Wall Street Investors Buy Up Neighborhoods

Rental Homes: Next Wall Street Idea?

Wall Street is at it again

Have you read the recent media reports about Wall Street firms buying up homes in order to create rental portfolios and then securitize the rental payments?

If it sounds familiar- it is.  This is the same strategy that backfired so miserably when Wall Street sliced and diced mortgages.

This week, the Center for American Progress released a report, “When Wall Street Buys Main Street” that more closely examines the first mortgage-backed security supported by income from single family rental properties.  The authors note that the bond is set to mature in two to five years.  If Invitation Homes (a subsidiary of Blackstone) is unable to pay back the bond holders, there could be negative consequences. For example, Invitation Homes could be forced to sell all of the rental homes to pay back the bond.  This sudden flood of homes onto local housing markets would hurt property values, and tenants would also be impacted.

The California Reinvestment Coalition, Housing and Economic Rights Advocates, and other advocates will be calling on federal regulators next week to address this issue.  In the mean time, if you’re interested in learning more about how this new strategy could affect current tenants, homeowners, communities, and prospective homeowners, here’s a few selected articles and resources:

  1. Home Loan Servicing Solutions Ltd. buys mortgage servicing rights from Ocwen and then hires it to collect loan payments. Altisource Residential Corp. (RESI:US) purchases delinquent loans, including some from Ocwen, to turn into rental homes. It’s managed by Altisource Asset Management Corp. And Altisource Portfolio Solutions provides services to Ocwen’s portfolio. “If a mortgage goes into foreclosure and you lose those servicing fees, so what,” said Christopher Wyatt, a housing consultant and former vice president at Goldman Sachs Group Inc.’s Litton Loan Servicing. “You can funnel it to one of your other businesses and still make money from it.” Billionaire Erbey Fails to Halt Ocwen Slide on Probe: Mortgages  (BloombergBusinessweek)
  2. Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.  How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme—Again  (Mother Jones)
  3. Doretha Johnson, 59, had rented a home near North Graham Street and Interstate 85 for nearly four years when her landlord sold it to a subsidiary of Blackstone, a Wall Street private equity giant. The house’s new owner, Invitation Homes, raised the rent by a third, beyond what she said her fixed income would bearCharlotte’s Wall Street landlords move quickly to evict renters (Charlotte Observer)
  4. The report by the Oakland-based Urban Strategies Council entitled “Who Owns Your Neighborhood?” said that 62 percent of the 10,508 completed foreclosures in Oakland since 2007 are either still owned by a financial institution or acquired by an investor. It said that as of October 2011, investors had acquired 42 percent of all properties that went through foreclosure in the cityReport Finds Investors Buying Up Foreclosed Oakland Homes (CBS San Francisco)
  5. Fitch’s concerns are further heightened by the number of operators concentrating their investments in a handful of states and metropolitan statistical areas (MSAs), which, based on most business models, are at the neighborhood level. Because of the specific demographic targeted by these institutional buyers and the inelasticity of rents, transactions are highly vulnerable to unknown variables that could potentially impact the cash flows and yields. Among them include repair and maintenance expense, capital expenditures, rising property taxes, homeowners association restrictions, or the potential for municipality involvement. Unlike other asset classes, SFRs do not have the benefit of historical performance over several business or housing cycles that would otherwise flush out some of these uncertaintiesRPT-Fitch: Too Soon for ‘AAA’ on Single Family Rental Securitizations (Fitch Press Release)
  6. Nicole Borden, a real estate agent with Coldwell Banker in Atlanta, said she was told this month by representatives from Invitation Homes and American Homes 4 Rent that the companies aren’t offering any of the homes on the market to Section 8 voucher holders. “This is not homeownership,” Borden said. “I don’t understand how so many people are being turned down from rentals.”  Wall Street’s Rental Bet Brings Quandary Housing Poor (Bloomberg)

CRC and HERA Co-Host Two CFPB Roundtables

CRC partnered with Housing and Economic Rights Advocates (HERA) to welcome representatives from the Consumer Federal Protection Bureau (CFPB) for two California roundtable discussions. The meetings, held this month in San Francisco and Los Angeles, provided a unique opportunity for housing counselors from around the state to learn about CFPB’s new housing rules, and to share examples of harmful servicing problems with CFPB representatives.

Many thanks to CRC board member Luis Granados at Mission Economic Development Agency (MEDA), and Lori Gay at Neighborhood Housing Services of LA County, for accommodating these important discussions.

This slideshow requires JavaScript.

