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48 SCOTUS: SECONDARY MARKETS NOT SUBJECT TO FDCPA REGULATIONS A recent unanimous Supreme Court decision in June could have vast implications for the mortgage and loan industry, particularly the secondary market, unless Congress amends the Fair Debt Collection Practices Act (FDCPA). In the case Henson et al. v. Santander Consumer USA Inc., the petitioners claimed that Santander, who had bought a number of defaulted car loans from CitiFinancial Auto, had to abide by the rules and regulations set out by the FDCPA as debt collectors, not loan originators who were trying to collect a debt for themselves. e petitioners brought their case in front of the Supreme Court in an appeal of the 4th Circuit Court ruling that, ultimately, the act defines debt collectors as a person or entity that "regularly seek[s] to collect debts 'owed … to another.'" e court found that since Santander was seeking to collect the debt they themselves were owed, they were not collecting on behalf of another person or entity. e petitioners continued this same line of semantic argument in front of the Supreme Court. e word "owed" they said is a past participle of the verb "to owe," which would encompass the attempted collection of any debt previously owed to another. e Supreme Court, however, thought this to be too much a stretch. ey are of the opinion that Congress has in the past been very specific as to their definitions, and that while they may not have envisioned a time when the secondary market would be such a large industry, that still did not change the fact it was not within the purview of the court to extend the reach of the law. In the report, Justice Neil Gorsuch writes, "And while it is of course our job to apply faithfully the law Congress has written, it is never our job to rewrite a constitutionally valid statutory text under the banner of speculation about what Congress might have done had it faced a question that, on everyone's account, it never faced." So what does this mean for the mortgage industry? Any entity, bank, or credit union that purchases a defaulted loan is not, under the letter of the law, considered a debt collector, and thereby not subject to the rules and regulations set in place by FDCPA. It is worth noting, though, that the petitioners believed Congress excluded loan originators from the act because Congress believed they already had legal and economic incentives for good behavior. Given that many organizations that participate in the secondary market also have business dealings in originations, there is reason to believe the good behavior could continue without congressional intervention, although it may be necessary. "Many wondered what impact U.S. Supreme Court Justice Neil Gorsuch would have on the court, and now we know: author of a 9-0 decision "limiting" the definition of a debt collector, meaning someone buying debt to collect it for themselves does not fall under the FDCPA," said Michelle Gilbert, Managing Partner of Gilbert Garcia Group P.A. "Given the expansion of the reach of the FDCPA by courts and judges since its enactment in 1977, this decision should propel our industry to work harder to lobby Congress for changes in the law." TIGHT INVENTORY DRIVES APARTMENT DEMAND SKY HIGH As housing inventory continues to tighten, would-be homeowners are being driven toward renting—and the apartment market is struggling to keep up. According to a new study commissioned by the National Multifamily Housing Council and the National Apartment Association, the U.S. will need 4.6 million new apartments by 2030 in order to keep up with demand—or 325,000 every year. According to the study, about 1 million new renter households were formed every year over the last five years. is steep jump is caused, in large part, by consumers delaying housing purchases. "Life events such as marriage and children are the biggest drivers of home ownership," Rental Housing Journal reported. "In 1960, 44 percent of all households in the U.S. were married couples with children. Today, it's less than one in five (19 percent), and this trend is expected to continue." Consumers aging or immigrating from other countries also play a role in the growing trend to rent over buy, according to Dr. Norm Miller, Principle at Hoyt Advisory Services and Hahn Chair of Real Estate Finance at the University of San Diego. "We're experiencing fundamental shifts in our housing dynamics, as more people are moving away from buying houses and choosing apartments instead," Miller said. "More than 75 million people between 18 and 34 years old are entering the housing market, primarily as renters." But it's not just millennials eschewing buying, Miller said. Older generations are leaning toward rentals, too. "Increasingly, baby boomers and other empty nesters are trading single-family houses for the convenience of rental apartments," Miller said. "In fact, more than half of the net increase in renter households over the past decade came from the 45-plus demographic." According to the study, the Western U.S., as well as large states like Texas and Florida will be where new rental units are needed most over the next few decades. It's no surprise either; a Home Value Forecast recently released by Pro Teck Valuation Services showed housing inventory lowest in Washington, New Mexico, Texas, Florida, and other southern states. Seattle had the lowest inventory of all U.S. metros. "Seattle has a dire need for more single- family, moderately priced homes," the report stated, "as supply has not kept up with demand, leading to limited inventory and increasing prices. While more multifamily homes are being built, single-family home starts are still at a fraction of precrash levels."

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