Tag Archives: Reiss

Cornell’s Entrepreneurship Center Expands in Its First Year

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modern office space looking out at new york city skyline

Cornell Law School just posted this about the new Entrepreneurship Law Clinic on Roosevelt Island:

In the summer of 2024, with a transformative gift from Franci J. Blassberg ’75, J.D. ’77, and Joseph L. Rice III, Cornell formally launched a center for entrepreneurship law in New York City. Bridging Cornell Law and Cornell Tech, the Blassberg-Rice Center for Entrepreneurship Law has continued to grow in the months since, establishing a new Entrepreneurship Law Clinic on Roosevelt Island, welcoming its first cohort of J.D. and LL.M. students, and hiring a second faculty member, David Reiss, clinical professor of law and research director, to lead the New York City program.

“We are thrilled to have David on board,” says Celia Bigoness, director of the Blassberg-Rice Center and clinical professor of law, who continues to lead the Entrepreneurship Law Clinic at the Ithaca campus. “This is the first time we’ve been able to offer a clinical experience that’s entirely embedded in the technology ecosystem of Cornell Tech, and there’s been tremendous demand among students and clients for the work that we’re doing.”

The upstate and downstate clinics operate in parallel, with the two halves meeting together throughout the semester to share lessons and progress. In both locations, students represent entrepreneurs in setting up the business entities for their startups, representing them on a range of matters involving commercial contracts, data privacy, employment, equity allocation, founders’ agreements, governance, intellectual property, and real estate.

student working at a computer with New York City in the background

Alex Cho ’25 is working with social entrepreneurs, including one that has released an AI-powered chatbot that helps tenants navigate their relationship with their landlords.

“We’re giving students an exposure to the breadth of knowledge that is key to serving entrepreneurs,” says Reiss, who began teaching in January. “Just as important, we’re spending time on the soft skills that will help students not just understand the law, but understand how to effectively counsel their clients. Every student who passes through these programs will come out with hands-on transactional skills that can best be learned in a clinical setting.”

In Ithaca, seven of Bigoness’ twelve current students are continuing from the fall semester, working on increasingly challenging questions for startups in biomedical engineering, food services, product development, technology, and youth sports. In New York City, where the spring semester’s clients are drawn from Cornell Tech, Weill Cornell Medicine, and the Queens Chamber of Commerce, Reiss’ six students are counseling clients in the early stages of creating startups in climate tech, software, and transportation.

“It’s been a great experience, and I think the thing I have gained the most from it is confidence,” says Maria Hatzisavas, LL.M. ’25, who is attending Cornell Tech in the year between earning her J.D. and beginning her first job in corporate law. “At Notre Dame, I developed as a law student, and here, I’m developing more as a lawyer. I’m learning skills I’ll use throughout my career, and I’m gaining new insights into the practice of law because so many attorneys come in to teach us.”

“As someone who wants to do transactional work but hasn’t had an extensive background in accounting or finance, this clinic has shown me the legal side of business,” adds Kylee Nguyen ’25, whose 3L year in the Ithaca clinic has given her a taste of life as a general counsel. “It’s sharpened my soft skills, taught me how to think in the real world, and helped me make a tangible difference in the lives of my clients. I’m taking everything I’ve learned in this clinic into my practice, and I’m not leaving anything behind.”

“This launch is incredibly exciting. I’m grateful to Celia Bigoness, Franci Blassberg, Joe Rice, Jens Ohlin, Eduardo Peñalver, and Shawn Gavin for their vision and to all involved for the hard work it took to bring this about,” says Beth Lyon, clinical professor of law and associate dean for experiential education and clinical program director.

What Happens if Fannie and Freddie Go Private?

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I was quoted in Fintech Nexus’ Home Invasion: What Happens if Fannie and Freddie Go Private. It reads, in part,

The Trump Administration has telegraphed significant changes to GSE mortgage lenders — with massive implications for the industry

Since his swearing in on March 14 as the fifth Director of the Federal Housing Finance Agency (FHFA), construction mogul William J. Pulte has executed major policy and personnel changes. Among other moves, Pulte has named himself board chair of the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, removed 14 of the GSEs’ 25 sitting board members, fired most of the companies’ audit boards, generally slashed headcount, and rescinded several Biden-era oversight-related advisory bulletins.

