment by defining the targeted employment area expansively,” he tells GlobeSt.com.
“For instance, the biggest real estate project in Brooklyn, Pacific Park — formerly known as Atlantic Yards –used nearby neighborhoods with high unemployment for an EB-5 investment located in a relatively low unemployment area,” he says.
In short, “there is a lot of talk of reform of the program that comes from all different directions – raise the minimum investment amount! – ensure that the targeted employment area is more narrowly drawn! – establish national standards!” Reiss says.
“But it is too early to tell which reforms might stick.”
Housing Finance Reform at the AALS
The Financial Institutions and Consumer Financial Services Section and the Real Estate Transactions section of the American Association of Law Schools hosted a joint program at the AALS annual meeting on The Future of the Federal Housing Finance System. I moderated the session, along with Cornell’s Bob Hockett.
Former Representative Brad Miller (D-N.C.) keynoted. Until recently he was a Senior Fellow, at the Center for American Progress and is now a Senior Fellow at the Roosevelt Institute. He was followed by four more great speakers:
- Mark A. Calabria, Director of Financial Regulation Studies, Cato Institute
- Laurie Goodman, Center Director for the Housing Finance Policy Center, Urban Institute
- David Min, University of California, Irvine School of Law
- Jennifer Taub, Vermont Law School
The program overview was as follows:
The fate of Fannie Mae and Freddie Mac are subject to the vagaries of politics, regulation,public opinion, the economy, and not least of all the numerous cases that were filed in 2013 against various government entities arising from the placement of the two companies into conservatorship. All of these vagaries occur, moreover, against a backdrop of surprising public and political ignorance of the history and functions of the GSEs and their place in the broader American financial and housing economies. This panel will take the long view to identify how the American housing finance market should be structured, given all of these constraints. Invited speakers include academics, government officials and researchers affiliated to think tanks. They will discuss the various bills that have been proposed to reform that market including Corker-Warner and Johnson-Crapo. They will also address regulatory efforts by the Federal Housing Finance Agency to shape the federal housing finance system in the absence of Congressional reform.
During the presentations, I felt a bit of awe for the collective knowledge of the speakers. The program also emphasized for me how much there always is to learn about a topic as complex as housing finance.
Laurie Goodman was kind enough to let me post her PowerPoint slides from the program. If you are looking for a good overview of the current state of housing finance reform, you will want to take a look at them.
I was a bit depressed by the slide titled, “Why GSE reform is unlikely before 2017:”
1. There is no sense of urgency: GSEs are profitable, current system is functioning.
2. Higher legislative priorities.
3. No easy answers as to what a new housing finance system should look like.
4. Bipartisan action requires compromise, and some believe they have more to lose than to gain by compromising in this arena.
While the slide depressed me, I think it offers a pretty realistic assessment of where we are. I hope Congress and the Obama Administration prove me wrong.
Are Baby Steps Enough for Fannie and Freddie?
S&P issued a research report, The Implementation Of The FHFA’s Plan For Fannie Mae And Freddie Mac Still Has A Long Way To Go. The report addresses a number of recent events that will impact any reform program for the two Government-Sponsored Enterprises. S&P strike an optimistic note in the opening lines: “The U.S. government continues to gradually make progress on the reform of the” two Enterprises.” (1) It is unclear to me that we are actually making any progress at all. S&P seem to acknowledge as much a few paragraphs later: “Fannie and Freddie are perhaps more entrenched in the housing market today than ever before. Including Ginnie Mae, the government-related housing entities have combined to purchase or guarantee more than 90% of mortgages underwritten in the U.S. since the housing crisis, up from about 50% before the crisis.” (1)
S&P notes that Fannie and Freddie’s financial health is improving as they “are now generating earnings, which reduces the urgency to try to minimize taxpayer costs.” (1) Their underlying loans are also performing much better: “At Freddie, loans originated after 2008 account for 63% of its single-family guarantee portfolio and have a seriously delinquent rate of 0.39%, versus 9.56% for loans originated from 2005–2008. At Fannie, loans originated after 2008 account for 66% of its single-family guarantee portfolio and have a seriously delinquent rate of 0.35%, versus 9.92% for loans originated from 2005–2008.” (2)
S&P takes heart that change is afoot because of “the new key aspect of the FHFA’s plan to build a secondary market infrastructure is the proposed creation of a joint venture (JV) between Fannie and Freddie. This JV would have a CEO and chairman that are independent from Fannie and Freddie, and its physical location would also be separate. The GSEs would initially own, operate, and fund this unit, but the JV also would be able to eventually act as a common securitization platform for the entire market, instead of a proprietary platform. Furthermore, the ownership structure would be one that is easily sold or that policymakers can use in housing finance reform once Fannie and Freddie have less of a role in the market.” (2-3)
S&P characterizes the federal government’s approach as “taking baby steps.” (4) I would characterize it as just so much muddling about.
