Tag Archives: property management

Domestic Violence and Housing Discrimination

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DomesticShelters.org quoted me in Abuse Survivors Not Welcome. It opens,

There are lots of barriers survivors of domestic violence face when searching for housing. Sandra Park, an ACLU attorney at the Women’s Rights Project who focuses on the rights of domestic violence survivors, shares one example.

Park worked with a woman called Hope who seemed to be on track to rent an apartment. Hope placed a deposit and the property management company gave her an application that asked for the social security numbers of her children. Due to her history as a domestic violence survivor, Hope had changed her own social security number and her identity. She had full custody of her children and their father had no visitation rights.

The property management company said they would run a check on the children’s social security numbers—a move that Hope feared could alert her abuser to her location. She refused to give the numbers and was turned down for the apartment. She turned to the ACLU, which filed a Fair Housing Act complaint on her behalf. Ultimately, the management company compensated Hope and changed its policy.

Discrimination Is Real

Research confirms that survivors of domestic violence are sometimes discriminated against when they look for housing. A study done by the Washington, D.C.-based Equal Rights Center found that advocates searching for housing on behalf of a domestic violence victim were either denied housing or offered less advantageous terms, compared to comparable people with no connection to domestic violence.

For example, the domestic violence advocates might be told that they had to meet a landlord in person, or that their move-in date was too soon, or that they would receive a call back with more information while another caller was given the information right away. In some cases the call back never came.

Another study, by the Anti-Discrimination Center of Metro New York and conducted in a similar fashion, found that 27.5% were flatly refused housing or failed to receive follow up.

Potential Problems

There are various reasons landlords might hesitate to rent to a domestic violence survivor:

● The landlord may be uncomfortable dealing with a survivor

● The landlord may believe the abuser will cause issues

● The survivor may have bad credit because the abuser ruined their credit history

● The survivor may have a history of eviction that’s linked to the domestic violence

● The survivor may have a criminal conviction for conduct stemming from self-defense

What Can Survivors Do?

It may help to be honest with your potential future landlord. “If you have negative criminal, credit or tenancy records because of domestic violence and you know the landlord is going to run that kind of check, it can go a long way to be up front and explain why you have that history,” Park says. “In some cases it makes sense to try to provide that information to the landlord, so when the check comes back they don’t throw away your application.”

She says if you believe you’re facing discrimination, you might want to seek legal assistance. Nationally, the Fair Housing Act and the Violence Against Women Act both offer some protection.

The Fair Housing Act doesn’t prohibit discrimination based on domestic violence status. But it does prohibit discrimination based on gender. Since the majority of domestic violence victims are women, in some cases you can make the argument that discriminating against a female domestic violence survivor is discrimination based on gender.

The Violence Against Women Act does offer protection for domestic violence survivors. But it only applies to federally funded and Section 8 housing. If you are applying to a property and you’re covered under the Violence Against Women Act, you may want to notify your landlord about your protection. “Some landlords will not know about the Violence Against Women Act at all, so it can be helpful for them to be educated about that,” Park says.

Some state and local laws also prohibit housing discrimination based on domestic violence status. The National Housing Law Project lists state laws that offer this protection.

David Reiss, professor of law at Brooklyn Law School, recommends keeping careful records as you search for housing, in case you need evidence to prove discrimination.

“Save your texts, emails and voicemails. If you have evidence you want to protect don’t destroy it, save a copy. Once you start making noise that you think you’re being discriminated against people will be more cautious,” he warns.

Bank Break-ins

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Chris Odinet has posted Banks, Break-Ins, and Bad Actors in Mortgage Foreclosure to SSRN. The abstract reads,

During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles began cropping up in newspapers and media outlets across the country recounting stories of people who had fallen behind on their mortgage payments returning home one day to find that all of their belongings had been taken and their homes heavily damaged. These homeowners soon discovered that it was not a random thief that was the culprit, but rather property management contractors hired by the homeowners’ mortgage servicer.

The issues arising from these practices have become so pervasive that lawsuits have been filed in over 30 states, and legal aid organizations in California, Florida, Michigan, Nevada, and New York report that complaints against lender-engaged property managements firms number among their top grievances. This Article analyzes lender-engaged property management firms and these break-in foreclosure activities. In doing so, the paper makes a three-part call to action, which includes the implementation of bank contractor oversight regulations, the creation of a private cause of action for aggrieved homeowners, and the curtailment of property preservation clauses in mortgage contracts.