Five of the most obnoxious debt collection tactics ever seen

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

5 Debt Collector Stories

The Consumer Financial Protection Bureau has asked the public to share their recommendations on rules they are designed for debt collectors.  If you’ve ever had a bad experience with a debt collector, (like harassing phone calls, calling the wrong person, making up amounts that you owe, etc) then you should spend 5 minutes to share your experience with the CFPB. (Click here to add your comments). Your five minutes today can help ensure that consumers aren’t left behind when these rules are designed.  There’s not much time left- comments are due by February 28, 2014.

There are more stories out there, and the CFPB needs to hear them.

These are five example of some of the more obnoxious debt collector tactics:

1) Threatening a senior citizen that you’ll put them in jail if they don’t pay their debts.

2) Calling a cell phone company and impersonating a person’s father in order to be added to their cell phone account in order to get personal details about them, and then sending text messages to them calling them “Fat  Pig” and a “200 pound slob.”

3) Sending an Illinois breast cancer survivor to jail for a debt she didn’t owe.

4) Using racial slurs (while racist, illegal, and obnoxious, the good news is that the recipient of these calls  successfully sued the debt collector for $1.5 million).

5) Threatening to dig up a dead family member’s body.

If you’ve had similar bad experiences with a debt collector, NOW is the time to speak up.  It’s a very simple process- you simply visit this website  and share your experience by clicking on “COMMENT NOW.”  If you have suggestions on how the CFPB can design the rules, be sure to include them.

The clock is ticking- the CFPB is only accepting comments until February 28, 2014.

Dept. of Justice Sued Over JPMorgan Chase Settlement: How a Housing Counselor Would have Structured the Settlement

chase lawsuit

News broke today that Better Markets, a nonprofit, filed a lawsuit in Federal Court, challenging the Department of Justice’s $13 billion settlement with JP Morgan Chase.

The organization cites concerns about the settlement not being approved by a court, granting civil immunity, and the lack of transparency for the settlement negotiations.

When news of the Chase settlement talks began to leak out in the fall of 2013, the California Reinvestment Coalition, along with 17 members and allies, signed onto a statement asking for the Department of Justice to structure a deal in a way that would benefit communities and homeowners who have been hard hit by the mortgage meltdown.

The organizations who signed onto this letter have helped thousands of California homeowners facing foreclosure, so the recommendations are rooted in their experiences working with these homeowners.

Recommendations include:

1) The amount of the settlement should have matched the amount of money lost due to predatory mortgages and improper foreclosure practices like robo-signing.  Communities of color have been hardest hit by the meltdown, according to a recent report by the Alliance for a Just Society.

2) A settlement should prioritize keeping people in their homes, especially through using principal reductions on people’s first mortgages.  In addition, CRC and our allies called on Chase and any other banks entering into settlements to immediately halt any foreclosure processes until they are able to determine who would qualify for the settlement.

3) As homeowners have sought help with navigating their options with the help of housing counselors and legal service lawyers.  Unfortunately, funding for organizations offering these services is often limited.  Therefore, it makes sense to allocate some funding to the people helping to keep communities strong.

4) Harmful loan servicing practices have to cease.  This is self-explanatory, yet as the Washington Post highlighted last week, (Consumers lodge thousands of complaints about firms that service mortgages) the Consumer Financial Protection Bureau is still seeing loan servicing problems.

5) Affordable housing- California was facing an affordable housing crisis before the mortgage meltdown, and this crisis has only been exacerbated by the meltdown and Wall Street investors who are buying up communities.

6) Since the beginning of the crisis, members of the California Reinvestment Coalition have called on regulators, elected officials, banks, servicers, and policymakers to increase transparency of efforts to help homeowners.  This includes demographic information so that we could see whether or not communities are benefiting equally from the settlement.  This issue was also addressed in a new GAO report titled: “TROUBLED ASSET RELIEF PROGRAM: More Efforts Needed on Fair Lending Controls and Access for Non-English Speakers in Housing Programs” that cited CRC surveys and concerns about unequal access.

7) Strong monitoring and enforcement of the agreement is vital to ensure that the bank actually complies and homeowners actually benefit.

If you’d like to read the more detailed statement and see the 17 other organizations that signed onto the statement, visit the press release: “Lessons from Past Mortgage Settlements Should Guide Department of Justice Settlement with JP Morgan Chase

Consumers: Now is the Time to Act Against Debt Collectors

Debt Collection Rules to be updated by CFPB

Debt Collectors: You’ve probably heard the horror stories- whether it’s calling people at work, threatening to come to their homes, or even threatening to send the police.   CNNMoney has a list of some of the worst offenders- (Debt collection horror stories) including one firm who pretended to be a law firm and threatened a borrower that they would come to their office and their co-workers would have to pick them out of a line-up.