According to Professor David Reiss of Cornell Law School, a scholar of real estate finance and housing policy, Pulte’s simultaneous leadership of the FHFA in addition to roles at the GSEs, which have been under federal conservatorship since the 2008 financial crisis, is not normal.

“The whole point of regulation is you have somebody who’s overseeing an industry,” he told Fintech Nexus. “This is like the left hand [knowing] what the right hand is doing: You’re overseeing yourself, so it’s … kind of inconsistent with the notion of a supervisory regulator.”

Fintech Nexus contacted the FHFA, requesting that it comment on the impetus behind Pulte’s simultaneous self-appointments to Fannie and Freddie. The FHFA did not respond.

*     *    *

CAPITAL IDEAS

One idea percolating is for the Trump Administration to use Fannie and Freddie as a pool of capital to inject into a sovereign wealth fund. An op-ed in the Financial Times by Stifel CEO Ronald Kruszewski suggested this reconfiguration could provide “continued government backing,” “stabilize investor confidence,” and “pave the way for a $1 trillion sovereign wealth fund by 2040.”

However, in a letter to the editor in the Financial Times, Dini Ajmani, Former Deputy Assistant Secretary of the US Treasury, suggested the idea would fail, as any privatization of the GSEs would require proper capitalization, taxpayer compensation, and adequate confidence of securities investors.

“I believe the difficulty in meeting all three conditions is why [the] status quo has persisted,” Ajmani told Fintech Nexus. “To build capital, Fannie/Freddie must retain earnings, which means the taxpayer is not compensated. If the taxpayer is compensated through dividend payments, private capital will be uninterested because the agencies will be undercapitalized.”

To this end, FHFA Director Pulte may continue to atrophy many forms of GSE oversight as a way to prime the pump: Pre-empting congressional activity by deregulating Fannie and Freddie can accelerate their transition toward open-market frameworks.

The Trump Administration may see it as its only viable short-term  avenue, as many members of Congress are uninterested in bringing Fannie and Freddie out of conservatorship; Senator Elizabeth Warren (D-MA), member of the Senate Committee on Banking, Housing, and Urban Affairs, called the move “Great for billionaires, terrible for hardworking people.”

Should the Trump Administration succeed in its quest, we may see states attempting to fill in the gaps on regulatory accountability, rhyming with blue-state attorneys-general’s litigiousness in the wake of the Consumer Financial Protection Bureau’s de-clawing, though this is unlikely.

“State regulators do not generally play a role similar to the two companies (except to some small extent state Housing Finance Agencies),” Reiss of Cornell Law School said. “I could imagine state agencies trying to increase consumer protection for mortgage borrowers, if the federal regulatory environment changes, but we would have to see how that plays out to understand how the states would respond.”

Trump’s Plans to Privatize Fannie and Freddie

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from Cato Institute website, https://www.cato.org/people/mark-calabria

Mark Calabria, OMB Associate Director for Treasury, Housing, and Commerce

I was interviewed on  WBUR-FM’s On Point (distributed by American Public Radio), hosted by Meghna Chakrabarti for an episode on How Trump Plans To Get Government out of the Mortgage Business. The link has the recording of the show as well as a transcript.

The transcript of the interview starts,

CHAKRABARTI: Now that President Trump is back in the White House, it seems that he intends to get the job done this time around. Mark Calabria has returned to Trump’s administration, this time working on housing policy at the Office of Management and Budget. Bill Pulte is now director of FHFA, and he just made the highly unusual move of appointing himself chair of both Fannie Mae and Freddie Mac, making the regulator and the regulated basically the same.

Pulte also fired 14 of the 25 sitting board members at Fannie and Freddie. A shakeup many are suspecting is a first step in leading these two companies out of government control and into privatization. We’re talking about a huge part of the U.S. economy that underpins the housing market. So this hour, we want to explore what privatization of Fannie and Freddie actually means, what it should look like, and how it might have an impact on homeowners and the housing market.

