2012 Spring Symposium Resources

2012 Spring Symposium Homepage 

These pages are updated regularly as new resources become available, so please check back frequently.

* indicates articles with a summary.

Mortgage Settlement

Mortgage Settlement Is Also Housing Relief Package, Los Angeles Times

Housing Crisis Losses-Who Pays?, San Francisco Chronicle

* Mortgage Foreclosure Settlement: Who Pays?, Huffington Post

* What The Robo-Signing Settlement Means For All Borrowers, The Baltimore Sun

* Foreclosures (2012 Robosigning and Foreclosure Abuse Settlement), The New York Times

* The $25 Billion Housing Settlement: Regulations with a Side of Cash, Petaluma Patch

* Who loses in foreclosure settlement?, The Boston Globe

* Mortgage Settlement Or Mortgage Shakedown?, The Wall Street Journal

* Mortgage settlement: One step forward, one step back, The Hill

* For legal teams in historic $25B mortgage settlement, little sleep at the end, Daily Business Review

* Wells Fargo: national mortgage settlement to cost $720 million in interest, Reuters Legal

The mortgage settlement holds the big banks accountable, The Sentinel

* Foreclosure Settlement With Banks Filed in Federal Court, Bloomberg

National Mortgage Settlement

Executive Summary of Multistate/Federal Settlement of Foreclosure Misconduct Claim, National Mortgage Settlement

Return Integrity & Accuracy to Foreclosure and Bankruptcy Proceeding, Washington State Office of the Attorney General

50 State Mortgage Complaint, United States District Court, District of Columbia

Summary of National Mortgage Settlement, Center for Responsible Lending


Recording System

Robo-Signing Settlement Might Not Provide Homeowners With Needed Help, Huffington Post

* What Is MERS And What Role Does it Have In The Foreclosure Mess?, Washington's Blog

* False Affidavits in Foreclosures: What The Robo-Signing Mess Means For Homeowners, NOLO

* MERS? It May Have Swallowed Your Loan, The New York Times

* All in One Basket: The Bankruptcy Risk of a National Agent-Based Mortgage Recording System, Nancy Wallace, UC Berkeley; John Patrick Hunt, UC Davis; Richard Stanton, UC Berkeley

Transfer and Assignment of Residential Mortgage Loans in the Secondary Mortgage Market, American Securitization Forum

Beginning to See the Light: The Ninth Circuit, the MERS MDL, and Other Courts Reject Claims Challenging MERS, K&L Gates

Foreclosure in California: A Crisis of Compliance, Office of the San Francisco Assessor-Recorder  

Life on MERS: Mapping the Landscape, K&L Gates

Leverage: State Enforcement Actions in the Wake of the Robo-Sign Scandal, Raymond H. Brescia, Yale University, Law School

The Case Against Allowing Mortgage Electronic Registration System, Inc. to Initiate Foreclosure Proceedings, Westlaw Next

Property Title Trouble In Non-Judicial Foreclosure States: The Ibanez Time Bomb?, Elizabeth Renuart Albany Law School


Legislative Guidelines/Responses

* Kamala Harris To Fannie Mae And Freddie Mac: Halt Foreclosures In California, Huffington Post

* Part 226—Truth In Lending (Regulation Z), Federal Deposit Insurance Corporation

* FHA Loan Requirements, FHA.com

Avoiding Foreclosure, HUD.GOV

Fair Housing Act, HUD.GOV

* Attorney General Kamala D. Harris Joins Legislative Leaders to Unveil California Homeowner Bill of Rights, State of California, Department of Justice

* California bills aim to end foreclosure abuses, The Sacramento Bee

* Examining Lending Discrimination Practices and Foreclosure Abuses, US Department of Justice

Summary of Hearing on Mortgage Modification Programs (Summary of Testimony - March 2, 2011 ), House Committee on Financial Services

* Problems in Mortgage Servicing from Modification to Foreclosure, Senate Committee on Banking, Housing, and Urban Affairs

Problems in Mortgage Servicing from Modification to Foreclosure, Part II, Senate Committee on Banking, Housing, and Urban Affairs

Testimony of Barbara Desoer, President of Bank of America Home Loans, Senate Banking Committee

Hearing on Failure to Recover: The State of Housing Markets, Mortgage Servicing Practices, and Foreclosures, House Committee on Oversight & Government Reform