In California, a debt collector kept bothering a state senator about a debt he had never taken out and never owed.  You can read about the legislation that was subsequently passed, in part due to his experience here:  Two Laws Signed by Governor Brown Will Help Consumers in California Facing Illegal Debt Collection Practices.

Is there a way to stop the madness?  To give power back to consumers?  To require collectors to follow the rules, and if they don’t, shut them down?

You betcha.  But you have to act NOW.  The deadline is February 28, 2014.

The Consumer Financial Protection Bureau has announced that it will be updating the Fair Debt Collection Practices Act.  As part of this process, it is seeking input from everyone that will be affected.

Debt collection is a profitable business, and so the people that own these companies (and that benefit from the status quo of harassing borrowers) will give their input and would probably prefer the rules don’t change.

That’s where consumers can help.

If you’ve had an experience with a debt collector, NOW is the time to speak up.  It’s a very simple process- you simply visit this website  and share your experience by clicking on “COMMENT NOW”

As they say in weddings: “Speak now or forever hold your peace!”

Interested in learning more about laws to protect consumers?  You might be interested in our earlier post on this topic: New Report Finds that State of California Could do More to Help Families with Debt Collectors.

Tenants Rights After a Foreclosure Upheld by California Court of Appeal

LeaseAgreement Photo

Last week, the California Court of Appeal reversed a trial court’s earlier decision and instead ruled in favor of Rosario Nativi, and her son Jose Roberto Perez Nativi, two tenants who were evicted when their landlord was foreclosed on.   The mother and son had been renting the garage of a house for several years in Sunnyvale, and then in 2009, the property was foreclosed.  The Nativis did not realize their landlord had stopped paying the mortgage, and had continued dutifully paying their rent.

After the foreclosure, Deutsche Bank became the owner of the property, and hired American Home Mortgage Servicing, Inc to service the property.  American Home Servicing, Inc, then hired XL Advisors Inc. dba Advisors Real Estate Group (Advisors), to prepare the property for sale and remove the tenants.

Despite the fact that the Nativis had a lease, representatives of Advisors Real Estate Group removed all of  their belongings and put them outside where they were ruined. Advisors Real Estate Group also called the police when the Nativis tried to regain access to the garage they had been renting.  The tenants sued, and a trial court ruled in favor of Deutsche Bank.  However, the California Court of Appeal reversed that decision on January 23, 2014.

Madeline Howard, who helped initiate the case while at Bay Area Legal Aid and is currently a staff attorney with Western Center on Law & Poverty, explained the significance in a press release: “Because of this decision, tenants like the Nativis, who were locked out of their apartment and left homeless, have recourse in state court.”

The story of a bank becoming the owner of a home after a foreclosure trustee sale is common in California.  Unfortunately, so is the experience of these two tenants who had continued paying their rent and should not have been evicted.  After a trustee sale, some real estate agents will try and get the current tenants out of the property as quickly as possible, offering cash for keys, making illegal threats, or even calling the police.  Tenants may or may not know their rights, and the real estate agents may take advantage of this and try and force them out quickly.

Kent Qian, from the National Housing Law Project, explained the decision is an important victory for tenants under the Protecting Tenants at Foreclosure Act (PTFA), for three reasons:

1) The court ruled that bona fide leases “survive” foreclosure under the PTFA;

2) Tenants in illegally converted garage units are protected under the PTFA; and

3) State law claims can be brought to enforce the PTFA.

As the WCLP press release explains, “the federal Protecting Tenants at Foreclosure Act requires post-foreclosure owners, including big banks, to step into the shoes of the former landlord when they acquire a rental property.”

To read more about the case, visit:

Western Center on Law and Poverty Press Release: “Court of Appeal Rules that Big Banks Step into Shoes of Foreclosed Landlords When Trying to Evict Tenants” 

Law 360 “Calif. Leases Survive Foreclosures, Appeals Court Says

To read the decision, visit this link: Court Opinion.

If you are a tenant who is losing your housing because your landlord is being foreclosed on, you may want to visit the Tenants Together Action Guide for California Tenants in Foreclosure Situations  or call their Tenant Rights Hotline.

The Western Center on Law and PovertyBay Area Legal AidAlborg, Martin & Buddle LLP, and Jenner and Block represented the Nativis.

An amicus curiae brief, drafted by the National Housing Law Project and AARP Foundation Litigation, was filed on behalf of the National  Housing Law ProjectNational Law Center on Homelessness and Poverty, the AARP Foundation Litigation, the National Fair Housing Alliance, and the California Reinvestment Coalition in support  of the Nativis.