So to do that, David Reiss joins us. He’s a clinical professor of law at Cornell Law School and Cornell Tech, an expert in housing finance and policy. Professor Reiss, welcome to On Point.

DAVID REISS: Meghna, thank you so much.

CHAKRABARTI: I have to tell you that I actually can’t believe that it’s been 17 years since the financial crisis of 2008.

Let’s dust off the memory banks professor and go back to before 2008 and start there. Can you just remind us like what Fannie Mae and Freddie Mac were, what their purpose was, who owned them, et cetera?

REISS: I’m gonna go even a little bit further back than Fannie and Freddie’s creation, because I think it’s really gonna help people visualize what’s at stake here.

And if you think back to the 19th century and somebody was trying to buy a house, they didn’t have that many options. A house has always been a very expensive thing to buy, so they need to borrow some money to buy a house. And how could you do that?

Maybe if you’re rich, you could do it, or had a rich uncle, but otherwise you need to go to somebody who has capital and that you could borrow it and give them some interest in return. And pay them back over time, and be able to live in that house while you’re paying back the amount of money that you borrowed. And so if people think of It’s a Wonderful Life where there’s the Bailey Brothers building in loans and where they, people deposit their small savings into the buildings and loan.

And then some people are then able to borrow some money from the buildings and loan for mortgages. And there’s the famous scene where there’s a panic at the bank. And Jimmy Stewart says, Mrs. Kennedy, your money is in Mrs. Smith’s house. And Mrs. Smith, your money is in Ms. Macklin’s house.

And that’s the way it was done in the 19th century and the early 20th century. But there were real limitations to that. Sometimes communities didn’t have a lot of capital to lend people, so maybe in out west or in the Midwest there wasn’t a lot of capital, like there might’ve been back east in Boston or New York.

And so people who could have handled the mortgage just didn’t have access to it. It was like they were living in a dry area, and the fresh flowing credit didn’t reach their dry community. So during the Great Depression and the New Deal the government started to intervene, to spread credit out across the country in a way that kind of provided liquidity to all the communities where people wanted to borrow.

And Fannie Mae was a creature of the New Deal, but really took off in the ’70s along with its sibling Freddie Mac. And effectively, what those two companies were designed by Congress to do was to ensure that capital could go across state borders in a way that banks were typically not allowed to do. And they effectively created at first a national market for mortgage credit, and effectively when they access the global credit markets over time, an international global market for credit. So they’re really intermediaries.

Tech Entrepreneurship Clinic in NYC

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Cornell has just formally announced the creation of its first NYC law clinic, a branch of the law school’s Entrepreneurship Law Clinic, to be located on the Cornell Tech campus. You can read more here.

 

Why Does a Bank Sell Your Mortgage?

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I was quoted in Marketplace’s story, Why Does a Bank Sell Your Mortgage? You can listen to it here. The transcript opens,

Right after Marc Hill bought his first home, a townhouse north of Chicago, in the summer of 2019, he got a letter telling him his mortgage had been sold. He didn’t think much of it after Googling around.

“I read that was kind of normal. And then it happened again. And then again. And I was like, ‘Well, what’s going on here?’” he said with a laugh.

Recently, less than five years after his purchase, the mortgage on Hill’s townhouse changed hands for the fourth time.

“Welcome to the 21st century housing market,” said David Reiss, a professor of real estate finance and housing policy at Brooklyn Law School. Today, upward of 70% of mortgages are sold into the secondary market.

“A lot of people have a sense that mortgages work like they did maybe in ‘It’s a Wonderful Life,’” he said. “Where you walk into your bank and if they think you’re a good risk, they’re going to give you some mortgage, and that’s going to come from money that they have from deposits.”

Sometimes that is how it works. But for the most part, Reiss said, “instead of banks lending you money that they have in deposit, once the bank makes the mortgage they then sell it to investors.”