* Home Affordable Foreclosure Alternatives (HAFA) Program, makinghomeaffordable.gov

Application Of The Uniform Commercial Code To Selected Issues Relating To Mortgage Notes, The American Law Institute

New Obstacles on the Course: State Foreclosure Laws Continue to Complicate Mortgage Loan Servicing, K&L Gates

Protecting Absent Stakeholders in Foreclosure Litigation: The Foreclosure Crisis, Mortgage Modification, and State Court Response, 

Industry Overview/Policy Proposals

* A 'Sensible' Outline For Housing Solution, Wall Street Pit

* The Academic Analysis of the 2008 Financial Crisis: Round 1, The Review of Financial Studies

* How Debt-Ridden Housing Holds Back Recovery: Mian And Sufi, Bloomberg

* In-House Counsel’s Role in the Structuring of Mortgage-Backed Securities, Wisconsin Law Review

* The Role of the GSEs and Housing Policy in the Financial Crisis, Dwight M. Jaffee, UC Berkeley

* Reforming The U.S. Mortgage Market Through Private Market Incentives, Dwight M. Jaffee, UC Berkeley

* Fixing Mortgage Finance: What to Do with the Federal Housing Administration?, CATO Institute

* Are Short Sellers Informed? Evidence from the 2007–2008 Subprime Mortgage Crisis, The Financial Review

Fannie, Freddie, and the Subprime Mortgage Market, CATO Institute

French Notaries and the American Mortgage Crisis, Peter L. Murray

Trust But Verify: Claim That New York Trust Law Voids Mortgage Transfer Does Not Survive Legal Scrutiny, K&L Gates

Doomed From The Start-A Critique Of The Home Affordable Mortgage Program, Marc Gans, UCLA, School of Law

The Properties of Instability- Markets, Predation, Racialized Geography, and Property Law,  Audrey McFarlane University of Baltimore, School of Law

Six Years On and Still Counting:  Sifting Through the Mortgage Mess,  Robert C. Hockett, Cornell University, School of Law


Homeowner Advocacy

Center for Responsible Lending

* Foreclosure Fighters San Francisco Bay View

Testimony of Diane Thompson, National Consumer Law Center Senate Committee on Banking, Housing, and Urban Affairs


Related Blogs

California Real Estate Lawyers Blog

California Consumer Finance Litigation


Foreclosure Defense Resource Center

Consumer Finance Law Blog

Banking Law Prof Blog

Real Estate Law Blog

Abbott & Kindermann Land Use Law Blog

Green Real Estate Law Journal

Land Use Prof Blog

Property Prof Blog

Real Estate Advisor Law Blog

Resource Summaries (Not all Articles Have Summaries)

Mortgage Foreclosure Settlement: Who Pays?

The latest controversy surrounding the mortgage settlement involves the charge that banks, which mishandled thousands of troubled mortgages, are getting a taxpayer incentive, through the government's existing Home Affordable Modification Program (HAMP), to live up to their obligations under the settlement. Under the proposed deal, the banks will pay only $5 billion in cash with the remainder coming from mortgage-principal reductions.  Scholars such as former TARP special inspector-general and NYU Law Professor Neil Bankofsky worry that if taxpayers pay banks as part of the settlement, it will have no punitive or deterrent effect.

What the Robo-Signing Settlement means for all Borrowers

The “robo-signing” settlement is a national settlement between state attorneys general and large mortgage servicers implemented to generally improve the mortgage servicing industry.  Among the provisions in the settlement are a prohibition of robo-signing—people signing court affidavits to allow foreclosure without reading relevant documents—and a requirement that servicers “promptly” record payments and post them within a two-day window for borrowers to view.  Other provisions require more disclosure about payments in bills to borrowers and restrictions on various servicing fees.  Additionally, force-placed rules require that a servicer only get force-placed insurance when it has actual cause to believe that there is no existing insurance policy protecting the borrower. Although the settlement applies only to Wells Fargo, Bank of America, Citigroup, JPMorgan Chase, and Ally Financial/GMAC, the federal government could mandate that its servicing rules apply to all federal institutions more broadly.

