New Article: Nestor Davidson, New Formalism in the Aftermath of the Housing Crisis, 93 B.U. L. Rev. 389 (2013). Abstract below:
The housing crisis has left in its wake an ongoing legal crisis. After housing markets began to collapse across the country in 2007, foreclosures and housing-related bankruptcies surged significantly and have barely begun to abate more than six years later. As the legal system has confronted this aftermath, courts have increasingly accepted claims by borrowers that lenders and other entities involved in securitizing mortgages failed to follow requirements related to perfecting and transferring their security interests. These cases – which focus variously on issues such as standing, real party in interest, chains of assignment, the negotiability of mortgage notes, and the like – signal renewed formality in nearly every aspect of the resolution of mortgage distress. This new formalism in the aftermath of the housing crisis represents something of an ironic turn in the jurisprudence. From the earliest history of the mortgage, lenders have had a tendency to invoke the clear, sharp edges of law, while borrowers in distress have often resorted to equity for forbearance. The post-crisis caselaw thus upends the historical valence of lender-side formalism and borrower-side flexibility.
Building on this insight, this Article makes a normative and a theoretical claim. Normatively, while scholars have largely embraced the new formalism for the accountability it augurs, this consensus ignores the trend’s potential negative consequences. Lenders have greater resources than consumers to manage the technical aspects of mortgage distress litigation over the long run, and focusing on formal requirements may distract from responding to deeper substantive and structural questions that still remain largely unaddressed more than a half decade into the crisis. Equally telling, from a theoretical perspective, the new formalism sheds light on the perennial tension between law’s supposed certainty and equity’s flexibility. The emerging jurisprudence underscores the contingency of property and thus reinforces – again, ironically – pluralist conceptions of property even in the crucible of hard-edged formalism.
Editor’s Note: though some of the paper is more for property folks than pure poverty profs, it does a good job of summarizing borrower-side post-crisis litigation strategies used to defend against foreclosure.
New Issue of “PATHWAYS A magazine on poverty, inequality, and social policy” from the Stanford Center on Poverty and Inequality. Below is a contents list:
Editors’ Note by David Grusky and Michelle Poulin
- Community Well-Being and the Great Recession
Ann Owens and Robert J. Sampson
We know a lot about how the Great Recession affected individuals. But we know rather little about how neighborhoods and communities fared. Which communities were winners and which were losers?
RESEARCH IN BRIEF
THE QUIET REVOLUTION IN HOUSING POLICY
- Why Concentrated Poverty Matters
Lisa Gennetian, Jens Ludwig, Thomas McDade and Lisa Sanbonmatsu
The best and latest assessment of the Moving to Opportunity experiment. Do the results require a major rethinking of why concentrated poverty matters?
- Do Housing Vouchers Work?
A full evaluation of a Section 8 housing voucher program in Wisconsin. The effects on mobility, poverty, and neighborhood quality are as expected, but not so for individual earnings. Why did earnings decrease among voucher recipients?
- Solving Urban Poverty: Lessons from Suburbia
Douglas S. Massey
What happens when affordable housing is placed in an affluent neighborhood? The big storm of protest…ends with a whimper and good outcomes all around.
- Can Housing Policy be Good Education Policy?
Disappointed with education policy? Housing policy may be the answer.
- The Case for Taxing Away Illicit Inequality
A conversation between Emmanuel Saez and David Grusky
Can we eliminate inequality arising from corruption, sweetheart deals, and information asymmetry? The case for making tax policy our anti-inequality weapon.
News/Report: Douglas Rice, Sequestration Could Deny Rental Assistance to 140,000 Low-Income Families, Center on Budget and Policy Priorities, Apr. 2, 2013.
New Article: Raymond H. Brescia, The Community Reinvestment Act: Guilty, but Not as Charged, SSRN Mar. 2013. Abstract below:
Since its passage in 1977, the Community Reinvestment Act (CRA) has charged federal bank regulators with “encourag[ing]” certain financial institutions “to help meet the credit needs of the local communities in which they are chartered consistent with safe and sound” banking practices. Even before the CRA became law – and ever since – it has become a flashpoint. Depending on your perspective, this simple and somewhat soft directive has led some to charge that it imposes unfair burdens on financial institutions and helped to fuel the subprime mortgage crisis of 2007 and the financial crisis that followed. According to this argument, the CRA forced banks to make risky loans to less-than creditworthy borrowers. Others defend the CRA, arguing that it had little to do with the riskiest subprime lending at the heart of the crisis.
