Book 1 [Stealing Home] Summary of the Book
1. In the Beginning: HUD’s History and Importance
Today, cities are once again in trouble. Median rent has increased 61 percent while renter income grew only five percent during the same time period. It is no surprise, then, that according to the National Low Income Housing Coalition, America has a crippling shortage of about seven million affordable rental units available to low-income or severely rent-burdened. Low-income housing is simply vanishing from the marketplace.
Yet, in 2019, there is more government-backed housing debt than at any other point in U.S. history, according to data from the Urban Institute. Fannie Mae, Freddie Mac, and the Federal Housing Administration underwrite almost $7 trillion in mortgage-related debt, 33 percent more than before the 2008 housing crisis. We have to ask ourselves, why? How can there be such a shortage of affordable housing when the debt levels at The Department of Housing and Urban Development (HUD) are at all-time highs?
2. Blessed Are the Children
Chapter Two will discuss the affordable housing crisis and explain what precisely affordable housing is and how it is measured. Also, what is and isn’t being done about the crisis. We completed a study on Seattle’s use of the Multifamily Tax Exemption Program and reported on its findings. The established programs to build affordable housing incentivize construction through property tax breaks; however, the program amounts to a tax burden shift. For example, in Building A, the 226-unit property was built under the tax-exempted program. Lets’ say the annual property taxes amounted to $3.5 million. Since Building A is exempted from paying that tax, the county spreads that $3.5 million over the remaining properties, which are not tax-exempted. However, these taxes aren’t discretionary; they include city services such as police, schools, firefighters, infrastructure, etc. Therefore, we ask the question, is the program providing affordable housing at a reasonable cost?
3. Chaos and What is Happening at HUD Today.
In Chapter Three, the history of the enterprises is discussed. For example, in 2008, the two government-sponsored GSEs—Fannie Mae and Freddie Mac—were placed into conservatorships. In June 2018, the Office of Management and Budget recommended privatizing them. Through oversight, OIG seeks to be a voice for and protect the interests of the taxpayers who have funded the treasury’s $191 billion investment in the enterprises. Since October 2010, OIG has made more than 425 recommendations to improve efficiency and effectiveness and reduce fraud, waste, and abuse at the FHFA.
For example, when employees separate from the FHFA, they must go through an offboarding process that includes educating employees about post-employment restrictions and financial disclosure requirements. However, in 2018, the OIG identified at least five separate employees and two departed contractors with active enterprise access cards and passcodes to the AI-powered mainframe. The FHFA did not have written procedures for collecting and deactivating access cards and passcodes.
4. To Live in a World Without Consequences: The Multifamily Financial Markets
Chapter Four, the OIG, has pointed out the defect in management’s oversight in that those responsible for the quality and types of loans to be put on the books have been purposefully kept out of the decision-making process—creating a potential blind spot.
Financial Crisis Inquiry Commission was established to examine the causes of the 2008 Great Recession—Five of the primary causes of the economic crash are explained and then compared and contrasted with today’s markets. However, what underpins those loans and offsetting bonds? How solid are they? Nevertheless, today, rental incomes continue to show an ever-increasing profit margin based on rental rate increases. Perhaps more importantly, we ask the question, are those ever-rising rental rates sustainable?
5. Property Managers and Artificial Intelligence-Driven Technology
Chapter Five The number one cause of the Great Recession of 2008 was the ‘consolidations and concentrations in the industry. We are going to look more deeply into those concentrations and mergers that have once again developed in our multifamily real estate industry and seeped into our financial system. I will explain who the actors are and how they came to be so consolidated and interconnected. Finally, we will evaluate and discuss the dangers and vulnerabilities this market structure has once again created. However, the immense profits are just too tempting to pass on such a rare opportunity.
We close this chapter by examining another factor in the real estate and financial markets that drive firms toward greater interconnection and growth: fee income. If the AI-Technology platform is the mechanism for growth in this industry, then fee income is the fuel that powers the growth.