This is a timely article about a cutting edge issue. All too often I have heard pro-bank lawyers claim that banks almost never foreclose improperly. The news reports and lawsuits discussed in this article counter that claim. And yet, I hope that some empirically-minded person could quantify the frequency of such misbehavior to better inform policymakers going forward.

The Good, Bad & Ugly of Real Estate

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U.S. News & World Report quoted me in The Good, Bad and Ugly of Real Estate Investments. It reads, in part,

While many investors get a rise when it comes to the potential profits in real estate, that doesn’t mean all properties rise enough in value to justify the commitment.

“Some people buy real estate expecting it to appreciate a lot over time,” says David Reiss, a professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School. “But it can be risky – or even foolish – to pay so much for a property that you’re losing money on an operating basis just because you think it will appreciate.”

The wisdom in real estate, then, applies just as it would with stocks, commodities or any other investment class: The variables are many, the can’t-miss propositions few. So where should the savvy money go? And how does real estate fit into your overall portfolio?

Here, experts and observers weigh in on the essentials that should guide your decisions, as well as the ways to guide your financial forays toward success.

Know your market well. If you pay market price for an investment property, you probably won’t see particularly robust returns. “It will make a market return, and if you want to do better than that, you have to pound the pavement,” Reiss says. “Look for deals that are underpriced for one reason or another. And you won’t know which deals are underpriced unless you have a good sense of how properties are priced.”

*    *    *

Increase your profit potential with an investment of time. Property development, management and administration often require an army of specialists. But if you’re adept at repairs, accounting or showing a vacancy to prospective renters, you can forego the fees associated with hired help. “Depending on your availability and your skills, these could be trade-offs that are worth making for you,” Reiss says.

Reiss on “Generation Rent”

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MSN Real Estate quoted me in ‘Generation Rent’ trend changes the housing game.

Tougher lending requirements, a transient lifestyle and seeing mortgages throw their
parents’ finances in turmoil are causing more millennials to rent instead of buy a
home.

“This attitude shift on homeownership and the rise in demand for rentals is directly influencing the growth of private firms looking to fill out real estate portfolios as well as property management groups that have scooped up business from investors who have no interest in the day-to-day of being a landlord,” said Don Lawby, president of Real Property Management in Utah.

Some 82% of consumers believe owning a home is a critical part of wealth building but 18% said they are not willing to assume the risk of a mortgage, according to a National Foundation for Credit Counseling (NFCC) survey.

“The unwillingness to take on a mortgage loan may be a smart decision for some, as many borrowers have learned the hard way that homeownership does not come with a guarantee of continually increasing equity,” said Gail Cunningham, spokesperson with the NFCC.

The “Generation Rent” phenomenon is not just about younger Americans. As a societal shift has slowly emerged to redefine the American Dream, many older Americans with empty nests are also exploring apartment living.

“Apartments are a maintenance-free alternative to single-family homes and retirement communities,” said Abe Tekippe, a spokesperson with Waterton Associates, a national apartment investor and operator. “They also allow residents to move closer to shopping, dining and entertainment venues, making them more accessible to aging Baby Boomers.”

For many years, homeownership was a policy objective of the federal government, which symbolized a level of achievement for a person or family but these days many are taking a closer look at whether the costs and benefits of home ownership outperforms the cost of renting.

“People are realizing that coming up with funds and motivation each month for maintenance and up-keep isn’t feasible for economic, medical, lifestyle or other
reasons,” said Dillon Baynes, co-founder and managing partner with Columbia Ventures in Atlanta.

If generation rent continues, a slow down in home sales is bound to have a ripple effect. “If renting remains a popular choice, it will certainly have an impact on the broader economy starting with the home building industry,” said David Reiss, professor with Brooklyn Law School.

“There would be a move away from single-family construction to multi-family.”

