Comment on Michael A. Stegman et al.’s “Preventive servicing is good for business and affordable homeownership policy”: What prevents loan modifications?

Abstract

After discussing the article by Stegman et al., this comment describes the barriers to preventive servicing for securitized residential loans and assesses the importance of loan modifications, given the recent increases in default and foreclosure rates for subprime loans. Several hurdles slow or reduce such modifications, even those that help borrowers and investors alike. For example, self‐interest may reduce servicers’ willingness to modify loans rapidly. In addition, underlying securitization agreements may impede servicers’ ability and discretion in this area. Further, tax laws that govern a common securitization entity may limit modifications, as may accounting standards. Finally, “tranche warfare,” the sometimes contradictory fiduciary duties servicers have toward investors holding different tranches of securitized pools, may decrease their ability or their willingness to modify loans.

This comment concludes that barriers to effective loan modifications should be reduced or eliminated where feasible, but that the securitization of subprime loans creates risks for borrowers.     

Stuck in Subprime? Examining the Barriers to Refinancing Mortgage Debt

Despite falling interest rates and federal policy intervention, many borrowers who could financially gain from refinancing have not done so. We investigate the rates at which, relative to prime borrowers, subprime borrowers seek and take out refinance loans, conditional on not experiencing mortgage default. We find that starting in 2009, subprime borrowers are about half as likely as prime borrowers to refinance, although they still shop for mortgage credit, indicating their interest in refinancing. This disparity is driven in part by the tightened credit environment postfinancial crisis, and the fact that many subprime borrowers were ineligible for the Home Affordable Refinance Program (HARP). In addition, we find that refinance rates have been significantly lower for black and Hispanic borrowers, even after controlling for borrower credit status. We argue that these barriers to refinancing for subprime borrowers have long-term implications for social stratification and wealth building.     

Policy incentives and the extension of mortgage credit: Increasing market discipline for subprime lending

The lax underwriting in non‐prime mortgage markets is widely perceived as one cause of the recent difficulties in the housing market. Policymakers are currently considering moves such as enforcing more careful underwriting to provide additional discipline to mortgage markets. This research explores the possibility of another approach to supplement or replace some of these efforts, namely the use of policy to create incentives for Fannie Mae and Freddie Mac (together, the GSEs) to help “check” behavior in non‐prime markets. The hypothesis is that the GSE Act affordable housing goals have increased GSE focus on targeted loan purchases, which in turn has led prime market lenders to compete more aggressively for borrowers on the margin between prime and subprime credit quality. As a consequence, these marginal borrowers will be more inclined to take prime mortgages rather than higher‐cost subprime loans. We test this hypothesis and find empirical support for it. We observe a negative relationship between the growth in GSE market share and the growth in subprime market share over time, and find that the impact of the GSEs on subprime lending tends to be stronger in high‐minority neighborhoods, where subprime lending has been concentrated and growing the fastest. Simulations show that a 10 percent increase in GSE market share (for example, from 20 to 22 percent) can cause 45,000 borrowers using prime instead of subprime loans a cost savings of about $1.7 billion. These results suggest that the GSEs, regardless of their postconservatorship form, should continue to devote attention to serving underserved populations and suggest that significant welfare benefits will accrue. © 2009 by the Association for Public Policy Analysis and Management.     

On Active Citizenship: Discourses and Language about Youth and Migrants in Italy

Abstract

The civic and political participation of young people and especially young migrants, who have limited rights of citizenship, is still a significant problem in Italy. Young people struggle to find opportunities and feel excluded from politics: the political agenda tends to see them more as a problem than as a resource. In this article, we illustrate the results of research to understand the dynamics of political and civic participation of young people and what the policy does in their favour. A content analysis of a corpus of European and Italian legislation, policy and planning documents has been undertaken. We also conducted six in-depth interviews with politicians and representatives of Italian nongovernmental organizations in order to investigate (a) policy priorities and institutional points of view, (b) consistency between these priorities and European programmes, and (c) European Union support for the policy actions and projects promoted in Italy about youth. The results showed a general difficulty for young people to ‘engage’ and be engaged in civic and political activities. There is also a gap between the political level and an effective investment which will recognize young people as a real resource.     