Foreclosures (2012 Robosigning and Foreclosure Abuse Settlement)

The recent recession has been exacerbated by the rise in foreclosures by homeowners, with nearly 4 million families losing their homes from 2007 to 2012. However, recent studies have revealed fraud within the foreclosure process over the past five years, particularly with “robo-signing” where foreclosures resulted from forged or un-reviewed documents. In response to this evidence, the government reached a $26 billion settlement with five of the largest U.S. banks to provide relief to a small portion of delinquent borrowers. Under the settlement, investigators have access to releases regarding the foreclosure process, as well as the right to investigate other elements that contributed to the housing bubble. Although many homeowners still face foreclosure, the settlement may expand to $45 billion if all fourteen major servicers participate.

The $25 Billion Housing Settlement: Regulations with a Side of Cash

The $25 billion housing settlement reached by California Attorney General Kamala Harris will help the housing market, although the biggest benefit may be in the details of the settlement and not in the billion dollar headlines. The settlement is not perfect, but it will help the current situation.  This assistance will not come in the form of a broad overnight fix of cash payments to those in default, but with the help of legislation already in place, it will come in the form of a slow, gradual, lasting attitude adjustment of what it means to be in default.

Who loses in foreclosure settlement?

The country’s largest banks are moving towards a massive $25 billion foreclosure settlement.  The deal is intended to balance the interests of the banks with those of underwater and foreclosed homeowners, and state attorneys general.  But who will be the ultimate winners and losers is yet to be determined.

Mortgage Settlement or Mortgage Shakedown?

This article criticizes the February 9, 2012, national mortgage settlement reached by the administration and 49 attorneys general with five big banks (Bank of America, JP Morgan, Chase, Wells Fargo, and Ally Financial) for having too little a connection to the harms alleged by the government Plaintiff. The government alleges that the banks used foreclosure documents that were “robo-signed” by executives who did not check the details and added unnecessary fees. The mortgage settlement provided $17 billion in loan modifications, $3 billion in refinancing relief, $1.5 billion for actual foreclosed borrowers, and $3.5 billion for state and federal governments for consumer protection programs. However, only a small number of “robo-signed” documents involved borrowers capable of paying their mortgages. Therefore, a majority of the settlement has nothing to do with “robo-signing” or unnecessary fees – the very harms alleged by the government Plaintiff. The article contrasts this approach to the approach taken by former New York Attorney General Eliot Spitzer, who attained sizeable settlements by directly linking them to the harms alleged: $1.4 billion from investment banks in 2003, and $250 billion from the tobacco industry in 1998. The article concludes by suggesting that a court that is asked to approve the settlement should reject it.

Mortgage settlement: one step forward, one step back

The Obama administration and the state attorneys general recently announced the completion of what’s being touted as the largest consumer financial protection settlement in U.S. history. The country’s top mortgage servicers agreed to provide as much as $25 billion to help some past and current homeowners. Banks regularly submitted foreclosure documents that were not properly reviewed or notarized. This article investigates how this settlement provides meaningful assistance for distressed homeowners and is a move towards housing recovery.

For legal teams in historic $25B mortgage settlement, little sleep at the end

This article discusses a historic settlement negotiated by the Justice Department’s Thomas Perrelli where forty-nine states and the federal government agreed to settle with the nation’s five largest financial institutions over mortgage servicing and foreclosure abuses.  Bank of America Corp., JP Morgan Chase & Co., Wells Fargo & Co., Citigroup, Inc. and Alley Financial, agreed to pay a $25 billion settlement in the largest joint state-federal settlement in history. The bulk of the money ($20 billion) will go toward various relief programs for homeowners, including at least $10 billion in principle reduction. The banks are required to pay the remaining $5 billion to the states and federal government.  The settlement also includes new mortgage serving standards, which will mark foreclosure as a last resort, and set procedures and timelines for the review of loan modification plans.  The settlement does not prevent state and federal authorities from investigating criminal actions rooted in the packaging of residential mortgage backed securities.

Wells Fargo: National Mortgage Settlement to Cost $720 Million in Interest

This newswire discusses Wells Fargo’s assertion that it will lose $720 million in interest income over a period of years due to the national mortgage settlement reached in February of this year.  The lost interest is a result of lost interest payments from a refinancing program set up for an expected 20,000 borrowers who owe more than their homes are worth (an unpaid principal balance totaling approximately $4 billion). Of the total $25 billion national mortgage settlement, Wells Fargo will contribute $5.3 billion: $3.4 billion in loan modifications, $900 million in total relief for the refinancing program, and $1 billion for foreclosure-related problems. Wells Fargo, who earned $49.4 billion from interest income in 2011, said it has already set aside reserves for loan modifications and foreclosure assistance.