The (R)evolution of Single-Family Rental Securitization

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Kroll Bond Rating Agency distributed its Single-Family Rental Securitization Methodology. Because this is a new asset class, it is interesting to watch how rating agency’s assess the risks inherent in it. And it will be interesting, of course, to evaluate down the road whether they got it right or not. The Methodology states that

Single-family Rental (SFR) securitizations are a new class of asset-backed securities with characteristics of both commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). Like CMBS, the primary source of certificateholder distributions during the term of an SFR transaction are loan debt service payments that are generated by income producing real estate collateral. Also like CMBS, there is an element of balloon risk, as SFR loans do not fully amortize over their terms, and the repayment of ultimate principal on the certificates is dependent upon a successful refinance of the loan or loans that serve as trust collateral. However, there is a broader source of demand for the single-family homes underlying an SFR securitization, which can be sold into the vast market for owner-occupied homes, totaling approximately 79 million units. In the event that the pool of single-family homes backing an SFR securitization needs to be partially or entirely liquidated due to an event of default either during the loan’s term or at the loan’s maturity, the expected recovery from such a distressed sale of homes would be largely determined by the conditions in the larger market for single-family homes, which is a primary focus of RMBS analysis.

*     *     *

the SFR securitization market is currently characterized by large institutional sponsors that have engaged in purchasing and refurbishing large numbers of single-family homes in distressed markets over relatively short periods of time.

*     *     *

As this is an evolving asset class, we will modify or adjust our methodology to address new transaction features as they emerge. SFR securitizations to date have been collateralized by a single large loan that is in turn secured by mortgages on several thousand income producing single-family homes. While this methodology is designed for this structure, it is also applicable to securitizations secured by a few large loans. Structures featuring a larger number of loans to distinct borrowers, many of whom may be non-institutional in nature, pose additional credit considerations that are not addressed herein. (3)

This summary demonstrates that there are a lot of new characteristics for this asset-class that Kroll is trying to capture in its rating methodology. These include the hybrid nature of the security itself; the hybrid nature of the underlying collateral for the security; the innovative business model of institutional investors entering the single-family market in a big way; and the possible entry of new players in that market, such as non-institutional ones; and changes in the type of collateral underlying the securities.

The takeaway for readers: don’t mistake the apparent simplicity of a rating (AAA, Aaa) as a signal of the solidity of the reasoning that went into it. Ratings, particularly those for new types of securities, are constantly evolving. To think otherwise is to risk being left holding a bag filled with all of lemons that the market has to offer to unsuspecting investors.

Reiss on Single Family Rental-Backed Bonds

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Law360 Quoted me in Newest Property-Secured Bonds Invite Scrutiny (behind a paywall). It reads in part,

The Blackstone Group LP’s recent groundbreaking move to sell bonds secured by single-family rental homes may have created the next securitization blockbuster, but attorneys say the product could attract the same type of litigation that has plagued the commercial and residential mortgage-backed securities markets.

Blackstone is among a growing group of entities that amassed large numbers of foreclosed homes after the crisis and are turning them into profitable rentals. Now some are hoping to take that profitability one step further, extending loans secured by these single-family homes and securitizing them.

This process offers benefits both to players like Blackstone and to smaller landlords that own groups of single-family rentals and can’t get traditional lenders to lend against their assets. Blackstone’s debut product — sold to a syndicate led by Deutsche Bank AG — has been very well-received, but attorneys caution that many questions remain unanswered, and REO-to-rental-backed bonds could pose litigation risks.

*    *    *

Blackstone’s $480 million deal, in which it pooled 3,200 homes owned by its portfolio company Invitation Homes and used them to secured a single loan that it then securitized, made waves as the first of its kind.

Several other opportunistic real estate investment companies, including American Homes 4 Rent and Colony Capital LLC, are expected to follow suit, but they are treading lightly as the new product is assessed by the market and investors.

*    *    *

The homes themselves may also be subject to condemnation or landlord-tenant litigation that could encumber the overall loan indirectly by affecting the value of the collateral, according to David Reiss, a real estate finance professor at Brooklyn Law School.

Before the recession, single-family homes were considered too expensive to be managed by a large institution like Blackstone or American Homes 4 Rent because of their geographic diversity and because it was hard to control property management on so many different homes, according to Reiss.

The financial crisis made distressed single-family homes cheaper and more attractive to opportunistic investors, and the low price may compensate for the other issues, he said.

“This is a new asset class, and it is not yet clear whether Blackstone has properly evaluated its risks,” Reiss said.  “Time will tell whether these bonds will become a significant new category of asset-backed securities or whether the financial crisis presented a one-time financial opportunity for some firms.”