Posts Tagged ‘mortgages’

“A New Look at the U.S. Foreclosure Crisis”

Hmmm, this doesn’t match the received account [Fernando Ferreira, Joseph Gyourko, “A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012″, National Bureau of Economic Research (NBER) Working Paper No. 21261, just out]:

Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.

More: Daniel Fisher.

Banking and finance roundup

  • Administration has abused the law in mortgage lender settlements [House Judiciary hearing: Paul Larkin, Ted Frank testimony]
  • Department of Justice official says banks may need to go much farther in informing authorities of customers who may be up to no good than just sending Suspicious Activity Reports (SARs) [Kevin Funnell] Interpol Red Notices, which among other effects cut off banking access, are open to geopolitical manipulation [Ted Bromund, Weekly Standard]
  • No, Operation Choke Point hasn’t gone away, not in the slightest [Funnell, Jared Meyer/Economics21]
  • What Elizabeth Warren has done to Michael Greve’s mortgage refinance application isn’t pretty [Liberty and Law]
  • Battle over loser-pays clauses in corporate governance rages on in Delaware [Reuters]
  • “The U.S. government’s stupid tax war on expatriates” [Brett Arends, earlier on FATCA]
  • Dodd-Frank: “Wall St. attacked, Main St. wounded” [Iain Murray]

Mortgage borrowers “helped” — at mortgage borrowers’ expense

Who could possibly have seen this coming? [Arnold Kling]:

Servicing [of mortgages] has been traditionally a very low-margin business, with the whole ballgame about keeping costs low.

Back in 2009, policy makers treated mortgage servicers like a piñata. They beat on servicers to provide foreclosure relief, loan modifications, and so forth. They told them to administer new programs that combined loan origination procedures with loan servicing procedures. They sought to punish servicers for noncompliance.

Well, guess what. Now servicers do not want anything to do with any loan that might become delinquent. The cost of dealing with such loans has skyrocketed, thanks to Washington’s piñata-bashing. So if you originate a loan to someone with a low credit score, the servicer charges a hefty premium. That in turn means that risky borrowers either have to pay that premium or get rationed out of the market altogether.

Not wholly unrelated: Sunday’s Washington Post laments that home values in suburban Prince George’s County, Maryland have not bounced back from the crash the way those in Reston, Va., have, and discerns a racial-injustice angle. Unfortunately, it misses a big legal angle that might explain some of the difference, about how the two states’ laws and lawmakers reacted to the foreclosure wave. And: more from Arnold Kling.

Judge rules against housing disparate impact theory

The Obama Administration has repeatedly dodged cases in fear of judicial review of its controversial application of the disparate impact theory to mortgage lending and other aspects of the housing market, but its position has now met with a stiff rebuke from district court judge Richard Leon [Insurance Journal]:

“This is yet another example of an administrative agency trying desperately to write into law that which Congress never intended to sanction,” Leon wrote.

He called the rule “nothing less than an artful misinterpretation of Congress’s intent that is, frankly, too clever by half.”

Banking and finance roundup

  • SEC regs suppress small business capital formation and that’s a shame [Commissioner Daniel Gallagher via Bainbridge]
  • Federally sponsored gripe site for financial institutions not likely to end well [Hester Peirce and Vera Soliman, Mercatus via Kevin Funnell]
  • Alleged terror payments “routed through” sued bank also went through major New York banks, which shouldn’t be surprising [Fisher]
  • Did mid-level managers in securitized mortgage finance know they were in a housing bubble but cynically go ahead? Evidence against [Cheng et al., American Economic Review via MR]
  • Shareholder litigation: “New ‘loser pays’ standard could curb abusive lawsuits” [Examiner editorial] Delaware take note: corporate by-law changes that cut off fee-seeking opportunism deserve acclaim [Keith Paul Bishop via Bainbridge]
  • NYT was hot on “Goldman Sachs manipulated aluminum market” allegations but judge wasn’t [Reuters, July 2013 NYT]
  • CFPB might shrug off discrimination and retaliation charges, but many of the firms it regulates could not afford to [Hans Bader]

Banking and finance roundup

Banking and finance roundup

Citigroup to pay $7 billion in mortgage settlement

WSJ editorial this morning: “We hold no brief for Citi, which has been rescued three times by the feds…. [But] good luck finding a justification for [the $7 billion figure] in the settlement agreement. The number seems to have been pulled out of thin air since it’s unrelated to Citi’s mortgage-securities market share or any other metric we can see beyond having media impact.

“This week’s settlement includes $4 billion for the Treasury, roughly $500 million for the states and FDIC, and $2.5 billion for mortgage borrowers. That last category has become a fixture of recent government mortgage settlements, even though the premise of this case involves harm done to bond investors, not mortgage borrowers.” More: Bloomberg. And the settlement directs Citigroup to hire former Eric Holder associate Thomas Perrilli, now at Jenner & Block, for a monitorship that is likely to prove an extremely lucrative plum [Reynolds Holding, Alison Frankel] Also: Ira Stoll.

Banking and finance roundup

  • In banking and FCPA cases, targets of DOJ prosecution are disproportionately firms domiciled abroad, and other countries do notice that [Jesse Eisinger, NYT “DealBook”]
  • “Los Angeles’ Confused Suit against Mortgage Lenders” [Mark Calabria, Cato] Providence also using disparate impact suits in hopes of making banks pay for its housing failures [Funnell]
  • Podcast discussion on Operation Chokepoint with Charles J. Cooper, Iain Murray, and Todd J. Zywicki [Federalist Society, earlier]
  • New round of suits against banks based on ATMs’ imperfect wheelchair accessibility [ABA Journal, earlier here]
  • Walgreen’s could save billions in taxes if it moved to Switzerland from U.S. Whose fault if anyone’s is that? [Tax Foundation]
  • “Left unmentioned: how fed regulation and trial lawyers deter banks from protecting themselves with overdraft fees.” [@tedfrank on NYT report about banks’ use of databases to turn down business from persons with records of overdrawing accounts, a practice that now itself is being targeted for regulation]
  • Scheme to seize mortgages through eminent domain stalling as cities decline to come on board [Kevin Funnell]