Law Commons^™

Foiled By The Banks? How A Lender's Decision May Support Or Undermine A Jurisdiction's Environmental Policies That Promote Green Buildings, Darren Prum

Darren A. Prum

In a report from the United Nations Environmental Program that addressed climate change, the authors point out that the built environment in both emerging and developed countries accounts for more than forty percent of the global energy usage while also emitting at least one third of the world’s greenhouse gasses. They further assert that the built environment offers an unsurpassed opportunity to supply cost effective, lasting, and meaningful reductions in greenhouse gas emissions. In response to such a call to action, many state and local governments turned to a variety of policies to ensure that the real estate developments within …

Tmi About Pmi: A Basic Guide To Private Mortgage Insurance, Marie Sarantakis

Marie Sarantakis

Purchasing a home for the first time can be an intimidating and overwhelming experience for the average consumer. In an economic downturn, Private Mortgage Insurance (PMI) is a commonly utilized mechanism that affords homebuyers the ability to purchase a residence with a minimal down payment while insulating the lender as the beneficiary of the policy. PMI is an often dreaded and misunderstood expense. This basic guide provides a rudimentary understanding of PMI for a real estate novice.

The Reasons For The Gramm-Leach-Bliley Act, Raymond Natter

Raymond Natter

One of the most repeated allegations about the financial crisis is that the passage of the Gramm-Leach-Bliley Act (GLBA) that repealed two sections of the Glass-Steagall Act in 1999 was a significant contributing factor in the subprime mortgage meltdown. However, these allegations never specify the exact link between GLBA and the crisis. The reason is that there is no readily apparent link between the two events. Simply put, the provisions of the Glass-Steagall Act that were repealed by GLBA did not prohibit the origination of subprime mortgage loans, to the securitization of mortgage loans, or to the purchase of mortgage-backed …

Congressional Intent Regarding The Qualified Mortgage Provision, Raymond Natter

Raymond Natter

The Consumer Financial Protection Bureau (CFPB) is currently considering a regulation that could well have a significant impact on the cost and availability of mortgage loans in the United States. The regulation is intended to implement the Qualified Mortgage (QM) provisions in the Dodd-Frank Act. These provisions impose significant legal liability on any mortgage originator that does not make a determination before making a mortgage loan that the borrower has a “reasonable ability to repay” the loan, before the mortgage is made. In light of the subjective nature of this standard, the Dodd-Frank Act also establishes a safe harbor for …

Preventing Future Economic Crises Through Consumer Protection Law Or How The Truth In Lending Act Failed The Subprime Borrowers, Jeff Sovern

Jeff Sovern

This paper argues that one cause of the current economic crisis was that the federal Truth in Lending Act failed to provide mortgage borrowers with the tools to determine whether they would be able to meet their loan obligations, and that as a result many borrowers assumed loans on which they would later default. The paper first explores the disclosures for adjustable rate mortgages—which were commonly used for subprime loans—and explains how those disclosures misled borrowers about their monthly payments. Next, the paper reports on a survey of mortgage brokers conducted in July of 2009. The brokers were nearly unanimous …

Preventing Future Economic Crises Through Consumer Protection Law Or How The Truth In Lending Act Failed The Subprime Borrowers, Jeff Sovern

Jeff Sovern

This paper argues that one cause of the current economic crisis was that the federal Truth in Lending Act failed to provide mortgage borrowers with the tools to determine whether they would be able to meet their loan obligations, and that as a result many borrowers assumed loans on which they would later default. The paper first explores the disclosures for adjustable rate mortgages—which were commonly used for subprime loans—and explains how those disclosures misled borrowers about their monthly payments. Next, the paper reports on a survey of mortgage brokers conducted in July of 2009. The brokers were nearly unanimous …

Non-Recourse Mortages – A Fresh Start, Ron Harris, Asher Meir

Ron Harris

In about a quarter of US states, all residential mortgages are essentially non-recourse, meaning that in case of default, the lender can only repossess the house but cannot collect on the private assets and future income of the borrower. This American innovation is now beginning to attract extensive interest abroad, but ironically in the US itself is getting a bad name. The law has been blamed for exacerbating the financial crisis, while stricken homeowners who take advantage of it have been scolded by lenders and even by the Secretary of the Treasury. We propose a fresh and more balanced look …

To Empower, Prohibit, Or Delegate?: Regulatory Strategies For Modernizing The Consumer Credit Market, Yoon-Ho A. Lee

Yoon-Ho A Lee

A number of proposals currently exist to bolster regulation in the market for consumer credit products. How should regulators evaluate their various options? Our diagnosis of the market—based on a review of empirical evidence and economic models—is that consumer are failing to minimize the economic cost of debt as a result of lack of information, lack of expertise, or lack of self-awareness. Consequently, the market lacks competitive dynamics and fails to eliminate welfare-reducing products. We view the space of regulatory options as a triangle with three nodes—empowerment, prohibition, or delegation—depending on whether a particular decision regarding consumer credit arrangement should …

Fannie Mae And Freddie Mac And The Future Of Federal Housing Finance Policy: A Study Of Regulatory Privilege, David J. Reiss

David J Reiss

The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit-driven, but as government-sponsored enterprises they also have a government-mandated mission to provide liquidity and stability to the United States mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy.

While the American taxpayer will be required to fund a bailout of the two companies that will …

Misbehavior And Mistake In Bankruptcy Mortgage Claims, Katherine Porter

Katherine Porter

The greatest fear of many families in serious financial trouble is that they will lose their homes. Bankruptcy offers a last chance for families to save their homes by halting a foreclosure and by repaying any default on their mortgage loans over a period of years. Mortgage companies participate in bankruptcy by filing claims with the court for the amount of the mortgage debt. To retain their homes bankruptcy debtors must pay these amounts. This process is well-established and, until now, uncontroversial. The assumption is that the protective elements of the federal bankruptcy shield vulnerable homeowners from harm.

This Article …

The Federal Government’S Implied Guarantee Of Fannie Mae And Freddie Mac’S Obligations: Uncle Sam Will Pick Up The Tab, David J. Reiss

David J Reiss

This article provides the most comprehensive statutory analysis to date of the federal government’s implied guarantee of Fannie Mae and Freddie Mac’s financial obligations. Fannie and Freddie together have $4.45 trillion in mortgage-related obligations. The magnitude of their obligations can only be understood in comparison to the amount of outstanding U.S. government debt -- $5.04 trillion. Given the ongoing meltdown of the residential mortgage market, it is important that the implied guarantee be understood for what it is, a contingent liability of the federal government. After explaining the nature of the implied guarantee and the risks that it poses, the …