Gather around and check out University of Texas Professor Dickerson’s interview on The Daily Show, a substantive conversation with Jon Stewart about her new book, The Middle-Class New Deal. Stewart decrees the book “fabulous!”
Category: Mortgage Debt & Home Equity
-
The Council of Economic Advisers Discredits Itself
Posted by
The White House’s Council of Economic Advisers has put out a crazy report about the supposed costs of the CFPB. It’s frankly embarrassing to see such shoddy legal and economic analysis come out of the CEA.
-
No, Assumable Mortgages Aren’t a Fix for the Housing Market
Posted by
Paul Kupiec and Alex Pollock have an op-ed in the Wall Street Journal arguing for a pair of federal government interventions in the mortgage market to boost the volume of residential real estate transactions that has been depressed because of borrowers being locked into very low rate mortgages and large, taxable appreciation. Alas, these interventions won’t work, as explained below the break.
-
APOR Consequences If the CFPB’s Funding Is Illegal
Posted by
In a prior post I noted that if the CFPB’s funding is illegal, it creates a time bomb for the entire US housing market because the Bureau will not be able to update the Average Prime Offer Rate (APOR) that is used to determine the presumptive legality of mortgages.
The situation is actually worse. If the Bureau’s funding is illegal, it isn’t just a problem going forward. It also implicates the legality of everything the Bureau has done since the Fed stopped running a profit, that is from the 4th quarter of 2022 onward. That is every rulemaking and every enforcement action and every termination of a consent decree becomes suspect if the Bureau’s been acting without legal funding. And that includes the APOR.
If the Bureau’s funding is illegal, then the APOR is arguably frozen at either the end of Q3 or Q4 2022. I think Q4 2022 because until the end of that quarter it wasn’t know if the Fed was running a profit.1 Here’s why it matters. The APOR for a 30 year mortgage was 6.79% at the end of Q3 2022 and 6.28% at the end of Q4 2022. Right now it’s 6.26%, but it’s been substantially higher at points between 2022 and today. That means that some mortgages that would be QM under the APOR that was listed when the mortgages were made would not be QM if the APOR were frozen at a Q3 or Q4 2022 level. That’s a potential mess for lenders, who face putbacks (they would be in breach of their reps and warrants), a borrower defense to foreclosure, and state AG enforcement.
Now it would seem easy enough to say “justified reliance” and grandfather everything old in. But I’m not sure that’s how it will work, and that uncertainty is enough of a problem in and of itself.
- The difficulty in knowing how/when to measure the Fed’s profitability is yet another factor that points toward the absurdity of the OLC’s opinion. Any corporate lawyer will tell you that if you have an incurrence test in your bond, you need a relevant incurrence date. And if you have a maintenance test, you should still know the date of a breach because there’s a notice requirement. There’s nothing at all like this for the CFPB, however. The timing of the Fed’s financial reporting is not synced with the timing of the CFPB draws, which suggests that the draws are not meant to relate to anything in the content of the reporting, including profitability. ↩︎
-
50-Year Mortgages? The Numbers Don’t Add Up
Posted by
The Trump administration has tried to seize the affordability mantle by proposing a move to 50-year mortgages. Unfortunately, the math doesn’t add up: a 50-year mortgage is a pretty bad idea.
The United States is unique globally in that our dominant mortgage product is the 30-year, fixed-rate, fully-prepayable, fully-amortized mortgage. The 30-year fixed is the American mortgage, and it is a wonderful financial product. It’s also one that only exists because of substantial government involvement in the market. But shifting it out to a 50-undermines the benefits of the product. (more…)
-
The Letitia James Indictment Falls Short
Posted by
I’m unaware of the federal government having previously charged anyone for fraud based on renting out a second home. Yet that’s what we have with the Letitia James mortgage fraud indictment. We don’t have all the facts available, but based on what is in the indictment, it’s clear why the career prosecutors in the Eastern District of Virginia refused to bring a case: James doesn’t appear to have made any misrepresentation in her mortgage because the mortgage does not directly prohibit rentals.
-
Bill Pulte’s Looking for Mortgage Fraud in the Wrong Place
Posted by
Reuters is reporting that Lisa Cook scheduled her Atlanta property as a vacation home on a loan estimate from her lender. That indicates that the lender was aware that the property was not going to be used as Cook’s principal residence. It’s going to be pretty hard to sustain a mortgage fraud prosecution in the face of the loan estimate.
Consistent with the indication that the Atlanta property was a vacation home, Cook didn’t claim a primary residence tax deduction for it (unlike what Pulte’s own parents did for their properties!).
If Reuters was able to unearth the Cook loan application materials, surely Pulte should have been able to do so. Either Pulte was wildly reckless by making the referral without pulling the loan file, including the application materials, or he proceeded despite having the loan file, which suggests that he acted maliciously. Regardless of whether Pulte acted recklessly or maliciously, his actions here are more than cause for his removal.
The Cook’s declaration of the property as a second home also suggests that if there was fraud—and it’s far from clear that there was—that it wasn’t by Cook, but by either the loan officer or her credit union. The loan officer might have wanted to facilitate the loan closing, while the credit union would have gotten a better price from Fannie/Freddie for a principal residence mortgage than for a second home mortgage. We’d need a lot more information to know if there was fraud and by whom, but if Cook had alerted the credit union that the property was a second home, I can’t see how this could rise to a criminal issue for her.
-
That Mortgage Document Doesn’t Say What You Think It Says
Posted by
I’ve been getting a lot of emails and on-line comments in recent days from people who work in the mortgage industry about the Lisa Cook mortgage situation. What I’m seeing in these comments is a serious gulf between lawyers and non-lawyers. The non-lawyers tell me that “This is how it is supposed to work.” To which my response is “Have you actually read the legal documentation?” (more…)
-
Pulte’s Latest Bad Faith Accusation
Posted by
Bill Pulte’s newest fraud claim against Lisa Cook is more outlandish and desperate than his original attack.
Pulte’s latest claim is based on Cook having rental income from 2021 second home mortgage in Cambridge. Pulte alleges that this means that Cook defrauded the lender by claiming the property as a second home, when it was actually intended as an investment property.
Once again, this is Pulte acting in bad faith to abuse his authority. There is no basis whatsoever on the current evidence for Pulte to be making a mortgage fraud referral to DOJ for Cook’s Cambridge mortgage. (more…)
-
The President’s Firing of Lisa Cook Is Illegal
Posted by
President Trump fired Federal Reserve Board Governor Lisa Cook tonight based on unproven allegations by his politically motivated henchman that Cook engaged in mortgage fraud. The President’s actions are illegal. He currently has no legal basis to fire Cook. Instead, he disregarded even a modicum of due process in order to achieve a political goal.
(more…)