Tag Archives: Reiss

Reiss on Watt Confirmation

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Law360 interviewed me about the Senate confirmation of Mel Watt as the Director of the Federal Housing Finance Agency in Fannie, Freddie’s Footprint Could Grow Under New FHFA Head. The article reads in part,

The U.S. mortgage industry is in for a sea change as Rep. Mel Watt, D-N.C., takes the helm of the Federal Housing Finance Agency, experts say, predicting Watt will seek to expand Fannie Mae and Freddie Mac, veering sharply from his predecessor’s plans but lining up more closely with President Barack Obama’s.

The confirmation came Tuesday in a 57-41 vote after months of delay ended by Senate Democrats’ implementation of the so-called “nuclear option” eliminating the filibuster of presidential nominees. Senate Republicans had expressed concern about the choice of a politician like Watt — as opposed to an academic or economist — to head the agency.

Members of the real estate finance community are also divided about whether Watt’s confirmation will have a positive or negative impact on the industry, but most agree that a major change is ahead.

“I think Watt, as director, could end up having a very big impact both in terms of reversing some changes that have been implemented, and also taking the agency in a very different direction,” said David Reiss, a professor at Brooklyn Law School.

Since 2009, interim FHFA head Ed DeMarco has made an effort to shrink the footprint of the regulator and its government-sponsored enterprises, Fannie and Freddie, in the U.S. residential mortgage market.

DeMarco faced pushback in these efforts from industry groups and lawmakers, causing him to backpedal a bit in November when the FHFA announced that it would hold off on reducing the size of mortgages that Fannie and Freddie can guarantee for at least the first half of next year.

Obama also did not share DeMarco’s ideology, but experts believe Watt’s plans for the GSEs are much more in line with those of the president. He appears cautious about allowing Fannie and Freddie to back away from the market entirely and may in fact favor policies that will increase the GSEs’ role in the mortgage market.

“My guess is that Watt will further enmesh Fannie and Freddie in the operations of the mortgage markets, whereas DeMarco was actually shrinking their footprint,” Reiss said.

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The difference between the short-term and long-term impacts of Watt’s expected actions will be significant, experts say.

DeMarco’s moves made short-term waves, but supporters believed the aim was long-term equilibrium and an eventual balance of public and private capital in the mortgage market. Watt may have more potential for positive short-term results, but there will still be a question as to whether this will translate into a stable market for the next generation, Reiss said.

“Often when people are talking about government intervention, they want help for problems now, but they’re also setting up the rules of the game for once the crisis has passed,” he said.

Reiss on $13B JPMorgan Settlement in CSM

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The Christian Science Monitor quoted me in JPMorgan Chase settles. Is $13 billion for role in mortgage crisis fair? The story reads in part,

The settlement does not, however, release any individuals within JPMorgan from further criminal or civil charges. The bank has agreed to cooperate fully in any investigations related to the fraud covered in the agreement.

“I think that the Department of Justice has heard the public in terms of saying, if people were criminally responsible, they should be held liable,” says David Reiss, a professor at Brooklyn Law School, who has written extensively on the mortgage crisis. “Just a handful of people have faced any serious personal liability as a result of the events of the financial crisis of the 2000s.”

But some feel that the unprecedented scope and size of the penalty is unfair for the bank behemoth, which was seen as something of a financial savior when it took on the imploding assets of Bear Stearns and Washington Mutual after the financial collapse. Some estimate that employees at these banks conducted up to 80 percent of the fraud found by the Justice Department. JPMorgan assumed these firms’ legal jeopardy when it took on their troubled assets.

“There’s a moral narrative about this, that it’s unfair to go after JPMorgan because they stepped in to help,” says Mr. Reiss.

Reiss on Future of Frannie at Urban Land Institute

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I will be on an Urban Land Institute panel on November 21st, The Future of Fannie Mae and Freddie Mac.  The panel

will seek to shed some more light on the road ahead for the GSEs and their impact on commercial real estate lending and residential mortgage securitization. Specifically, the panel will address questions such as:

• What will the GSEs’ roles be in the multi-family and single-family markets in the future?

• Will the GSEs remain in conservatorship? If not, what level of government support, if any, will they receive going forward?

The event will feature individuals speaking on behalf of the lending, investment, academic, and GSE communities.

