Law Commons^™

Why Flexibility Matters: Inequality And Contract Pluralism, Jeremiah A. Ho

Faculty Publications

In the decade since the Great Recession, various contract scholars have observed that one reason the financial crisis was so “great” was due in part to contract law—or, more precisely, the failures of contract law for not curbing the risky lending practices in the American housing market. However, there is another reason why contracts made that recession so great: contracts furthered inequality. In recent years, when economic inequality has become a dominant national conversation topic, we can see development of that inequality in the Great Recession. And indeed, contract law was complicit. While contractual flexibility and innovation were available to …

Community Collateral Damage: A Question Of Priorities, Andrea Boyack

Faculty Publications

Today’s soaring mortgage default rate and the uncertainty and delay associated with mortgage foreclosure proceedings threatens to cause financial tragedies of the commons in condominiums and homeowner associations across the country. Assessment defaults in privately governed communities result in an inequitable allocation of upkeep costs, and current law provides no way to prevent this spillover effect. But the collateral damages caused by delayed foreclosures and insufficient recoveries can be minimized by gradually increasing the priority position of the association lien.

In a majority of states, association liens are completely subordinate to the first mortgage lien. At foreclosure of the mortgage …

Laudable Goals And Unintended Consequences: The Role And Control Of Fannie Mae And Freddie Mac, Andrea Boyack

Faculty Publications

The United States is struggling to emerge from an era of loose mortgage underwriting standards – lapses in credit analysis that led to origination and securitization of toxic loans. The fallout has been crippling, costing borrowers their homes, investors their money, and the government its taxes.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) passed last summer was the first comprehensive effort to address the problems in the system that led – in sequence – to the subprime crisis, the housing crisis, and the financial crisis. The Dodd-Frank Act, which contains over 2,300 pages of legislation, …

An Evolving Foreclosure Landscape: The Ibanez Case And Beyond, Peter R. Pitegoff, Laura S. Underkuffler

Faculty Publications

Mortgage securitization, subprime lending, a persistently weak housing market, and an explosion of residential mortgage defaults – today’s homeowners and banks face a new and challenging landscape. Recently, courts in several states have issued decisions that alter the terrain for mortgage foreclosures. In Massachusetts, New Jersey, and New York, among other states, courts have dismissed foreclosure actions on the basis of what might seem to be highly technical deficiencies in the pleading or proof. The most well-known–and controversial–in this cluster of cases is U.S. Bank National Ass’n v. Ibanez, decided by the Supreme Judicial Court of Massachusetts this year. In …

Stop Shutting The Door On Renters: Protecting Tenants From Foreclosure Evictions, Eloisa Rodriguez-Dod

Faculty Publications

This article discusses existing and proposed federal and state law affecting tenants’ rights in foreclosure. As “Foreclosure” signs rapidly join “For Sale” signs across the country, the national foreclosure crisis has not only displaced homeowners, but a plethora of renters as well. The approach taken by states concerning tenants affected by foreclosure varies greatly. Furthermore, a recently enacted Federal law, created specifically to help tenants in foreclosure, does not relieve the uncertainty in resolving this issue. In addition to being the first to critique the new federal law, this article offers recommendations for legislation that may better protect tenants from …

Why Mortgagors Can't Get No Satisfaction, R. Wilson Freyermuth

Faculty Publications

This article addresses current law governing mortgage satisfaction, the need for effective reform, and the extent to which URMSA provides (or fails to provide) that reform.

Adopting Restatement Mortgage Subrogation Principles: Saving Billions Of Dollars For Refinancing Homeowners, Dale A. Whitman, Grant S. Nelson

Faculty Publications

In eras of declining interest rates, millions of residential mortgage loans may be refinanced. When this occurs, it is customary for the refinancing lender to require a title examination and a new mortgagee's title insurance policy. This requirement is expensive, usually costing several hundred dollars or more, and the cost is invariably paid by the borrower. This Article proposes that in the vast majority of refinancings this expense can be substantially reduced or even eliminated. This result can be achieved through proper understanding, adoption, and use of the doctrine of equitable mortgage subrogation articulated in the Restatement (Third) of Property: …

Chinese Mortgage Law: An American Perspective, Dale A. Whitman

Faculty Publications

My objective in this paper is to compare and to evaluate some of the features of the American and Chinese systems. I do so without any preconception that the American system provides better answers, but with the recognition that it is far more mature and provides more answers. Hence it provides a reference point from which the Chinese system can be considered. Perhaps each system has something to teach the other.

Respa - Questioning Its Effectiveness, Eloisa Rodriguez-Dod

Faculty Publications

Purchasing real estate is a complicated process, especially for the average consumer. The closing procedure alone involves fees and documents that can be confusing to a borrower. The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 in order to ease some of this confusion.

This article discusses the enactment of RESPA and its purpose, which is mainly to "insure that consumers... are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices." The article also discusses disclosure requirements that …

Mortgage Drafting: Lessons From The Restatement Of Mortgages, Dale A. Whitman

Faculty Publications

The American Law Institute's adoption of the Restatement (Third) of Property: Mortgages may have significant impact on the negotiation and drafting of mortgages. Rather than merely reciting the prevailing case law, the Restatement proposes approaches the American Law Institute believes are desirable as a matter of sound policy. This Article highlights key areas in which the new Restatement may affect mortgage drafting and suggests useful techniques for mortgage drafters.

Of Hotel Revenues, Rents, And Formalism In The Bankruptcy Courts: Implications For Reforming Commercial Real Estate Finance, R. Wilson Freyermuth

Faculty Publications

This article is intended to continue the dialogue begun by the proposed Restatement and has two distinct goals in this effort. Parts I through III argue that the position of the Restatement drafters is both legally and functionally sound and that bankruptcy courts should embrace and apply the proposed Restatement in administering distressed real estate developments. Part I reviews the reasoning articulated in the hotel bankruptcy cases, demonstrating how courts have applied the provisions of the Bankruptcy Code and state law in a formalistic manner to extinguish the hotel mortgagee's lien upon postpetition room revenues. Part II rejects the analysis …

Congressional Preemption Of Mortgage Due-On-Sale Law: An Analysis Of The Garn-St. Germain Act, Dale A. Whitman, Grant S. Nelson

Faculty Publications

We first describe the several major types of mortgagor transfer restrictions, and the judicial and legislative responses to these restrictions before the Act. Second, we analyze the effect and coverage of the important provisions of the Act and its attendant regulation. The complex exceptions to the application of the Act known as “window periods” are then considered. These window periods were created by Congress in an attempt to soften the impact of the Act on states that previously restricted due-on-sale enforcement, and are based on preexisting state law. We examine the difficult standards for identifying such window periods and suggest …