Tag Archives: NPR

Dr. Carson’s Slim Housing Credentials

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photo by Gage Skidmore

Law360 quoted me in Carson’s Slim Housing Credentials To Be Confirmation Focus (behind paywall). It opens,

Dr. Ben Carson will face a barrage of questions Thursday on topics ranging from his views on anti-discrimination enforcement to the basics of running a government agency with a multibillion-dollar budget at his confirmation hearing to lead the U.S. Department of Housing and Urban Development.

Carson, a famed neurosurgeon and former Republican presidential candidate, was President-elect Donald Trump’s surprise choice for HUD secretary, given the nominee’s lack of experience or statements on housing issues. That lack of a track record means that senators and housing policy advocates will have no shortage of areas to probe when Carson appears before the Senate Banking Committee.

“I want to know whether he has any firm ideas at all about housing and urban policy. Is he a quick study?” said David Reiss, a professor at Brooklyn Law School.

Trump tapped Carson in early December to lead HUD, saying that his former rival for the Republican presidential nomination shared in his vision of “revitalizing” inner cities and the families that live in them.

“Ben shares my optimism about the future of our country and is part of ensuring that this is a presidency representing all Americans. He is a tough competitor and never gives up,” Trump said in a statement released through his transition team.

Carson said he was honored to get the nod from the president-elect.

“I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met,” he said in the transition team’s statement.

The nomination came as a bit of a surprise given that Carson, who has decades of experience in medicine, has none in housing policy. It also came soon after a spokesman for Carson said that he had no interest in a Cabinet position because of a lack of qualifications.

Now lawmakers, particularly Democrats, will likely spend much of Thursday’s confirmation hearing attempting to suss out just what the HUD nominee thinks about the management of the Federal Housing Administration, which provides insurance on mortgages to low-income and first-time home buyers; the management and funding for public housing in the U.S.; and even the basics of how he will manage an agency that had an approximately $49 billion budget and employs some 8,300 people.

“You will have to overcome your lack of experience managing an organization this large to ensure that you do not waste taxpayer dollars and reduce assistance for families who desperately need it,” Sen. Elizabeth Warren, D-Mass., said in a letter to Carson earlier in the week.

To that end, Carson could help allay fears about management and experience by revealing who will be working under him, said Rick Lazio, a partner at Jones Walker LLP and a former four-term Republican congressman from New York.

“The question is will the senior staff have a diverse experience that includes management and housing policy,” Lazio said.

One area where Carson is likely to face tough questioning from Democrats is anti-discrimination and fair housing.

Carson’s only major public pronouncement on housing policy was a 2015 denunciation of the Affirmatively Furthering Fair Housing rule that the Obama administration finalized after it languished for years.

The rule, which was part of the 1968 Fair Housing Act but had been languishing for decades, requires each municipality that receives federal funding to assess their housing policies to determine whether they sufficiently encourage diversity in their communities.

In a Washington Times, op-ed, Carson compared the rule to failed efforts to integrate schools through busing and at other times called the rule akin to communism.

“These government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous,” Carson wrote.

Warren has already indicated that she wants more answers about Carson’s view of the rule and has asked whether Carson plans to pursue disparate impact claims against lenders and other housing market participants, as is the current policy at HUD and the U.S. Department of Justice.

Warren’s concerns are echoed by current HUD Secretary Julian Castro, who said in an interview with National Public Radio Monday that he feared Carson could pull back on the efforts the Obama administration has undertaken to enforce fair housing laws.

“I’d be lying if I said that I’m not concerned about the possibility of going backward, over the next four years,” Castro said in the interview.

HUD, as the agency overseeing the Federal Housing Administration, has also been involved in significant litigation against the likes of Deutsche Bank, HSBC, Bank of America and JPMorgan Chase & Co., among others, seeking to recover money the FHA lost on bad loans they sold to the agency.