The moderator is Katharine Briggs, a Managing Director at BlackRock. She is a member of BlackRock’s Financial Markets Advisory Group within BlackRock Solutions. Ms. Briggs is a member of the Commercial Real Estate Advisory Team within BlackRock Solutions’ Financial Market Advisory Group. Mrs. Briggs specializes in US and European commercial real estate and related analytics. Ms. Briggs was formerly the Vice President of Corporate Finance with Summit Properties, a multifamily developer and publicly traded REIT owning 60 communities valued at over $2 billion. At Summit, she was responsible for all capital markets activities, investor relations, financial forecasting and tax planning.

The other panelists are:

Robert E. Bostrom, Co-Chair of the Financial Regulatory and Compliance Practice at Greenberg Traurig. His legal career spans more than 30 years, where he has worked and advised at the highest levels of leadership in the banking sector, in private legal practice and inside a government sponsored enterprise (GSE). As general counsel of Freddie Mac, Bob played a pivotal role during the financial crisis and recovery directing Freddie Mac’s legal strategy through the conservatorship, investigations, enforcement actions and litigation. Bob has advised clients on financial institutions regulation, examination, compliance and supervision matters. He is experienced helping clients navigate the implementation of the Dodd-Frank Act, especially the Consumer Financial Protection Bureau.

David Brickman, the Senior Vice President, Multifamily,, at Freddie Mac.  He was named senior vice president of Multifamily in June 2011. As head of Multifamily, Mr.
Brickman is responsible for customer relations, product development, marketing, sales, loan purchase, asset management, capital markets, and securitization for the company’s multifamily business, which includes the flow mortgage, structured and affordable mortgage, CMBS and low-income housing tax credit portfolios. The total multifamily portfolio was $180 billion as of March 31, 2013. He is a member of the company’s senior operating committee and reports directly to CEO Don Layton.

Mike McRoberts, a Managing Director at Prudential Mortgage Capital Company.  He is responsible for growing and enhancing Prudential’s leadership position in multifamily lending as head of the company’s market rate Fannie Mae and Freddie Mac portfolio teams and agency production team. Prior to joining Prudential, Mike was a vice president and national head of sales and production for Freddie Mac, where he was responsible for the agency’s conventional multifamily business, structured transactions and senior’s housing teams, the national Freddie Mac Program Plus network and Freddie’s four regional production offices. Earlier, he was
national head of underwriting and credit and managing director of Freddie Mac’s southeast region.

Joanne Schehl, Vice President and Deputy General Counsel at Fannie Mae. She is Fannie Mae’s Vice President and Deputy General Counsel for the Multifamily
Mortgage Business. She reports to the Senior Vice President and Deputy General Counsel – Multifamily Mortgage Business. Ms. Schehl leads the team responsible for providing legal support for multifamily infrastructure and operations, lender relationships, operational risk, and regulatory compliance. Ms. Schehl was previously a partner at Arent Fox PLLC, where she was a member of the real estate and finance groups, and served on the firm’s executive committee and as its professional development counsel, founded and led the firm’s strategic technology initiative, and was a leader in the firm’s diversity efforts.

Alan H. Wiener, Group Head, Wells Fargo Multifamily Capital, at Wells Fargo & Company. He is the group head of Wells Fargo Multifamily Capital, based in New York. Wells Fargo Multifamily Capital specializes in government-sponsored enterprise (GSEs) financing through Fannie Mae and Freddie Mac programs and Federal Housing Administration (FHA)-insured financing. Alan’s career has focused on housing and community development in both the public and private
sectors. Prior to joining Wachovia, he was the chairman of American Property Financing Inc., which Wachovia acquired in 2006. Before that, he was executive vice president with Integrated Resources, Inc.

Brooklyn’s New Center for Urban Business Entrepreneurship

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Brooklyn Law School has announced a new venture, the Center for Urban Business Entrepreneurship (CUBE), that will encompass much of the work that Brad Borden and I do, including this very blog.  The press release reads:

Brooklyn has become a world magnet for new businesses. Today, the Brooklyn Tech Triangle (DUMBO, Downtown Brooklyn, and the Brooklyn Navy Yard) ranks second only to Silicon Alley as the largest technology hub in the nation. Brooklyn Law School is intent on playing an integral role in ensuring the borough’s promise as the home for future innovators and entrepreneurs.

