The 11th Annual Demographia International Housing Affordability Survey: 2015 has been released. The survey provides ratings for metropolitan markets in Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the U.K. and the U.S. There are some interesting global trends:
Tag Archives: United States
Reiss on Cramming
E-Commerce Times quoted me in Feds Pounce on Sprint for Phone Bill Cramming. It opens,
The United States government is delivering a one-two punch to Sprint over the practice of cramming — allowing third parties to place unauthorized charges on customers’ bills.
The Consumer Finance Protection Bureau on Thursday filed a civil suit against Sprint over the issue.
Meanwhile, the Federal Communications Commission reportedly is planning to hit Sprint with a US$105 million fine.
Coordination between the government agencies “is not atypical,” said David Reiss, professor of law at the Brooklyn Law School.
“Frequently federal government agencies coordinate their actions for better results,” he told the E-Commerce Times.
It’s possible that the FCC was negotiating with Sprint prior to the CFPB taking action, suggested Robert Jaworsky, a partner at ReedSmith.
“I doubt the FCC will take any action while this lawsuit is pending,” he told the E-Commerce Times.
The CFPB’s Allegations
Sprint charged wireless customers for unauthorized third-party services from 2004 through 2013, costing them millions of dollars each year, by creating a billing and payment system that provided third parties with unfettered access to its customers’ accounts, according to the CFPB complaint.
Sprint automatically enrolled customers in this billing system without their knowledge or consent, and many customers were unaware of the unauthorized charges, the bureau maintains.
Sprint continued to operate its system despite numerous red flags, including high refund rates, along with complaints from customers, law enforcement agencies and consumer groups, the CFPB claims. The carrier retained 40 percent of the gross revenue collected for the third-party charges, totaling “hundreds of millions of dollars.”
Sprint took advantage of its customers, treated them unfairly in various ways, mishandled or ignored complaints about the unauthorized charges, and didn’t track them, said CFPB director Robert Cordray.
Sprint refused to provide refunds to some customers, instead telling them how to block future third-party charges, he added — and sometimes it referred victims back to the scammers themselves.
Regulation and Housing Supply
Gyourko and Molloy have posted Regulation and Housing Supply to SSRN. Unfortunately, it is behind a paywall (although it is also available at NBER if your library has access and an earlier draft can be found here). The abstract of this book chapter states that it reviews the scholarly literature on the causes and effects of local government regulation that “influences the amount, location, and shape of residential development.” The abstract continues,
Tall Mortgage Tales
Todd Zywicki has posted The Behavioral Law and Economics of Fixed-Rate Mortgages (and Other Just-So Stories) to SSRN. The article contains
SPOILER ALERT!
a spoof, in order to make a larger point.
The abstract reads,
A major cause of the recent financial crisis was the traditional American mortgage, which is distinctive for the following features: it is a thirty-year, self-amortizing loan with an unlimited right to prepay. The United States is unique in the world for standardizing on a mortgage product with these features. Yet not only have a majority of the foreclosures that occurred during the financial crisis been fixed-rate mortgages, the fixed-interest-rate characteristics have undermined efforts by the Federal Reserve and government to assist recovery of the housing market. Moreover, the long fixed-rate term and ability to refinance are highly expensive and suboptimal features for many consumers. Nevertheless, many consumers persist in purchasing this mortgage. Drawing on the methodology of behavioral law and economics, this article provides rationalizations for how behavioral law and economics can explain the persistence of a product that is so harmful to many consumers and to the economy at large. The article then draws conclusions about what this analysis means for the behavioral law and economics research program generally and for the use of behavioral law and economics in government policymaking.
I have a lot to say about this article but I don’t want to ruin it for you! Suffice it to say, the article is a provocative critique of behavioral law and economics. Those of us who hope to see a healthy mortgage market develop would do well to take this critique seriously — even if you end up rejecting its broader implications.
Reiss on Fannie and Freddie Conservatorship Litigation
I have posted An Overview of the Fannie and Freddie Conservatorship Litigation to SSRN (and to BePress as well). The abstract reads:
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 have been filed in 2013 against various government entities arising from the placement of the two companies into conservatorship. This short article will provide an overview of the last of these. The litigation surrounding Fannie and Freddie’s conservatorship raises all sorts of issues about the federal government’s involvement in housing finance. These issues are worth setting forth as the proper role of these two companies in the housing finance system is still very much up in the air. The plaintiffs, in the main, argue that the federal government has breached its duties to preferred shareholders, common shareholders, and potential beneficiaries of a housing trust fund authorized by the same statute that authorized their conservatorships. At this early stage, it appears that the plaintiffs have a tough row to hoe.
The Road to Securitization
Miguel Segoviano et al. of the IMF released a helpful Working Paper, Securitization: Lessons Learned and the Road Ahead (also on SSRN). It opens,
Like most forms of financial innovation, there are cost and benefits associated with the securitization of cash flows. From a conceptual perspective, a sound and efficient market for securitization can be supportive of the financial system and broader economy in various ways such as lowering funding costs and improving the capital utilization of financial institutions—benefits which may be passed onto borrowers; helping issuers and investors diversify risk; and transforming pools of illiquid assets into tradable securities, thus stimulating the flow of credit—an issue of particular relevance for some European countries. However, these features need to be weighed against the potential costs, including the risk that securitization contributes to excessive credit growth in and outside of the formal banking system; principal-agent problems that amplify perverse incentives; the complexity and opaqueness of certain products which make efficient pricing problematic; and the heavy reliance of the industry on credit ratings. (3)
The authors identify lessons learned from the financial crisis as well as impediments to a renewed securitization market. They conclude with a set of policy recommendations.
I recommend this paper as a good overview. I particularly like that it looks beyond the United States market, although it does spend plenty of time looking at the history and structure of the U.S. market. The recommendations tend to be pretty reasonable, but not particularly innovative — implement Dodd-Frank-like requirements in non-U.S. jurisdictions; de-emphasize the role of NRSRO credit ratings; increase transparency and decrease needless complexity throughout the industry; modernize land record regimes, etc.
It is surely hard to get your hands around the global securitization industry, but it is important that we try to. Securitization is here to stay. We should manage its risks the best that we can.