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February 19,
2008
Mortgage
Lending
name='1'>Senate Housing Stimulus Package Includes Mortgage
Modification Provisions
Senate Majority Leader Harry
Reid (D-Nev.) estimated that the provisions of S. 2636, the
“Foreclosure Prevention Act of 2008,” will help over 1
million people stay in their homes and help families and communities
avoid problems in the future, MortgageNewsDaily.com reported on Friday.
The proposed legislation will increase available funds for
pre-foreclosure counseling by $200 million to assist as many as one-half
million additional families to connect with appropriate mortgage
representatives and explore available options to keep them in their
homes. A second, potentially far-reaching provision would change the
Bankruptcy Code to remove the prohibition on judges modifying the
mortgages of chapter 13 debtors.
href='http://www.mortgagenewsdaily.com/2152008_Foreclosure_Prevention_Act.asp'>Read
more.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:s2636pcs.txt.pdf'>Click
here to read the text of S. 2636, the “Foreclosure Prevention
Act of 2008.”
name='2'>Mortgage Lender Receives Approval for Bankruptcy
Plan
Bankruptcy Judge
James Marlar
size='3'>approved the reorganization plan for bankrupt mortgage lender
First Magnus Financial Corp. on Friday, the
size='3'>Arizona Daily Star reported on
Saturday. First Magnus owes about $13 million on employee claims. In the
midst of a credit crunch in August, Tucson-based First Magnus shut down
operations and filed for bankruptcy without paying its roughly 5,500
laid-off workers. First Magnus President and CEO G.S. Jaggi previously
testified that the company filed for bankruptcy quickly in part to get
employees paid.
href='http://www.azstarnet.com/business/225383'>Read
more.
name='3'>Countrywide's Delinquencies Jump
Countrywide Financial
Corp.'s January loan delinquency rate continued to climb last month as
falling home values and the sagging economy hammered borrowers,
the Wall Street
Journal reported on Saturday. The nation's
largest mortgage lender's delinquencies rose to 7.47 percent of unpaid
principal balances from 4.32 percent a year earlier and 7.2 percent in
December. The foreclosure rate on loans serviced by Countrywide edged up
to 1.48 percent last month from 1.44 percent in December. Countrywide
funded $21.89 billion in loans in January, compared with $23.55 billion
in December and $37.11 billion a year earlier. That included no nonprime
fundings and a 76 percent plunge in home-equity loans and lines of
credit.
href='http://online.wsj.com/article_print/SB120308160672671445.html'>Read
more. (Registration required.)
name='4'>Analysis: Wall St. Banks Confront a String of
Write-Downs
Wall Street banks are
bracing for another wave of multibillion-dollar losses as the crisis
that began with subprime mortgages spreads through the credit markets,
the New York
Times reported today. In recent weeks, one
part of the debt market after another has buckled. High-risk loans used
to finance corporate buyouts have plummeted in value. Securities backed
by commercial real estate mortgages and student loans have fallen
sharply. Even auction-rate securities, investments usually considered as
safe as cash, have stumbled. The breadth and scale of the declines mean
more pain for major banks, which have already written off more than $120
billion of losses stemming from bad mortgage-related investments. The
deepening losses might make banks even more reluctant to make the loans
needed to prod the slowing American economy.
href='http://www.nytimes.com/2008/02/19/business/19banks.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
w:st='on'>
name='5'>Tennessee
face='Times New Roman' size='3'> Home Builder Files for
Bankruptcy
Corinthian Custom Homes
Inc. filed for chapter 11 after seeing a sharp drop in sales, the
Tennessean
size='3'>reported on Saturday. The filing by the Franklin, Tenn.-based
company comes as homebuilders grapple with tighter lending standards
linked to the subprime mortgage meltdown. Nick Psillas, Corinthian's
president, said that his firm sold fewer than 70 homes last year,
compared with an average of 150 in prior years. The filing with the U.S.
Bankruptcy Court in
w:st='on'>
size='3'>Nashville
company's assets and liabilities at more than $1 million each.
href='http://www.tennessean.com/apps/pbcs.dll/article?AID=/20080216/BUSINESS01/802160328'>Read
more.
Delays Ruling on Solutia Inquiry
Bankruptcy Judge
Prudence Carter
Beatty on Thursday delayed a decision on
whether to force Citigroup Inc. CEO Vikram Pandit to answer questions
about the bank's decision to pull the plug on Solutia Inc.'s $2 billion
bankruptcy-exit financing, the Associated Press reported on Friday.