The Center for Urban Business Entrepreneurship (CUBE) – an extraordinary venture launching in November – will harness this energy. CUBE will be the hub for exploring legal issues surrounding entrepreneurship, and for providing effective legal representation and support for new commercial and not-for-profit businesses – while also training the next generation of business lawyers to advise and participate in these sectors. CUBE’s express purpose is to offer the legal tools to support and help build the start-up successes of tomorrow and beyond. The Center will reinforce and capitalize on Brooklyn’s role as a haven for business, media, energy, technology, creative arts, and social enterprise innovators.

Marking CUBE’s launch will be the Entrepreneur Lawyers Showcase on Thursday, November 14. The event will bring together BLS alumni and students who are exploring new ways to represent innovative entrepreneurs; trailblazing paths for the entrepreneurial lawyer and the legally-trained entrepreneur; and embarking on ventures of their own.

In addition to its base at the Law School, CUBE will be headquartered at two locations: 55 Washington Street in the heart of DUMBO, and 15 MetroTech Center. Space has been generously provided by David and Jed Walentas, Principals of Two Trees Management Co., LLC., and Forest City Ratner Companies, respectively.

“Brooklyn has always been a place where great ideas are born and nurtured, from the start of the American Revolution up to today’s Digital Revolution,” said Dean Allard. “CUBE will be a home for the next generation of revolutionaries, pioneers, entrepreneurs, and leaders. It also reflects the very best of Brooklyn Law School. In the public sector, our pro bono, government, criminal and civil justice, and community work in the U.S. and abroad – such as through the Sparer Fellowship Program – is renowned. In the private sector, we lead in areas such as international business law, business regulation, bankruptcy, and compliance, among others. CUBE presents powerful new opportunities centered on the role of law for emerging commercial and not-for-profit businesses. It adds another component of our comprehensive curriculum for the 21st century.”

The curriculum will focus on advanced training in six specific areas: Real Estate Development; Technology; Cre­ative Arts and Media; Community Deal-Making; Energy; and Social Enterprise. A three-pronged approach will define the experience:

foundational courses focused on entrepreneurship;

in-house clinics and other skills-focused courses (including the successful Business Boot Camp) that allow hands-on training with expe­rienced attorneys; and,

industry-specific courses, workshops, pro bono opportunities, student organizations (Start-Up Club, Business Law Society, IP Law Society), panels, conferences, symposia, journals, and other activities for burgeoning entrepre­neurial attorneys.

Students completing CUBE’s coursework in all three categories will have the opportunity to graduate with an Entrepreneurship Certificate at graduation.

CUBE will also promote entrepreneurial thinking through one-year fellowships, supporting third-year students’ projects designed to improve legal representation and support of start-up companies and growing enterprises. Adding to this unique approach will be a CUBE Legal Project Competition to encourage innovation and entrepreneur­ship. Students will pitch their projects, with winners selected as Fellows by a panel of prominent judges, many of whom will be entrepreneurs themselves. Seed money will also be available to help jumpstart the winning proposals.

CUBE builds on a foundation of highly respected programs, such as the Brooklyn Law Incubator & Policy Clinic (BLIP), founded by Professor Jonathan Askin; the Corporate and Real Estate Clinic, founded by Professor Debra Bechtel; and the Community Development Clinic founded by Professor David Reiss. Earlier this year, Askin was tapped by the European Commission to help guide implementation of similar clinics world­wide, part of a European Union-funded pilot program. CUBE will serve as the U.S. “landing strip” for a European consortium of 16 academic partners, which includes Queen Mary University of London Centre for Commercial Law Studies in England, the KU Leuven Interdisciplinary Centre for Law and ICT in Belgium, and the University of Amsterdam, Institute for Information Law, in the Netherlands.

The launch of CUBE is made possible through the vision of BLS entrepreneurs: Evan B. Azriliant ’92, Partner, S & E Azriliant, P.C.; Robert B. Catell, Chairman, Advanced Energy Research & Technology Center, Stony Brook University and Former Chairman and CEO of KeySpan/National Grid; Lawrence I. Feldman ’74, Chief Executive Officer, Subway Development Corp., and Diane Feldman; Stanley M. Grossman ’67, Senior Counsel, Pomerantz, Grossman, Hufford, Dahlstrom, and Nancy Grossman; Debra G. Humphreys ’84, Founder and Chair of Board of Trustees, Thomas Jefferson Independent Day School, and David C. Humphreys, President and CEO, Tamko Building Products Inc.; and Gary M. Rosenberg ’74, Partner, Rosenberg & Estis P.C.