Foreclosure Settlement with Banks Filed in Federal Court

The article discusses the $25 billion foreclosure agreement that ended federal and state investigations into the foreclosure practices of five U.S. banks, including Bank of America and JPMorgan. The settlement will provide $20 billion in relief for borrowers, and $5 billion for state and federal governments. The settlement will also establish revised standards for loans that aim to prevent future foreclosure abuse. A monitoring committee comprised of state financial regulators, state attorneys general, the Department of Justice, and Department of Housing and Urban Development has also been created to ensure that banks abide by the agreement.  There will be penalties of $1 million for certain violations and $5 million for repeated violations.

What Is MERS and What Role Does It Have in the Foreclosure Mess? (Hint: It Holds 60% of All Mortgages, But Has ZERO Employees)

Mortgage Electronic Registration Systems, also known as “MERS”, is name of the company created and owned by all of the big banks that processes title to most U.S. properties.  In fact, MERS processes the titles to nearly 60% of U.S. properties.  But astonishingly, MERS does not have a single employee working for it.  This article addresses the effects that MERS causes in relation to the foreclosure problems in the residential real estate market.

False Affidavits in Foreclosures: What the Robo-Signing Mess Means for Homeowners

After the recent "robo-signing" scandal, several large banks temporarily froze all pending foreclosures. For some homeowners, the robo-signing mess may create opportunities to challenge their foreclosures in court or negotiate with lenders to avoid foreclosure. This article investigates the massive robo-signing problem and what it means for homeowners.

MERS? It May Have Swallowed Your Loan   

This article discusses the role that Mortgage Electronic Registration Systems (“MERS”) plays in the mortgage industry as titleholder of nearly half of all home mortgages in the country. Judges and lawmakers are raising questions about MERS, including how it can claim title to all of these mortgages without having invested any money in a single loan. While MERS has distanced itself for the dubious behavior of its members, MERS itself has not been accused of wrongdoing. The article covered roughly twenty years of MERS problematic record-keeping, including the inability to know who owned a piece of property, MERS’ liberal “deputization” of those in the mortgage industry, and the fact that fewer than thirty percent of mortgages had accurate records in MERS. Officers at MERS realize that they are in dangerous waters: several federal agencies are investigating MERS, MERS will no longer accept unverified new officers, and MERS seems to be willing to revoke memberships. However, judges are still asking whether MERS acted with “the utmost good faith and loyalty in the performance of its duties.”

All in One Basket: The Bankruptcy Risk of a National Agent-Based Mortgage Recording System

Professors Hunt, Stanton, and Wallace explain that Mortgage Electronic Registration Systems (“MERS”), which owns legal title to at least 30 million mortgages in the U.S. and was a key part of the mortgage securitization apparatus in the 1990s and 2000s, is under pressure from public and private lawsuits and faces the threat of insolvency. The authors suggest that there is an assumption that if MERS entered into bankruptcy, the mortgages it owns would not enter its estate and would not be available to creditors. This article challenges that assumption, pointing to the authority that the Bankruptcy Code confers on the bankruptcy trustee to bring into the estate real property interests that the debtor could have conveyed to a good-faith purchaser. There is a risk that MERS can convey its mortgages to a purchaser acting in good faith. Part of the risk is due to the fact that the company can sell the mortgages, has a constitutionally protected property interest in the mortgages, is a creditor of mortgage borrowers, and owns a beneficial interest in the mortgages.  Another part of the risk is inherent in any mortgage recording system that operates nationally and holds mortgages as an agent. The authors conclude that policymakers should consider the risk when considering whether MERS should be replaced and what its replacement should be.