Judge Beatty said that Solutia's attorneys need to talk to executives
from the other two lenders involved in the financing – Goldman
Sachs Group Inc. and Deutsche Bank AG – before she'll rule on
whether Pandit should be deposed. Solutia wants to question Pandit about
his role in the decision to back out of the financing as the chemical
company prepares for a Feb. 21 trial aimed at forcing the banks to come
through with the financing it needs to exit bankruptcy. Pandit denied
being involved in the decision to back out of the financing.
href='http://www.chron.com/disp/story.mpl/ap/fn/5542643.html'>Read
more.
name='7'>Telecom Infrastructure Provider Files for Chapter
11
Infrastructure provider
Charys Holding Co. Inc. filed for chapter 11 protection on Thursday,
saying that it has already entered into a restructuring deal with
bondholders that are saddled with more than $120 million in debt,
Bankruptcy Law360
reported on Friday. Its nonoperating subsidiary, Crochet
& Borel Services Inc., also filed for chapter 11. Charys, which
offers its infrastructure services in the reconstruction and wireless
communications markets, listed assets of $245 million and debts of
approximately $255 million.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=47239'>Read
more. (Registration required.)
name='8'>Senator Delays Bill to Prevent Debt Collection from
Deceased Soldiers
Efforts Thursday night to
move a Senate measure to bar the Veterans Affairs Department from
collecting debts owed by soldiers killed in combat ran into objections
from Veterans Affairs Chairman Daniel Akaka (D-Hawaii),
face='Times New Roman' size='3'>CongressDaily
size='3'>reported on Friday. The bill's sponsor, Military
Construction-VA Appropriations Subcommittee ranking member Kay Bailey
Hutchison (R-Texas), won consent from Senate leaders to bring the bill
to the floor for approval by unanimous consent, but Akaka objected to
bypassing the committee. He and the department had questions about the
measure, including how the instances of debts incurred through fraud or
bad faith are handled. In a letter sent Thursday, Akaka asked VA
Secretary Peake to suspend debt collections from families of soldiers
either killed in combat or on active duty in training since Sept. 11,
2001, while the committee examined the bill further and plans to hold a
hearing on the issue soon. Under current law, if a soldier who is killed
in combat previously owed debts, the VA is required to contact the
deceased's family to collect.
name='9'>Credit Default Market Is Next to Face Market
Test
Credit default swaps form
a large but obscure market that will be put to its first big test as a
looming economic downturn strains companies’ finances, the
New York Times
size='3'>reported on Sunday. Like a homeowner’s policy that
insures against a flood or fire, these instruments are intended to cover
losses to banks and bondholders when companies fail to pay their debts.
Since 2000, the credit default market has ballooned from $900 billion to
more than $45.5 trillion — roughly twice the size of the
entire U.S. stock market. American International
Group last week said that it had incorrectly valued some of the swaps it
had written and that sharp declines in some of these instruments had
translated to $3.6 billion more in losses than the company had
previously estimated. Its stock dropped 12 percent on the news but edged
up in the days after. A.I.G. said that it expects to file its year-end
financial statements on time by the end of this month with appropriate
valuations. Placing accurate values on these contracts is just one of
the uncertainties facing the big banks, insurance companies and hedge
funds that create and trade these instruments.
href='http://www.nytimes.com/2008/02/17/business/17swap.html?sq=bankruptcy&st=nyt&scp=3&pagewanted=print'>Read
more.
name='10'>Bond Insurer Seeks to Split Itself, Roiling Some
Banks
FGIC Corp. told the New
York State Insurance Department on Friday that it was looking to split
up its business to create a new company to insure safe municipal bonds
and for the existing one to keep responsibility for riskier debt
securities already insured, such as those tied to the housing market,
the Wall Street
Journal reported on Saturday. The move by
FGIC, a holding company for the nation's third-largest bond insurer, may
help regulators protect investors who have municipal bonds insured by
the firm, but could also force banks who are large holders of the other
securities to take significant losses. Some banks that have been talking
with FGIC in recent weeks to bolster the firm were taken aback by the
announcement and could yet try to block it. The move by FGIC is a
further sign that the industry could retreat from insuring some of the
complex financial instruments that fueled the recent housing
boom.
href='http://online.wsj.com/article_print/SB120308290353671507.html'>Read
more. (Registration required.)
face='Times New Roman' size='3'>
name='11'>Delphi
size='3'> Fights Bid to Lift Stay for ERISA
Spat
Auto parts maker Delphi
Corp. is trying to put the brakes on a bid by three former employees to
have the bankrupt company's automatic stay lifted so they can file a
lawsuit against
size='3'>Delphi and its pension
plan, Bankruptcy
Law360 reported on Friday.
w:st='on'>
size='3'>Delphi
Thursday, asking Bankruptcy Judge
size='3'>Robert D. Drain to reject Jimmy
Mueller, David Gargis and Keith Livingston's December motion for relief
from the automatic stay. The potential
plaintiffs were employed by
face='Times New Roman' size='3'>Delphi
size='3'>as hourly employees and protected by a collective bargaining
agreement between the company and the United Automobile, Aerospace and
Agricultural Implement Workers Union of America. They switched to
salaried employment but requested to return to hourly pay and transfer
their benefits back to
size='3'>Delphi’s Hourly-Rate
Employee Pension Plan. Gargis, Livingston and Mueller claim
size='3'>Delphi
transfer back to hourly employment whenever they wished but shifted
course and didn't allow them to do so.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=47306'>Read
more. (Registration required.)