Networks and nonprofits: Opportunities and challenges in an era of federal devolution

Abstract

Community development corporations and other nonprofit organizations are increasingly responsible for producing and managing low‐income housing in urban America. This article examines the network of governmental, philanthropic, educational, and other institutions that channel financial, technical, and political support to nonprofit housing sponsors. We analyze the relationships among these institutions and propose an explanation for their success. We then consider challenges the network must confront if the reinvention of federal housing policy is to succeed.

Block grants and rental vouchers, the dominant emphases of federal policy, present opportunities and constraints for nonprofit housing groups and their institutional networks. While states and municipalities are likely to continue to use block grants for nonprofit housing, the viability of this housing will be severely tested as project‐based operating subsidies are replaced by tenant‐based vouchers. We recommend ways that the federal, state, and local governments should help the institutional support network respond to this challenge.     

The grapes of rent: A history of renting in a country of owners

Abstract

In a recent study of neighborhood development, Goetz and Sidney (1994) found an “ideology of property” separating the interests of homeowners from the interests of lower‐income tenants. According to this ideology, owners are better citizens than renters, and therefore public policy should benefit owners at the expense of renters. In spite of continuing research that shows this allegation to be false, a widespread bias against renters persists. Why is this so?

A deliberate bias favoring property owners and harming renters has been prominent in American public policy from colonial times to the present, although its exact form has varied over time—property requirements for suffrage, land redistribution schemes promising ownership but delivering tenancy and poverty, and tax policies that privilege ownership and punish tenancy. Public policy that stigmatizes renters represents a bias as pernicious as other biases of gender, race, religion, and nationality.     

Shadow peacebuilders and diplomatic counterinsurgencies: informal networks,knowledge production and the art of policy-shaping

ABSTRACT

This article explores the role of informal networks in producing strategic knowledge and influencing policy responses to the 2011 post-election crisis in Bosnia-Herzegovina. The analytical focus is on networks of shadow peacebuilders, defined as actors who are often not visible to the public and who promote a mix of altruistic and personal interests of their broader network by generating strategic narratives and influencing peacebuilding policy. As this article shows, shadow peacebuilders engage in diplomatic counterinsurgencies waged by means of diplomacy, politics, public relations and legal means. Strategic narratives are instrumental in legitimizing diplomatic counterinsurgency, inducing internal cohesion within the network and delegitimizing alternative narratives and policy solutions. Yet the production of strategic knowledge by shadow peacebuilders has its limitations. When the gap between strategic narrative and actions becomes too big, the network risks fragmentation and defeat by other networks that promote alternative strategic narratives and paths of action in the battle over control of peacebuilding policy.     

Ideas and Coordination in Policymaking: The Financial Crisis of 2007–2009

Policy change occurs because coalitions of actors are able to take advantage of political conditions to translate their strong beliefs about policy into ideas, which are turned into policy. A coalition's ability to define a problem helps to keep policies in place, but it can also cause coalitions to develop blind spots. For example, policy subsystem actors will often neglect the need for coordination between governmental actors. We examine the financial crisis of 2007–2009 to show how entrenched policy ideas can cause subsystem actors to overlook the need for policy coordination. We first analyze the prevalent idea that policymakers should aim to keep inflation low and stable while employing light touch regulation to financial markets. We then demonstrate how this philosophy led to a lack of coordination between monetary and regulatory policy in the subprime mortgage market. We conclude with thoughts about the need for coordination in future economic policy.     

Conversion,Acquiescence, or Delusion: The Contingent Nature of the Party-Voter Connection

Normative theories of representative government posit congruence of opinion between the electorate and their representatives. However, not all political issues are equally salient, and agreement is expected to be greater on relatively salient issues. This paper employs balance theory to describe mechanisms which may produce congruence of opinion between voters and parties when an issue increases rapidly in salience. Panel data on Norwegian opinion during the debate on European Union membership are used to determine whether opinion congruence resulted from persuasion by political parties or policy voting by the electorate. Policy voters are found to differ systematically from voters who were persuaded by parties. Finally, the characteristics of parties which determine their success in persuading voters or attracting policy voters are evaluated.     