Kamala Harris To Fannie Mae And Freddie Mac: Halt Foreclosures In California

The Attorney General, Kamala Harris, will ask Edward DeMarco, head of the Federal Housing Finance Authority, to suspend foreclosures in California until the Authority has investigated the potential effect of principal reduction.  So far, Mr. DeMarco has not allowed principal reduction, and he is therefore unlikely to suspend foreclosures.  Mr. DeMarco argues that principal reduction poses substantial challenges without proven effectiveness.  The federal government disagrees, arguing the principal reduction is more likely to prevent defaults than other loan restructurings.  Meanwhile, Ms. Harris has been one of Mr. DeMarco's most outspoken critics, calling for his resignation and filing suit against Fannie Mae in December of last year.

Part 226-Regulation Z

Issued by the Board of Governors of the Federal Reserve System as part of the Truth in Lending Act, Regulation Z seeks to “promote the informed use of consumer credit by requiring disclosures about its terms and cost.” Reg. Z applies to two different sets of rules: one to open-end credit, such as home-equity lines, and another to closed-end credit, such as car loans. The rules for open-end credit require accurate disclosure of the Annual Percentage Rate (APR), variable rates, penalty rates, minimum interest charge any grace period where payment can be delayed without a finance charge, and fees imposed by creditor. Rules for closed-end credit contain a consumer’s right to rescind a transaction involving a lien on the consumer’s principle dwelling except in certain situations and require accurate disclosure of principle loan amount, itemization of the amount financed, APR, variable rate information and payment scheduled to repay the obligation.  Reg. Z does not apply to business, commercial, agricultural or organizational credit, where the credit extended is for business, commercial or agricultural purposes

FHA Loan Requirements

The FHA underwrites single family and multi-family home mortgages issued by FHA-approved lenders. For a homebuyer to qualify for the FHA loan, the homebuyer cannot have a mortgage expense to effective income ratio (mortgage cost and home ownership related costs divided by gross monthly income) greater than 29%, and cannot have total fixed payments to effective income (mortgage payments and associated home ownership costs plus all recurring monthly installment debt divided by gross monthly income) greater than 41%. Additionally, to qualify for a FHA loan, the homebuyer must have sufficient credit history and a certified FHA appraiser must conclude that the home is in good condition and the home does not exceed the maximum loan-to value amount stipulated by the FHA.

Attorney General Kamala D. Harris Joins Legislative Leaders to Unveil California Homeowner Bill of Rights

This article announces the landmark settlement negotiated by Attorney General Kamala Harris on behalf of California home owners who have suffered the devastating effects of the mortgage and foreclosure crisis.  The Homeowner Bill of Rights is designed to protect California communities from banks and mortgage companies’ unfair practices by providing basic fairness and transparency for homeowners.  The Bill of Rights will also guarantee community tools and tenant protections to prevent blight after bank foreclosures, enhanced law enforcement to defend homeowner rights and a special grand jury to investigate financial and foreclosure crime.  This comprehensive package is expected to result in $18 billion of benefits for California homeowners.

California bill aims to end foreclosure abuses

Attorney General Kamala Harris recently unveiled the California Homeowner Bill of Rights, a package of bills designed to curb foreclosure abuses.  Included in the six measures is a bill protecting renters who live in foreclosed properties, and another creating a special grand jury to investigate financial foreclosure crimes.  Harris aims to end deceptive practices, including the controversial “dual-track foreclosures” which allow banks to start the foreclosure process and negotiate a loan modification simultaneously.  Although lawmakers and Harris’s predecessors failed to pass similar bills previously, the foreclosure crisis is limiting the legislature’s excuses not to protect California homeowners.  The current legislative package comes on the heels of Harris securing approximately $18 billion for California over three years from the country’s five largest lenders.

Examining Lending Discrimination Practices and Foreclosure Abuses

This article addresses the accomplishments of the Civil Rights Division in combating unlawful lending discrimination over the past two years in several key areas: (1) close collaboration with federal and state partners; (2) lending discrimination enforcement; (3) pricing discrimination: charging borrowers more because of their race or national; (4) cases of redlining in mortgage lending; and (5) discrimination against women on paid maternity leave. In addition to the traditional fair lending work, this article also highlights the efforts to protect the rights of the servicemembers through enforcement of the Servicemembers Civil Relief Act (SCRA).