name='12'>Refco’s Ex-CEO Pleads Guilty to Fraud and
Conspiracy
Former Refco CEO Phillip
R. Bennett pleaded guilty Friday to conspiracy and fraud charges that
carry a possible prison term of more than 300 years, the Associated
Press reported on Saturday. Bennett pleaded guilty before Judge Naomi
Reice Buchwald of Federal District Court in
w:st='on'>
size='3'>Manhattan
20-count indictment charging conspiracy to commit securities fraud, wire
fraud, bank fraud, money laundering and making false filings to the
Securities and Exchange Commission. The government said Bennett kept
auditors and investors from discovering hundreds of millions of dollars
in losses that Refco, then privately held, and its customers had
incurred in the financial markets through trading in the mid-1990s while
the company was partly controlled by Bennett. It said he then caused the
company to make false filings to the SEC.
href='http://www.nytimes.com/2008/02/16/business/16refco.html?sq=bankruptcy&st=nyt&scp=6&pagewanted=print'>Read
more.
name='13'>Delta Air Lines Close to Deal with
Northwest
The boards of Delta and
Northwest Airlines have both scheduled emergency board meetings for
today where a deal in which Delta would purchase Northwest could be
approved, the New York
Times reported today. Still, these people
cautioned that several outstanding issues still needed to be resolved
— including reaching an agreement with the pilots’ unions
— and that the negotiations could be delayed or collapse
altogether. If a
deal is reached, it would end months of speculation about a combination
of Delta and Northwest, which would create the world’s largest
airline. Such a merger would also probably spur more consolidation:
United Airlines and Continental Airlines also have been holding merger
discussions and are likely to announce their own deal. United and
Continental are eager to announce their merger soon after any
Delta-Northwest tie-up so that regulators can look at both deals at the
same time.
href='http://www.nytimes.com/2008/02/19/business/19air.html?ref=business&pagewanted=print'>Read
more.
In related news, a draft
bipartisan House Transportation and Infrastructure Committee letter to
the Justice and Transportation departments seeks close reviews of
potential airline mergers,
size='3'>CongressDaily reported on Friday.
Reps. Dan Lipinski (D-Ill.) and Steven LaTourette (R-Ohio), both members
of the Aviation Subcommittee, are urging Attorney General Mukasey and
Transportation Secretary Peters to 'carefully evaluate consolidation
proposals to ensure they are not solely based on corporate interests.'
Transportation and Infrastructure Chairman James Oberstar (D-Minn.) has
gone on record opposing a planned merger between Delta Air Lines and
Northwest Airlines, which is headquartered in his home state of
size='3'>Minnesota
has also reportedly been in merger talks with United Airlines, which is
based in Lipinski's hometown of
w:st='on'>
size='3'>Chicago
size='3'>.
International
name='14'>British Government Nationalizes Struggling
Lender
The British government
announced on Sunday that it would bring Northern Rock, the struggling
mortgage lender, under its control, the
size='3'>New York Times reported yesterday. It
was the first nationalization of a bank in more than a decade as the
British government rejected two takeover proposals for the lender, which
ran into trouble last year because of a money shortage that followed a
subprime mortgage crisis in the
w:st='on'>
size='3'>United States
size='3'>. The government was forced to shore up the company with about
£55 billion, or $107 billion, in loans and guarantees. “The
government has completed its review of the two detailed proposals
received,” Alistair M. Darling, chancellor of the Exchequer, said
on Sunday. “But in current market conditions, we do not believe
that they deliver sufficient value for money for the taxpayer. The
government has therefore decided to bring forward legislation to take
Northern Rock into a period of temporary public ownership.” Under
the government ownership plan, the taxpayers’ outstanding loans to
Northern Rock will be repaid in full with interest, Darling said. He
said that the private sector alternatives did not meet this
test.
href='http://www.nytimes.com/2008/02/18/business/worldbusiness/18northern.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='15'>Taiwan
face='Times New Roman' size='3'> Air Carrier Seeks Bankruptcy
Protection
Far Eastern Air Transport
Corp. has asked the Taipei District Court to grant it one to three
months of bankruptcy protection, the
size='3'>Wall Street Journal reported
yesterday. The airline's creditors include Bank of Taiwan, Mega
Financial Holding
size='3'>Co.'s Mega Bank, Taiwan
Cooperative Bank and Far Eastern International Bank, Mr. Chang said. He
declined to disclose the airline's outstanding bank loans. The carrier's
membership in the International Air Transport Association was suspended
last week after it failed to settle an overdue payment of $840,000. Far
Eastern Air said last week that it plans to settle the payment to the
trade group within one month, and it also reached an agreement with
Taiwan's Civil Aeronautics Administration to pay a debt of more than 40
million Taiwan dollars ($1.3 million) for landing and airport-service
fees before today.
href='http://online.wsj.com/article_print/SB120329957331574557.html'>Read
more. (Registration required.)
href='http://online.wsj.com/article_print/SB120329957331574557.html'>