When the bank or lender that originated your mortgage sells it, they get back all the money they lent you right away, plus a chunk of the interest you’re expected to pay over the life of your mortgage. They also get some of your closing costs.

Debranding Trump

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Dano CC BY 2.0 DEED

Agence France-Presse (AFP) quoted me in Posts Falsely Say Trump Name Erased from New York Properties. It reads, in part,

“We have already seen cases where Trump’s name has been removed from a property because the owner no longer thought it benefited the property,” David Reiss, professor at Brooklyn Law School, confirmed to AFP on October 4.

In September 2023, it was also reported that Trump would sell his multimillion-dollar lease on a public golf course in the Bronx to the Bally’s casino chain . . . “naming rights are often a separately negotiated item. For instance, companies pay millions of dollars to get naming rights to stadiums,” Reiss explained.

Both the Trump Tower and Trump Park Avenue, for example, still bear the former president’s name and remain under his ownership, as of this writing, a member of buildings staff confirmed to AFP by telephone.

AFP contacted the Trump Organization for further comment, but a response was not forthcoming.

While exceptions happen, Reiss noted that “generally when a party gives up ownership or control of a property, their name goes with them.”

 

 

 

How to Fake-Own the New Yorker Hotel

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Reinhold Möller, CC BY-SA 4.0

New York magazine’s Curbed interviewed me for their explainer, How to Fake-Own the New Yorker Hotel. It reads:

The story of how a guy named Mickey Barreto came to own, at least on paper, the New Yorker hotel is a weird one. It started in June 2018, when Barreto first booked a night at the Art Deco landmark for $149. He had plans to stay a while: Using an obscure clause in the city’s rent-stabilization law, Barreto requested a six-month lease to live at the hotel. The gambit worked. Even as the owner of the hotel, which happens to be the Unification Church despite the fact that it operates as a Wyndham, tried to boot him, the judge ordered them to let him back in.

Around the same time he requested the lease, and despite the fact that he did not own the New Yorker, Barreto filed a deed transferring ownership of the hotel from himself to something called Mickey Barreto Missions. Why did Barreto believe he owned the building? As he told a judge in 2019, the “building was never subdivided. It’s all one lot. It’s all one parcel.” Which meant, at least to him, that because he had a legal claim to room 2565, he had a legal claim to the whole thing: “What affects that part of the building called 2565, whatever happens in there, happens to the whole lot, the whole parcel.” He then went around presenting himself as the owner, attempting to collect rent from the building’s street-level businesses and at one point calling the Fire Department to have the building evacuated and, per court documents, identifying “himself as the owner of the subject property.” In the end, the judge found Barreto’s deed, which was extremely fraudulent, to be extremely fraudulent.

But Barreto wasn’t done! The Commercial Observer reports that Barreto made another play at ownership this month, with a 2021 deed transfer from Mickey Barreto Missions to … Mickey Barreto Missions. (Barreto only signed the document earlier this month, and the Department of Finance made it public shortly after.) All of which raises some important questions: Why is it so easy to fake-own a building in New York City? And what is this rent-stabilization law Barreto took advantage of? To help make sense of everything, and potentially try it myself, I reached out to David Reiss, a professor at Brooklyn Law School, who explained everything.

This interview has been edited and condensed for clarity.

Can we start with fake-owning a hotel? Barreto managed to file documents transferring ownership of the hotel to himself. Can someone just … do that?
The government looks at deeds and says: Do they meet our technical requirements for a deed? Is it on the right kind of paper, is it the right size? Does it have a notary stamp on it? If it meets all those technical requirements, then it is recordable. The way you sell a property is based on the fact that most people are doing the right thing and they’re not doing shenanigans. But if you record something that is fraudulent, that doesn’t make it real. A fraudulent deed conveys nothing, and really nobody’s going to be misled by this. It just needs cleaning up. The true owner has to go to court and get this deed declared fraudulent so that it could be removed from the recording documents.

