Earlier this summer, the New York State Assembly passed the “Foreclosure Fraud Prevention Act of 2012” which imposes criminal liability on those in the residential mortgage business who use allegedly fraudulent and deceptive practices in connection with a foreclosure action, and the Managers who “recklessly tolerate” any such practices. Despite the swift passage in the Assembly, it is unlikely that the proposed legislation will be taken up by the New York Senate before the 2012 legislative session formally adjourns in January. If this bill is to move forward, the most likely course will be for the Assembly to re-enact it in 2013 and then send it to the Senate for consideration. But because of the committed support of New York Attorney General Eric T. Schneiderman, it is likely that this bill will be kicking around Albany for several more months – so let’s take a closer look at what might end up on the books.Continue Reading A Closer Look at New York’s “Foreclosure Fraud Prevention Act”
2012
As Covered Bond Markets Retreat
Any number of banks in the United States have been courting, in a desultory sort of way, the covered bond. The Street has been scratching its head for many years trying to determine whether a U.S. covered bond could be done and, if so, whether it would be good. Congressman Garrett, who certainly can’t be faulted for lack of effort, has repeatedly introduced covered bond legislation, the most recent one of which was captioned the United States Covered Bond Act of 2011. As those with nothing better to do than follow the covered bond sausage-making know, an effective U.S. covered bond market really does require enabling legislation, which we do not have for a number of reasons, including the unremittant hostility of the FDIC.Continue Reading As Covered Bond Markets Retreat
Eminent Domain Proposals: Federal Housing Finance Agency Concerned
Last week, the Federal Housing Finance Agency (“FHFA”) has joined the chorus of opponents, expressing “significant concerns about the use of eminent domain to revise existing financial contracts”. We at CrunchedCredit have recently covered the eminent domain proposals being considered by Chicago and San Bernardino County.
Continue Reading Eminent Domain Proposals: Federal Housing Finance Agency Concerned
Use of Eminent Domain to Seize Mortgages: Not Likely a Panacea (or is it?)
As is the case in too many cities in the United States, even after more than 4 years since the beginning of the foreclosure crisis, Chicago’s homeowners have been hard hit. In March of 2012, nearly 667,000 Chicago area homes were underwater, and 13% of those homeowners were also delinquent on their mortgage payments for three months or more. Add to these troubling statistics Chicago’s above-average unemployment rate which, as of May 2012, was 9.8%, and the city’s condition appears even more dire.
Chicago has been willing to take aggressive (though problematic) actions to solve problems brought on by the financial crisis. One such move was the passage of the vacant building ordinance which landed a leading role here at Crunched Credit on two separate occasions (click here and here). Continue Reading Use of Eminent Domain to Seize Mortgages: Not Likely a Panacea (or is it?)
Qualified Mortgage Rule Emerges as Critical Issue in Restructuring of Residential Mortgage Market Regulation
The Consumer Financial Protection Bureau (the “CFPB”) is currently charged with defining a “Qualified Mortgage” (a “QM”). The federal banking agencies, the SEC, the FHFA and the Department of HUD are jointly charged with defining a “Qualified Residential Mortgage” (a “QRM”), and the QRM definition cannot be any broader than the QM definition. A narrowly…
Complexity is Not the Enemy
I want to talk about structural complexity and innovation. Complexity has gotten a really bad name resulting from the collapse of many highly-structured transactions in the firestorm following the recession and Lehman’s collapse. That’s certainly an understandable reaction. Enormous losses were incurred on transactions barely understood by investors and perhaps by sponsors as well. And while I won’t go so far as to trot out the old saw, “Guns don’t kill people, people do,” the resulting hostility to complexity has conflated good complexity resulting from purpose-driven transaction structures and opaque, dysfunctional documentation and disclosure. The hostility toward complexity limits both risk mitigation and innovation, just at the time both are critically important to repair CRE debt capital markets.
Financial engineering is, in large measure, about risk transfer and the need to meet the needs of investors. It is a process of identifying risk, mitigating risk, and fine-tuning structure to do very specific things. Structures which can reduce deal risk and deliver solutions to very specific investor requirements will grow liquidity. With the growth of liquidity comes transactional efficiency and that way lies market growth.Continue Reading Complexity is Not the Enemy
What if LIBOR is Disrupted?
What if LIBOR is disrupted? Something new to worry about, as if Europe’s slow motion financial train wreck, the U.S. elections, the fiscal cliff, the slowing U.S. economy, Mid-east tensions and uncertainty about the Asian economy aren’t enough. We now have a broken LIBOR to entertain us too!
Continue Reading What if LIBOR is Disrupted?
California Authorities Consider Seizing Mortgages Secured by Residential Properties
It’s no secret that California has been hit harder than most states by the housing crisis. Just east of Los Angeles, the county of San Bernardino has cities with some of the highest foreclosure rates in the U.S.
On July 18, the San Bernardino City Council declared a fiscal emergency and voted to file for Chapter 9 bankruptcy protection.
Attempting to stimulate the local economy, the county of San Bernardino entered into an agreement with two of its cities, Fontana and Ontario, to create the Homeownership Protection Program Joint Powers Authority (“JPA”) “to explore a variety of proposals to assist homeowners within their jurisdictions who are underwater on their mortgages.” Currently, the JPA is considering a controversial eminent domain plan put forth by Mortgage Resolution Partners (“MRP”), a San Francisco-based venture-capital firm, whereby (based upon publicly available information) underwater performing residential mortgage loans held in private-label securitizations would be seized, refinanced or restructured and sold to third-party investors, with the government recovering administrative costs and MRP earning a fee on each transaction (the “Program”). On July 13, the JPA held its first organizational meeting where it created the structure for moving forward and heard a handful of public comments from opponents of the Program. The next meeting of the JPA is planned for August 16. The Joint Exercise of Powers Agreement states that the Homeownership Protection Program established by the JPA “may include the Authority’s acquisition of underwater residential mortgage loans by voluntary purchase or eminent domain and the restructuring of these loans to allow homeowners to continue to own and occupy their homes.”Continue Reading California Authorities Consider Seizing Mortgages Secured by Residential Properties
Massachusetts Lenders Can Find Solace in Eaton v. Federal National Mortgage Association
We previously covered the Massachusetts Supreme Judicial Court’s decisions in Ibanez and Bevilacqua on these pages, in which the court gave Massachusetts lenders agita when it upheld lower court decisions invalidating residential mortgage foreclosures. In a recent decision in Eaton v. Federal National Mortgage Association, the SJC set the record straight by clarifying foreclosure requirements in Massachusetts. Continue Reading Massachusetts Lenders Can Find Solace in Eaton v. Federal National Mortgage Association
It’s the Math, Stupid
Back to Europe and the Euro.
To misquote President Clinton, it’s the math, stupid. OK, that’s a bit of an exaggeration, as there are political prescriptions that could change the outcome of this tale of woe. As I write this, everyone continues to celebrate the result of the most recent Summit and the alleged breakthrough for the European Union and the Spanish and maybe Italian banks. The announcement that the European Financial Stability Facility, or the European Stability Mechanism, will actually lend directly to the banks in Spain and Italy was a bit of an overachievement for this body and, as I write this, stock markets are surging across the world on the news and spreads are coming in a smidge on the periphery. But, as usual, no details, and I’m not buying it. My bet is that the bloom will come off this rose just as it’s come off following other Summits, promising coordination of fiscal policies leading to a mutualization of the debt. Continue Reading It’s the Math, Stupid