6. The Consequences of Artificial Intelligence-Driven Technology
The study uncovered four significant findings. First, the fees being charged to tenants are unreasonable and against current laws and regulations. Second, violations of the Fair Debt Collection Practices Act in collecting consumer credit are rampant. Third, Property Managers and their property-owner clients are violating Fair Housing Laws by employing the technology platforms they use to discriminate against protected minorities. Finally, the result of the predatory leasing and collection practices is the loss of due process for the tenants. Will there ever be a price too high for greed and power?
7. One Tin Soldier, the Regulator—The Consumer Financial Protection Bureau
Chapter Seven discusses the role of the Consumer Financial Protection Bureau (CFPB), the Regulator. Who are they, what is their purpose, and why are they essential to the American Taxpayer and consumer? We will further the storyline of the Trump Administration's role in destroying the CFPB, the only Regulator between the consumer and companies powered by AI Technology.
8. The Chain of Command Over Artificial Intelligence-Driven Technology
Chapter Eight will discuss the conflicts of interest associated with implementing AI Technology in the GSEs, the Chain of Command leading the Shadow Group in charge of implementing the technology in the Housing Markets: and the privatization of the enterprises. Furthermore, we will attempt to answer the question as to whether those involved in implementing the technology are doing so on a fair and equitable basis or based on discrimination.
9. When the Bough Breaks--- The Return of Shadow Banking
Chapter Nine compares today's housing markets against the results from the 2008 FCIC as the primary causes of the economic crash and finalizes our discussion from Chapter 4. Furthermore, HUD played a substantial role in the 2008 Great Recession. Do we see a repeat of HUD’s role in another pending economic crash, or has HUD and the Housing Markets been tamed?
The pre-2008 phenomenal growth of the shadow banking system—that freely operates in capital markets beyond regulatory control- has grown in size and complexity. Sources, including OIG Audits and official reports, concluded that the enterprises are underwriting risky loans. They’re the only Federal Agency that hasn’t strengthened its underwriting criteria following the 2008 market crashes. Including nonrecourse loans (not personally guaranteed by the owners), funded at subprime terms yet at fantastic rates, with the collateral risk equal to or higher than before the 2008 economic crash--except that the numbers are much more significant in size and complexity. Yet, the Taxpayer remains the guarantor of that $7 Trillion housing debt, much of which is nonrecourse loans to billionaires; worse, many of the loans are based on subprime qualifications. And worse yet, the affordable housing shortage continues to worsen.
10. HUD Is Changing the Rule on Discrimination
Chapter Ten introduces disparate impact. It occurs when policies, practices, rules, or other systems that appear to be neutral, in reality, result in a disproportionate impact on a protected group. The HUD rule establishes unprecedented guidance for the Artificial Intelligence-Driven Technology that powers the housing market. Under the new laws, landlords would not be responsible for the effects of an algorithm provided by a third party. This policy would create an industry backdoor to discrimination.
11. The Face Dancers, the Amicus Briefs, and the Legal Challenge Before the US Supreme Court
Chapter Eleven discusses that the Trump administration has stated to the Supreme Court that the Consumer Financial Protection Bureau is unconstitutional. “This case strikes at the heart of the CFPB’s legitimacy and authority to protect consumers,” the opening statement by AARP. The CFPB is the Regulator designed to protect taxpayers from the harmful effects of AI-Technology abuses. This chapter will finalize that discussion by detailing whom the players are,-- those paying for the war on the CFPB, and what they aim to accomplish. We will examine their motives and why they want the Regulator removed.
12. The Wisdom of Solomon
Chapter Twelve discusses that the time has come to choose. Do we hold onto our past and allow the New Deal age to end? And if so, what plan will replace it? To borrow a phrase from President Ronald Reagan, who became popular for asking the simple question, “Are we better off than we were before?” In this example, are we better off before or after the Nixon administration’s changes to the HUD housing market?