“Will you commit to continuing to strictly enforce these underwriting standards in order to protect taxpayers from fraud?” Warren asked.

Carson has also drawn criticism from fair housing advocates for his views on the assistance the government provides to the poor, saying in his memoir that such programs can breed dependency when they do not have time limits.

To that end, housing policy experts will want to hear what Carson wants to do to ease the affordability crisis, boost multifamily building and improve conditions inside public housing units. HUD also plays a major role in disaster relief operations, another area where people will be curious about Carson’s thinking.

“I’d be looking at hints of his positive agenda, not just critiques of past programs,” Reiss said.

Mnuchin and Housing Finance Reform

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photo by MohitSingh

Sabri Ben-Achour of Marketplace interviewed me in Choice of Mnuchin Troubles Housing Activists. (The audio is available at the link at the top of the linked page.)  The summary of the story reads as follows:

Donald Trump has tapped financier, Hollywood producer and hedge fund manager Steven Mnuchin as Treasury Secretary. In that role, Mnuchin would have quite a lot to say about housing, finance and policies related to mortgage lending. Mnuchin has been involved in lending before, and it didn’t go well for many homeowners.

At issue specifically is his an investment in a failing mortgage lender in 2009 called IndyMac in California. Mnuchin and other investors renamed it OneWest, and it proceeded to foreclose on tens of thousands of homes nationwide. Critics say the company could have kept some portion of those people in their homes.

The story reads in part,

“I think the really big place where the Treasury Secretary can have an impact is on housing finance reform and, really, what we should do with Fannie and Freddie.”  David Reiss is a Professor of Law at Brooklyn Law School.

The Fate of the CFPB

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photo by Lawrence Jackson

President Obama Nominating Richard Cordray to Lead Consumer Financial Protection Bureau, with Elizabeth Warren

The United States Court of Appeals for the District of Columbia issued a decision in PHH Corporation v. Consumer Financial Protection Bureau, No. 15-1177 (October 11, 2016), that found an important aspect of the structure of the CFPB to be unconstitutional:  the insulation of the Director from Presidential supervision. While this decision will almost certainly be appealed, even if it is upheld, it will allow the the CFPB to continue functioning much as it has.

I was interviewed about the decision on NPR’s All Things Considered in a segment titled, Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau (audio available). The transcript reads,

AUDIE CORNISH, HOST:

A federal appeals court has mandated big changes to the Consumer Financial Protection Bureau. The three-judge panel says the consumer watchdog agency is set up in a way that’s unconstitutional. In its ruling, the court says the agency will have to restructure. NPR’s Yuki Noguchi reports.

YUKI NOGUCHI, BYLINE: The suit was brought by a mortgage lender called PHH, which asked the court to invalidate a $109 million enforcement action against it and scrap the agency, too. The D.C. Court of Appeals sent the fine back to the bureau for review.

But it also ruled that the CFPB’s director has too much power to write and enforce rules without enough oversight from another branch of government. The remedy, the panel says, is that the CFPB should fall under the president’s control. And the president should be able to remove the director at will.

The CFPB’s opponents in the financial services industry declared victory. Bill Himpler is executive vice president for the American Financial Services Association.

BILL HIMPLER: Our issue is still with the authority given to a single director. That is, as the court pointed out, not subject to a lot of oversight.

NOGUCHI: Himpler instead supports a CFPB run by a bipartisan commission, similar to others like the Securities and Exchange Commission. David Reiss, a law professor at Brooklyn Law School, says the ruling is not an existential challenge to the CFPB or its past decisions.

DAVID REISS: The decision does not invalidate the CFPB’s actions. This is more about its structure going forward.

NOGUCHI: Reiss says an appeal to the Supreme Court is all but guaranteed. Indeed, the CFPB says it disagrees with the conclusion. In an emailed statement, a spokesperson says the ruling does not change its mission and that it is, quote, “considering options for seeking further review of the court’s decision.”