Estimates and public policy: The politics of numbers

Abstract

Estimates of the number of homeless persons in the United States are frequently said to range from 250,000 to three million. In fact, the latter number is an invalid guesstimate that developed staying power for political reasons. National estimates of homeless persons based on explainable methodologies actually range from 230,000 to 736,000, with the most likely estimates around the half‐million mark. Despite the confrontational politics surrounding the numbers issue in the 1980s, a consensus is developing in the 1990s among private groups, including some major advocacy organizations, and all levels of government regarding policy direction in assistance programs for the homeless. There is widespread recognition that the goal should be to end homelessness, not simply to provide emergency assistance. Permanent housing solutions for special populations are needed in the context of renewed efforts to combat poverty.

In the public debate about the policy implications of divergent national estimates of the numbers of homeless persons, a common assumption is that the estimates vary widely and inexplicably—anywhere from a few hundred thousand to three million or more. Those who do try to explain the odd discrepancy between the extremes seem to assume that any count is politically motivated. They say that it depends on how one defines homelessness and who is counting. In other words, the implication is that numbers derive from policy and politics, rather than the other way around.

Given such perceptions, it is not surprising that some who have neither the time nor, perhaps, the resources to judge the accuracy of estimates begin to feel that the truth must be somewhere in between, as if a mathematical average were equivalent to a political compromise. Others will believe the message if they like the messenger. In a recent book on homelessness, for example, the author confesses that he trusts estimates “made by people who live where ‘the rubber meets the road’… rather more than the bright theorists tucked away in ivory towers.”¹ Although many statistics are politically controversial, it is probably safe to say that the debate on homelessness during the past decade represents the apogee of political numerology. It is worth reviewing just how this came to pass.     

Marketing the Political Message

Abstract

The potential for Americanisation of UK political campaigning is discussed with a particular focus on message development and dissemination. The paper recognises that there is difference between policy and message development, arguing that it is through the latter that British parties have most to learn from their transatlantic counterparts. Contextual differences in operation mitigate wholesale migration of American know-how, restricting technology transfer to fund-raising techniques and the incorporation of opposition and market research techniques into the development and dissemination of the message. Parties should focus their research on how to make their messages more easily understood and where to disseminate them, but they should use a process that maintains the integrity of their content (i.e., the underlying policy).     

Against Humanitarian Impunity: Rethinking Responsibility for Displacement and Disaster in Northern Uganda

Abstract

Given that humanitarian organizations can often be responsible for enabling, prolonging or intensifying violence and conflict through their interventions into war zones, it is important that these organizations, despite their presumed neutrality and beneficence, be held accountable for the deleterious consequences of their actions. The case of northern Uganda will be used to demonstrate how humanitarian agencies have made possible the government's counterinsurgency, including its policy of mass forced displacement and internment, which has led to a vast humanitarian crisis. The Ugandan government policy will be assessed as a war crime, making aid agencies accessories to this crime. This case study is used as an example to highlight that processes which demand the post-conflict accountability of those responsible for violence may be dramatically incomplete, and unjust, if they do not include the humanitarian agencies. In conclusion it will be suggested that if humanitarian organizations built popular accountability mechanisms into their daily operations this might prevent them from being complicit with egregious violence in the first place.     

Flourishing children,flourishing adults: families,equality and the neutralism-perfectionism debate

Abstract

Political philosophers are divided on the question of whether society should guide individuals in their projects and goals in light of the competing, yet overlapping, values of moral independence and human well-being. The lively neutralism-perfectionism debate appears to be significantly muted, however, when it comes to children who, all parties assume, should be guided by adults in their plans of life. Thus, in their stimulating new book, Family Values: the Ethics of Parent-Child Relationships, liberals Harry Brighouse and Adam Swift affirm the role of the family in directing and enabling children’s flourishing. My paper challenges this distinction between parents and children in the liberal position to argue that the idea that it is appropriate to direct children to enable them to flourish, entails in fact, a commitment to policies that promote and enable the flourishing of all.     