Research into the relationship between the mortgage crisis and the CRA generally vindicates those in the camp that believe the CRA had little to do with the risky lending that fueled these crises. At the same time, recent research by the National Bureau of Economic Research attempts to show that the CRA led to riskier lending, particularly in the period 2004-2006, when the mortgage market was overheated.
This paper reviews this and other existing research on the subject of the impact of the CRA on subprime lending to assess the role the CRA played in the mortgage crisis of 2007 and the financial crisis that followed. This paper also takes the analysis a step further, and asks what role the CRA played in failing to prevent these crises, particularly their impact on low- and moderate-income communities: i.e., the very communities the law was designed to protect. Based on a review of the best existing evidence, the initial verdict of not guilty – that the CRA did not cause the financial crisis, as some argue – still holds up on appeal. At the same time, as more fully described in this piece, an appreciation for the weaknesses inherent in the law’s structure, when combined with an understanding of the manner in which it was enforced by regulators, lead one to a different conclusion; although the CRA did not cause the crisis, it failed to prevent the very harms it was designed to prevent from befalling the very communities it is supposed to protect.
The defects in the CRA that emerge from this review, in total, suggest not that the CRA was too strong, but, rather, too weak. They also point to important reforms that should be put in place to strengthen and fine-tune the CRA to ensure that it can meet its important goal: ensuring that financial institutions meet the needs of low- and moderate-income communities, communities for which access to capital and banking services on fair terms is a necessary condition for economic development, let alone economic survival. Such reforms could include expanding the scope of the CRA to cover more financial institutions, creating a private right of action that would grant private and public litigants an opportunity to enforce the law through the courts, and having regulators enforce the CRA in such a way that will put more pressure on banks to modify more underwater mortgages.
News Coverage: Jennifer B. McKim, Tenants, buyers of foreclosed units tangle over rents, Boston Globe, Mar. 20, 2013.
Quick Report: Center on Budget and Policy Priorities, Policy Basics: Federal Rental Assistance (2013).
New Article: Michael Diamond, De-Concentrating Poverty: De-Constructing a Theory and the Failure of Hope, in COMMUNITY, HOME, AND IDENTITY (Michael Diamond & Terry Turnipseed, eds., Farnham, U.K.: Ashgate 2012). Abstract below:
Since the late 1980s, led by William Julius Wilson’s The Truly Disadvantaged, scholars have been writing about the social problems caused by the concentration in residential communities of high levels of poverty. Even before Wilson’s book, government policy, which previously had resulted in racially and economically segregated communities, had begun to shift towards de-concentration. The consent decree in Hills v Gautreaux, and the HOPE VI and Moving to Opportunity Programs all pointed towards de-concentration of poverty. Commentators have suggested both benign and not-so-benign reasons for the policy shift.
There were a variety of quite hopeful goals promoted by advocates of the policy changes. While some of the desired outcomes of these programs have been met, I argue in this paper that the programs, on the whole, have not been successful in achieving their intended purposes. Moreover, I argue that due to the destruction of existing communities the costs of these programs, particularly the HOPE VI program, far outweigh their benefits. I point out some of the benefits derived from existing communities and some of the costs of forced relocations from them.
I do not argue here for a return to policies leading to high concentration poor communities and certainly not for policies leading to dysfunctional communities. I argue instead for a policy that promotes voluntary relocation of residents in such communities with all appropriate governmental support; for a policy that results in the production of more decent and affordable units throughout the economy; and mostly for the commitment to improve existing communities so that they are places where lower income residents may live with dignity and pride.
News Article: Sabrina Tavernise, Intangible Dividend in an Antipoverty Experiment: Happiness, N.Y. Times, Sep. 20, 2012.
Symposium Articles Published: UCLA Law Review, “Overpoliced and Underprotected: Women, Race, and Criminalization.”
-Thanks to Concurring Opinions Blog for the heads up!