Problems in Mortgage Servicing from Modification to Foreclosure

Professor Adam Levitin’s written testimony before the Senate Committee on Banking, Housing, and Urban Affairs addresses the problems within the mortgage foreclosure process.  He discusses problems ranging from easily remedied procedural defects to possible systemic defects. With regard to procedural defects, Professor Levitin states that the problems will likely be remedied in the short-term and costs will be passed to future mortgage borrowers. However, if the problems are systemic, long-term issues may remain for the mortgage system, which will result in trillions of dollars of financial claims against major financial institutions and possible financial crisis. Professor Levitin recommends addressing future systemic risk now to stave off future crises, including serious investigations by federal regulators and possible legislative responses. He concludes that staying ahead of systemic risk will stabilize the housing market, and will be best addressed through a global settlement on mortgage issues.

Home Affordable Foreclosure Alternatives (HAFA) Program

The Home Affordable Foreclosure Alternatives (HAFA), a part of the Making Home Affordable Program, is designed for individuals who cannot afford their mortgage payment and who are considering transitioning to more affordable housing. HAFA provides two options for transitioning out of a mortgage: a short sale or a Deed-in-Lieu (DIL) of foreclosure. In a short sale, the mortgage company allows an individual to sell his/her house for an amount that falls "short" of the amount he/she owes.  In a DIL, the mortgage company permits the individual to give the title back, transferring ownership back to the mortgage company. To be eligible for HAFA’s assistance, an individual must live in the home or have lived there within the last 12 months; have a documented financial hardship; not have purchased a new house within the last twelve months; have a first mortgage of less than $729,750; have obtained the mortgage on or before January 1, 2009; and must not have been convicted of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction. HAFA also offers benefits to ease the transition, including free advice from housing counselors and licensed real estate professionals; complete release from a mortgage debt after sale of the property; guaranteed waiver of the deficiency by the servicer; minimized impacts on credit scores than foreclosure or conventional short sales; and $3,000 in relocation assistance provided by HAFA.

A ‘Sensible’ Outline for Housing Solution

In this article, the author argues that the economy will not rebound in a meaningful sense until the housing market stabilizes.  The author alleges that government sponsored mortgage programs have created a moral hazard while generating little results.  The author urges for “a more aggressive posture . . . in addressing the widespread and systemic fraud that occurred in our mortgage and housing sectors” and calls for market based solutions.  This article includes notes from real estate experts Kenneth Rosen and Lew Ranieri.  Rosen and Ranieri argue that the US housing market is repairable and the current situation can be remedied through proper flow of credit, mortgage modifications, and rent-to-own programs.  Rosen and Ranieri, while acknowledging the role of government in rental programs, urge for a private sector based solution.

The Academic Analysis of the 2008 Financial Crisis: Round 1

This analysis of the 2008 financial crisis is a compilation of articles and studies from the academic community that addresses four main sub-topics relating to the crisis.  First, there is a comparison of the 2008 crisis to the Great Depression of the 1930’s and a suggestion of retroactive solutions and mitigation ideas for both of these national housing price crashes.  This is followed by an analysis of whether modern mortgage market conditions contributed to the downturn and a look at possible exasperating inputs present in the 2008 environment that were not characteristic of earlier decades. The next set of papers reviews the impact of the 2008 financial crisis on non-financial firms and addresses the inquiry of why some credit-worthy firms, as a result of the crisis, did not receive the capital they deservedly required.  The article ends with a look at the banking industry and a description of the effects of the 2008 crisis on this sector, leading the reader from initial credit shortage to eventual failure.

How Debt-Ridden Housing Holds Back U.S. Recovery: Mian and Sufi

Professors Atif Mian and Amir Sufi argue that the impact of declining home values upon the broader economy is due to the debt-ridden nature of the housing market. Generally, a decline in housing prices aid consumers looking to buy larger homes. However, because most homeowners utilize great amounts of debt to purchase their homes, lower home values end up negatively affecting household spending. First, a decline in a home’s collateral value prevents owners from securing additional loans with their home value. Next, the rampant use of debt to purchase homes often leads to loan defaults and foreclosures, which also harms household spending. Finally, lower home values may lead to deleveraging even for homeowners who pay their mortgages. Thus, the authors conclude that high debt levels were the primary impetus behind the negative impact that declining home values have had on the economy. Policy changes should therefore account for the existence of debt in the housing market, rather than simply trying to artificially inflate home prices.