‘Flexicurity’ as a policy strategy: the implications for gender equality

Abstract

The ‘flexicurity’ strategy reached the top of the European Union's policy agenda in the mid-2000s. The strategy assumes an adult worker model family and aims to promote better, as well as more, jobs and to ensure that policies should further both flexibility in the labour market and security for workers. The article explores, first, the meaning of internal and external flexibility, and of employment-based security and the different implications for men and women. While the policy documents assume that flexicurity will increase gender equality, the mechanisms have not been specified. In fact, as the article shows, women are often more ‘flexible’ workers than men, particularly regarding their contractual arrangements and hours of employment. However, they tend not to be economically autonomous and, we argue, the supply-side policies advocated on the security side of the flexicurity matrix are insufficient to improve their position, which is strongly related to the gendered divisions of paid and unpaid work.     

The Role of Policy Labs in Policy Experiment and Knowledge Transfer: A Comparison across the UK,Denmark, and Singapore

Abstract

Policy labs have been increasingly used to generate scientific evidence and political momentum to boost policy experiments, but our understanding of the conditions for knowledge creation and transfer through policy experiments in the labs is scarce. This paper compares the UK’s Cabinet Office’s Behavioral Insights Team (BIT), Denmark’s the Danish MindLab, and Singapore’s the Human Experience Lab (THE Lab) to identify their similarities and differences in fostering policy experiment and knowledge transfer. It is found that BIT as the “Nudge Unit” is keen on bringing in rigorous scientific evidence to advocate effective albeit controversial policies, critical to its survival and influence in an adversarial political circumstance. MindLab takes more initiative to co-create and run projects together with agencies and organizations. THE Lab is dedicated to gleaning ethnographic insights from various stakeholders to support design thinking in policy implementation. These discernable differences can be attributed to their different political regimes and policy environments, which suggest workable avenues for policy labs in other countries.     

Governance by Proxy: A Comparative Policy Analysis of the Mainstreaming of Immigrant Integration Governance

Abstract

This paper assesses mainstreaming as a governance strategy that potentially addresses the call for a more integral governance response to wicked policy problems. Our comparative qualitative policy analysis of the mainstreaming of immigrant integration governance contributes to the governance and mainstreaming literature by emphasizing the importance of strong horizontal and vertical coordination mechanisms and the distinction between universal and proxy targeting in mainstreaming. Although policy programmes indeed seem to broaden to a universal mainstreamed approach, in practice they often operate by “proxy”. Furthermore, horizontal coordination structures tend to be weak or not in place at all, again obstructing the embedding of immigrant integration as a mainstreamed cross-cutting governance issue.     

Responding to the foreclosure crisis

Abstract

Regional economic downturns, speculation on skyrocketing home prices, and rampant unfair and deceptive mortgage lending practices have combined to create the perfect foreclosure storm in America. More than 2 million foreclosures are expected to occur during the next 12 to 18 months. Common to all three of these contributing factors is the reality that effective regulation of the mortgage market would have greatly limited damage from foreclosures.

This article traces the origins of the subprime market crisis and the resulting impact of foreclosures on the housing market, minority households, and the economy. The article also reviews the effectiveness of current interventions to mitigate or limit foreclosures and recommends broader solutions to help families maintain their homes.     

Controlling Federal Agencies: The Contingent Impact of External Controls on Worker Discretion and Productivity

ABSTRACT

Previous scholarship has investigated why legislatures sometimes choose to delegate policy choice to executive agencies, but there is little research on the consequences of the choice to delegate or not. Using a multiple principal-agent framework, this paper provides empirical evidence regarding the impact of legislative delegation and agency discretion on the work of U.S. government employees. Findings suggest that delegation directly reduces employee discretion only in client service agencies; its direct effects on employee productivity are more evident but varied. Legislative delegation is also associated with more executive political appointees, whose presence reduces both employee discretion and productivity. Whether employees with more discretion are more productive than those with less depends on their commitment to the job: employees who like their work more than their pay use their discretion to enhance productivity, while employees who like their pay more than their work use their discretion to reduce productivity.