Dennis Kelleher is CEO of Better Markets, a group that advocates for stronger financial regulation. He says the bureau’s actions on banks have made the financial sector more determined to undercut the agency.

DENNIS KELLEHER: They do not want a consumer watchdog on the Wall Street beat. That’s what this fight is about.

NOGUCHI: The decision was not unanimous on all the issues. Judge Karen Henderson dissented in part, saying the panel overreached in calling the bureau’s structure unconstitutional. Yuki Noguchi, NPR News, Washington.

 

Best Real Estate Investing Advice Ever

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I was interviewed on the Best Real Estate Investing Advice Ever with Joe Fairless podcast. The interview, How to Negotiate the Interest Rate on Your Mortgage Down…A LOT, went live today. The teaser for the show reads,

Today’s Best Ever guest shares just how important it is to do you due diligence with everything. From negotiating the interest rate on your mortgage rate down to an unheard of number, to learning about different zoning codes and what they mean to you.

The interview runs about half an hour. I always like to be invited to speak on a long-form program because I can go into greater depth about things that I think are important. I also got a chance to discuss some topics that usually only come up in my Real Estate Practice class.

The Best Ever Real Estate Investing Advice Ever show is one of the highest rated investing podcasts on iTunes, up there with Suze Orman, Jim Cramer, Marketplace, Motley Fool, NPR and the Wall Street Journal. The show is sold with some hype, but it was a substantive discussion, geared to the newish real estate investor. All in all, this was a fun interview to do.

 

 

Reiss on Marketplace: Cash Cows to Slaughter

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I was interviewed on Marketplace for its story, Fannie and Freddie: Cash Cows Avoid The Slaughter? (sound file) The text of the story reads

We are making money – the tax payer, that is – on Fannie and Freddie Mac.

When Freddie Mac hands the treasury a $10.4 billion dividend next month, tax payers will have received more money in interest than was put in. (Technically the two institutions still owe the principal on the loan that bailed them out, but the interest they’re paying will shortly exceed that amount).

But.

There always is a but with these things.

Making money for the tax payer isn’t good if you ask those who want reform.

Back during the financial crisis, conservatives and liberals disagreed over whether Freddie and Fannie were a victim of or a cause of the housing collapse, but they agreed that the institutions needed reform. The profits are throwing a wrinkle into this debate.

“As long as Fannie and Freddie continue to pay substantial amounts of money to the government, they are looked at by some people in Congress as a great source of revenue that reduces the deficit,” explains Peter Wallison with the American Enterprise Institute. His concern – shared by reformers on both sides of the political spectrum – is that if Fannie and Freddie become cash cows, congress won’t want to touch them.

David Reiss, professor of law at the Brooklyn Law School, agrees. He says the financial crisis wasn’t a one time problem.

“We should think of it as that we dodged a bullet. There’s fundamental problems with the Fannie and Freddie business model which rests on this notion of privatizing profits and socializing losses.”

Freddie and Fannie buy mortgages from lenders, and then bundle them into “mortgage backed securities” that can be sold to investors. It’s useful because it converted illiquid mortgage loans into liquid securities. In plain English, it means a bank or investor who made a mortgage loan to someone didn’t have to wait around for 30 years to be paid back. They could sell their stake in the mortgage to Fannie or Freddie, move along, and go invest in other things. This helped more people get mortgages.

One concern was that Fannie and Freddie were simply too big and too concentrated. Another concern was that the federal government implicitly guaranteed investments in Freddie and Fannie, and that encouraged people to make home loans that were too risky.

Even without the complication of profits, the debate over how to reform Fannie and Freddie is at a stand still.

House Republicans don’t want the government involved at all, they want an efficient market. The Senate wants the government to be involved a little bit, essentially to promote housing.

“What I see,” says David Reiss, “is nothing really happening, and us being a holding pattern for a long time.”

It’s possible that reform-minded politicians will compromise before they lose their chance. Also possible they won’t.