In-House Counsel’s Role in the Structuring of Mortgage-Backed Securities

This article examines how in-house counsel should address complex legal transactions by examining their role in the structuring of mortgage-backed securitization transactions. The article discusses whether, in order to own and enforce the mortgage loans backing those securities, a SPV “purchasing” mortgage loan must take physical delivery of the notes and security instruments in the precise manner specified by the sale agreement. The article further analyzes (i) the extent that the controversy has merit; (ii) whether in-house counsel should have anticipated the controversy; and (iii) what in-house counsel could have done to avert or, after it arose, to mitigate the controversy. Finally, it examines how the foregoing analysis can help to inform the broader issue of how in-house counsel should address complex legal transactions.

The Role of GSEs and Housing Policy in the Financial Crisis

This presentation focuses on the role of Government-Sponsored Enterprises and housing policy in the financial crisis, and was part of the testimony for the Financial Crisis Inquiry Commission.  The presentation asserts that the housing policy was a catalyst in the crisis, but no changes to the policy during the last decade were found to have actively expanded the incentives to make low-quality, high-risk, mortgages. High-risk mortgage purchases and guarantees by GSEs played a major role in expanding the crisis because rather than stabilizing the markets, as a government entity should do, these actions were destabilizing.  GSEs engaged in high-risk mortgage activity primarily to increase profits, but were also motivated by Housing Goals.  Unlike GSEs, traditional FHA activity dramatically decreased as subprime lenders and the FHA played a minor role in the crisis, and evidence suggests the Community Reinvestment Act did not have a unique impact on the financial crisis. Other essential factors leading up to the financial crisis included the nation’s trade deficit and global saving glut, U.S. monetary policy, innovations in underwriting and securitization, commercial/investment banks, and OTC credit default swaps.

Reforming the U.S. Mortgage Market Through Private Market Incentives

This article develops and evaluates a proposal to reform the U.S. mortgage system along private-market principles and without any form of Government Sponsored Entities (GSEs).  The proposal would reduce the GSE conforming loan limit by $100,000 each year until the limit reaches zero and GSE activity disappears.  The transition would be smooth, anticipated by private markets, and allow for a government reaction should it fail to proceed as expected. The proposal advocates continuing the current FHA and HUD programs in support of lower-income families.  The article argues that the private market would provide the stability and access to mortgage credit that is required by U.S. homebuyers.  First, the GSEs have played no role in originating U.S. mortgages and only a minor role as investors in these mortgages.  Second, Western Europe provides a very important case study of the high performance achieved by private mortgage markets in the absence of significant government interventions.  The article also evaluates alternative proposals.

Fixing Mortgage Finance: What to Do with the Federal Housing Administration?

This article argues that while Fannie Mae, Freddie Mac, and private subprime lenders have deservedly garnered the bulk of attention and blame for the mortgage crisis, other federal programs also distort our mortgage market and put taxpayers at risk to finance massive financial bailouts. The most prominent of these risky agencies is the Federal Housing Administration (FHA). The FHA currently backs an activity portfolio of over $1 trillion.  Even relatively small changes to this portfolio’s performance could result in significant losses to taxpayers because of its economic value of $2.6 billion (representing a capital ratio of 0.24 percent).  The taxpayer is responsible for any losses above the FHA’s current capital reserves.  Reasonably foreseeable changes to the FHA’s performance could easily cost the taxpayer tens of billions of dollars, which would surpass the ultimate cost of the Troubled Asset Relief Program (TARP) bank bailouts. The article concludes by recommending that the FHA scale back immediately.  Instead, an emphasis should be placed on improving its credit quality to protect the taxpayer and the broader economy.  Ultimately, the agency should be placed on a path to elimination, and its risk-taking should be transferred back to the private sector.

Are Short Sellers Informed? Evidence from the 2007–2008 Subprime Mortgage Crisis

This paper examines short sale activities surrounding financial firms’ announcements of asset write-downs during the 2007–2008 subprime mortgage crisis. Short sellers accumulate short positions prior to write-down announcements, and stocks experience significantly negative returns around such announcements. These results suggest that short interests’ return predictability is due to short sellers’ informational advantage. In the announcement month, short sellers increase their positions significantly and continue to increase them thereafter. This suggests that there is a feedback effect for the disclosed write-downs on financial firms’ existing exposures. The valuable information contained in the short interests should encourage regulators to mandate disclosure of short sale activities more frequently.