Reiss on Risk Management

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Law360.com interviewed me in Banks Caught In Middle Of Regulators’ Fair-Lending Pursuits (behind a paywall).  The article reads in part,

Federal and state regulators are increasingly enlisting banks in their pursuit of fair-lending and other violations at payday and auto lenders and other financial services providers with which they do business, a tactic that has also increased banks’ risk of penalties for conduct by third parties.

In late October, the Office of the Comptroller of the Currency was the latest to put out new guidance for banks’ responsibility to monitor the activities of third-party vendors that perform operations on behalf of the bank. Other federal and state regulators have been calling on banks with growing frequency and force in recent years in order to ensure their vendors and clients comply with fair lending and other laws.

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The increased use of pressure on banks to indirectly go after firms that may not be subject to federal or state laws or regulations comes after banks outsourced a great deal of their mortgage-lending operations and other services during the financial crisis, according to David Reiss, a professor at Brooklyn Law School.

While many of those vendors met high standards, others, particularly in the subprime loan context, did not. And banks didn’t monitor those failings, Reiss said.

“The crazy thing about that is you’d think banks would do this on their own,” Reiss said. “Why do they need their regulators to say, ‘Check on these things’?”

Reiss on Mayor De Blasio’s Plans for Mandatory Inclusionary Zoning

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Law360.com interviewed me about Mayor-Elect de Blasio’s plans for mandatory inclusionary zoning in NYC Real Estate Faces Less Friendly Market Under De Blasio (behind a paywall). It reads in part:

One of the biggest and most controversial pieces of de Blasio’s affordable housing platform is a plan to mandate inclusionary zoning — requiring developers to build affordable housing as part of their market-rate multifamily projects — when developments are being constructed in areas rezoned by the city.

Mandatory inclusionary zoning is meant to be a “hard-and-fast rule” to replace the incentives de Blasio plans to end for big developers, and he predicted on his campaign website that the strategy would create up to 50,000 new affordable housing units during the next 10 years.

But “mandatory” anything is considered an added cost when developers are weighing their options in deciding where to build, and requiring that residential developments include affordable housing could push some developers elsewhere, experts say.

“The devil is in the details,” said Brooklyn Law School professor David Reiss, noting that the way the de Blasio administration writes and implements the rule will make a big difference, either encouraging more development of affordable housing or shutting down the market to new developers.

And while de Blasio has emphasized that inclusionary zoning would only be mandatory for projects taking place in areas specifically rezoned for new development, Learner points out that the Bloomberg administration rezoned more than 30 percent of the city, so the new rule could likely affect many developers.

“When the program is designed, a lot of thought needs to go into what impact mandatory inclusionary zoning will have on the bottom line of developers,” Reiss said. “If it’s too significant of an impact, a less than optimal amount of housing will be built.”

Reiss on Buying a Home

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MainStreet.com interviewed me in Guess the Unexpected Best Time to Buy a Home. It reads in part,

Hunting for a new home during the holidays can have many hidden advantages for buyers, despite conventional wisdom.

While there is less inventory to choose from in the fall, house hunting in November and December also means there is less competition with other buyers out there. Sellers might also be willing to strike a better deal for potential home owners.

Home buyers can take advantage of sellers who are eager to sell. The end of the year is a great time to look above your price range and negotiate for a lower price, said Alison Bernstein, president of The Suburban Jungle Realty Group.

“Sellers want to clear inventory before the spring and will be open to price adjustments to make the sale,” she said.

Consumers can find the best prices after Thanksgiving and before the Super Bowl because most home owners do not want to wait until the winter months when the bulk of potential buyers disappear, Bernstein said.

Seeing a home during the winter months shows both the house and the neighborhood in its “true colors,” she said.

Many sellers could also have tax reasons to sell by the end of the year, said David Reiss, a professor at the Brooklyn Law School who teaches a course that covers residential real estate transactions. However, this could prove to be a double-edged sword for buyers.

It might motivate sellers to get a deal done quickly and to compromise easily on price or other terms. On the other hand, sellers may insist on draconian penalties if the buyer fails to close by the end of the year, he said.

“Buyers must tread very carefully in such circumstances, be confident that their lender will come through by the drop dead date and certain that they will not be held liable for the delays caused by others, such as sellers themselves or escrow agents,” Reiss said.