You may not remember this famous headline some 20 years ago when the New York Daily News transferred ownership of the Empire State Building to itself. The notary was Willie Sutton, the famous bank robber, and one of the witnesses of the deed was Fay Wray from King Kong. They got a big headline, but it’s less interesting than the headline suggests.

They were trying to prove a point. 
I believe what they were trying to demonstrate is that regular people can have their properties swept away from them through deeded theft, which is another name for this. And this can be a serious problem for people living in relatively modest homes, typically in the outer boroughs. And typically the victims are elderly people, and it’s a way to steal people’s property. This is a horrific fraud.

Barreto’s fraud was more like the Empire State Building fraud. Barreto told the restaurant to pay rent to him and all these things, but no sophisticated person is going to fall for this. They’re going to call the property manager and say, “What’s going on?” It’s not going to change anything.

So it’s mostly a hassle. 
If this happened to you, you’d be miserable and you’d probably have to hire a lawyer. It would be a pain in the butt. But it doesn’t happen that often. And when you think about all of the transactions that happen whenever you design a government system like the recording system, you want to balance ease of use versus potential for fraud. Maybe it’s a cost we accept as a government because it doesn’t happen very much.

It was also funny to me that he transferred the deed from Mickey Barreto Missions to Mickey Barreto Missions. 
I mean, his deed was really weird because the deed was from himself to himself. So that’s even more fraudulent on its face. If David Reiss transfers to David Reiss, that doesn’t really even do anything. This is just nonsense, right?

Right. 
I mean maybe he was magically thinking that this would give him ownership of the building or just wanted to gunk up the works for them or is just a little wacky. Whatever his reasoning, trying to interpret it as a legal matter doesn’t get you anywhere because he had no rights and he kind of made it up. It’s like if your kid was writing a deed.

Okay, so he was not using magical thinking when it came to claiming a lease at the New Yorker Hotel. Can you tell me about that clause? 
So, this is part of the rent-stabilization law that allows guests at single-room occupancy (SRO) hotels to become tenants, usually by living there continuously for six months or by staying there for one night and requesting a lease. They’re a very specialized, small part of the New York City housing stock that are very complex. Most of them are in very bad condition. They’re kind of a holdover from an earlier era — after World War II a lot of them filled up with single men who would come to New York City to make their way in the world. They fell on very hard times in the ’70s and ’80s and kind of phased out. Then the government came up with a supportive SRO model where it had a similar type of housing space with services on-site. But we’re not talking about very many units.

But the New Yorker Hotel is kind of nice. Is it an anomaly?
The New Yorker Hotel is owned by the Unification Church, the Moonies church. I’m guessing it’s a complicated story. It’s not your typical hotel owner.

And Barreto knew about this odd little provision on rent-stabilized hotels. 
He clearly knew what he was doing. He was either advised by somebody or had done his own research and realized that he was able to request a lease. Some not-for-profit legal entities will even provide form letters to tenants so that they can do this, because for some people this is a very attractive housing option. It’s very reliable compared to being in a men’s shelter or a women’s shelter or something like that. So it’s obscure, but it’s doable. There have been other cases about this, and owners will often fight with a tenant about it because they would rather use it as a hotel unit where they can rent it out at a higher nightly rate. But that’s not complying with the law. So what he did in regards to rent stabilization and getting the lease is not extraordinary, although it’s rare.

And he paid $149 for one night at the hotel, but I assume once the court said he could stay, he would have paid a much lower rent?
That’s right. It can’t be higher than the legal rent. And the legal rent is set by a combination of what the initial rent was back in the day, and then whatever increases had been allowed over time under the rent-stabilization law.

So if someone gets a six-month lease, can they stay indefinitely because it’s a rent-stabilized lease?
Effectively, yes.

Are there similarly obscure laws tenants or people can use to try to get leases from properties like this?
If you become a family member of a rent-stabilized tenant, you can succeed tenancy upon their death, but that’s really well known. You can’t be evicted without a court process if you’re a resident for more than 30 days in an apartment, and you sometimes hear horror stories of a roommate who doesn’t leave and gets tenancy rights. But I don’t know if I’m familiar with a thing that’s so similar to this.