Foreclosure fighters and occupiers

This article discusses how San Francisco Assessor-Recorder Phil Ting announced “the first audit of foreclosure records in the state of California,” which revealed the statistics regarding violations of law in relation to foreclosure. The article further tells the stories of several foreclosure victims. According to Mesha Monge-Irizarry, whom Bank of America threatens to evict from her home, “There are 14 bank-owned home foreclosures in the Bayview on Quesada Avenue alone in a three-block range.” The Occupy Movement has spawned a powerful nationwide backlash against foreclosures and spun off assertive re-occupations by owners of their foreclosed homes.

Leverage: State Enforcement Actions in the Wake of the Robo-Sign Scandal

Mortgage lenders and mortgage servicers involved in the robo-signing scandal exposed themselves to liability.  This is especially true in states applying Unfair and Deceptive Acts and Practices (UDAP) laws.  UDAP laws prohibit unfair and deceptive practices and have been used to rein in abusive practices in car sales, telemarketing, and tobacco product sales.  Attorneys that seek to eliminate abusive practices and reform mortgage markets may be able to use UDAP laws as leverage against mortgage lenders and servicers. UDAP laws provide state attorneys an “opportunity [that] can give rise to critical advances in stabilizing home prices and the mortgage market, and reduce volatility in those prices and markets.”

The Case Against Allowing Mortgage Electronic Registration System, Inc. to Initiate Foreclosure Proceedings

The article argues that granting MERS standing in foreclosure proceedings weakens the protection foreclosure laws provide to homeowners.  MERS is an electronic clearinghouse that allows lenders to record newly originated mortgages without having to record the mortgages with the county clerk’s office.  As such, the MERS system is a more efficient way to conduct business.  However, it tends to run afoul of foreclosure laws. The article argues that MERS could potentially cloud the title to land, and the author suggests that any reform to the mortgage system should not be attempted by the mortgage industry or MERS, but by legislatures.

Doomed From The Start-A Critique Of The Home Affordable Mortgage Program

This article critiques the effectiveness of the Affordable Mortgage Program (HAMP) and its companion programs. These programs were proposed by President Obama in 2009 and were intended to cease the foreclosure crisis.  Proponents hoped the programs would help as many as 4 million borrowers avoid foreclosure by the end of 2012. This article dissects what went wrong with HAMP, and includes an analysis of strategic defaults, securitization and legal liability. It further lays out proposed and best solutions. Finally, the article provides an outlook for the real estate market.

The Properties of Instability- Markets, Predation, Racialized Geography, and Property Law

This article considers the recurring instability of home ownership experienced by minority property owners. It alleges that the instability reflects an ongoing crisis of purposeful involuntary divestment of land owned by members of racial minorities. This crisis has presented a disquieting reality of persistent and enduring instability for minorities. The article argues that fraud, exploitation, and desperation enable property markets. It further suggests that there is a need to emphasize an under-theorized stick in the bundle of property rights: “the right to keep.”

Property Title Trouble In Non-Judicial Foreclosure States: The Ibanez Time Bomb?

In this article, Professor Renaurt analyzes the effects on clear title when a property is foreclosed due to the irresponsible and/or fraudulent handling of mortgages.  Renaurt looks closely at states where non-judicial foreclosure procedures are permitted, such as Arizona, California, Georgia and Nevada.  The debate centers around whether foreclosure procedures are designed to (1) ensure that those with current authority have the right to eject people from their homes, or (2) whether these rule are too technical and may actually allow homeowners to stay in their homes despite their financial delinquencies.  Ultimately Renaurt concludes that property title trouble is likely to occur in all of the above-mentioned states except Arizona.

Six Years On and Still Counting:  Sifting Through the Mortgage Mess

In this article, Robert Hockett discusses a solution to the current devastating mortgage market slump, and in the process he unpacks many complex issues.  First, Hockett identifies the various interests at stake as well as the constituencies that hold these interests.  He then isolates the overlapping interests that exist among the various constituencies, including the general public. Next, Hockett catalogues the impediments that stand in the way of satisfying these interests, including the collective action problem.  Finally, Hockett offers what he views as a best next step, which would require municipalities to exercise their eminent domain power in partnership with investors.