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January 8, 2009
name='1'>Citigroup, Homebuilders in Talks to Let Judges
Modify Mortgages
Citigroup Inc. is leading other lenders in advanced talks with key
senators on legislation that would allow judges to set new repayment
terms for millions of mortgage holders who file for bankruptcy, the
Wall Street Journal reported today. Banks have consistently
fought 'cramdown' legislation, saying that cramdowns would raise
borrowing costs for all home buyers. Additionally, the National
Association of Home Builders said yesterday that it has reversed its
yearslong opposition to cramdowns, as foreclosures choke the market for
new homes. Legislation allowing bankruptcy restructuring of individual
mortgages was introduced in the House and Senate on the opening day of
the new Congress Tuesday. The Senate bill was introduced by Sen. Dick
Durbin (D- Ill.), the Senate's second-ranking Democrat, and has the
support of Senate Banking Committee Chairman Christopher Dodd (D-Conn.).
A measure allowing court-ordered mortgage workouts could be passed
separately, or as part of Congress's coming economic-stimulus
package.
href='http://online.wsj.com/article/SB123137932114363115.html?mod=testMod'>Read
more. (Subscription required.)
href='www.abiworld.org/e-news/durbinmortgagemodificationlegislation.pdf'>Click
here to read the text of the “Helping Families Save Their
Homes in Bankruptcy Act.”
name='2'>Gentler Tax Laws Urged on Debt Default
The National Taxpayer Advocate yesterday urged Congress to ease certain
tax laws governing defaults on mortgages, credit cards and other
consumer debt to help Americans who are struggling in the economic
downturn, the New York Times reported today. The Group, which
acts as a watchdog agency of the Internal Revenue Service, said that
without the changes hundreds of thousands of Americans could mistakenly
pay taxes this year on their canceled debts, adding to their financial
malaise. Congress has already provided some debt relief to homeowners
through the Mortgage Forgiveness Debt Relief Act of 2007, which exempts
from taxes any debts reduced or canceled during foreclosure or mortgage
restructuring. However, the exemption applies only if proceeds are used
to acquire or improve a principal residence.
href='http://www.nytimes.com/2009/01/08/business/08tax.html?_r=1&ref=business&pagewanted=print'>Read
more.
Consumer Loan Delinquencies Increase to Highest
Level Since 1980
Mounting job losses resulted in a surge of late payments to
consumer loan accounts, Forbes.com reported, as the American Bankers
Association yesterday issued a report that showed the number of
delinquent accounts in the third quarter rose to the highest level since
1980. The percentage of accounts with payments at least 30 days late
rose to the highest level in nearly three decades, to a seasonally
adjusted 2.90 percent, up from 2.68 percent in the prior quarter.
Payments on home equity credit lines and loans from auto dealers were
particularly difficult for consumers to meet in the third quarter, with
delinquencies on these types of loans rising to record levels. Late
payments to indirect auto loans climbed to 3.25 percent from 3.07
percent in the second quarter, and delinquencies on home equity lines of
credit hit 1.15 percent, up from 1.08 percent in the prior
quarter.
href='http://www.forbes.com/markets/2009/01/07/banks-delinquencies-loans-markets-econ-cx_mp_0107markets28.html'>Read
more.
name='4'>Coal Company Files for Chapter 11
Facing a tough economy and rising costs, Clearwater Natural Resources
LLC, a leader of U.S. coal-mining operations in central Appalachia, has
filed for bankruptcy along with two affiliates, Bankruptcy
Law360 reported yesterday. Clearwater filed for chapter 11
protection yesterday in the U.S. Bankruptcy Court for the Eastern
District of Kentucky, listing assets of more than $100 million and debts
of less than $100 million. The mining giant cited financial problems at
its wholly owned subsidiary Miller Bros. as a major reason for the
filing, with the unit controlling extensive mining reserves that serve
as the cornerstone of Clearwater's operations. The case is Clearwater
Natural Resources LP, case number 7:09-bk-70011, in the U.S. Bankruptcy
Court for the Eastern District of Kentucky.
href='http://bankruptcy.law360.com/articles/82072'>Read
more. (Subscription required.)
name='5'>Study: 2008 Left Many Pensions Underfunded
A study by the the Mercer consulting firm showed that the collapse of
the stock market last year left corporate pension plans at the largest
companies underfunded by $409 billion, reversing a $60 billion pension
surplus at the end of 2007, the Washington Post reported today.
Mercer's monthly snapshot of corporate pension plans focuses on those
offered by employers in the Standard and Poor's index of 1500 big
corporations, and it uses the accounting methods that companies must
follow when they prepare their financial statements. Mercer estimated
that the S&P 1500 pension plans held enough assets overall to cover
only 75 percent of their obligations, down from 104 percent at the end
of 2007. Precise figures won't be available until companies issue their
annual reports for 2008 in the coming months.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/01/07/AR2009010701387_pf.html'>Read
more.
name='6'>Analysis: Slide in 401(k) Values Spurs Calls for
Change
The stock-market rout has ignited a crisis of confidence for millions of
Americans who manage their own retirement savings through 401(k) plans,
the Wall Street Journal reported today. Congress has begun
looking at ways to overhaul the 401(k) system. At hearings in October,
the House Education and Labor Committee heard some proposals for setting
up 'universal' retirement accounts, which would cover all workers. One
such plan called for establishing accounts that would receive annual
contributions from the federal government and would offer a guaranteed,
but relatively low, rate of return. Another proposed automatically
investing contributions in an index fund that holds stocks and bonds,
with the mix getting more conservative as workers approach retirement.
Nearly 50 million Americans have 401(k) plans, which have $2.5 trillion
in total assets, estimates the Employee Benefit Research Institute in
Washington. In the 12 months following the stock market's peak in
October 2007, more than $1 trillion worth of stock value held in 401(k)s
and other 'defined-contribution' plans was wiped out, according to
Boston College's Center for Retirement Research.
href='http://online.wsj.com/article/SB123137714796462913.html'>Read
more. (Subscription required.)
name='7'>GMAC Sees Progress in Reshaping ResCap
Auto lending giant GMAC LLC today reiterated its support for mortgage
unit Residential Capital LLC, saying it has made 'significant progress'
in reshaping ResCap to better align it with current market conditions,
the Wall Street Journal reported. In a filing with the
Securities and Exchange Commission, GMAC said that it believes that the
support it has provided to ResCap to date was in the best interests of
GMAC stakeholders. ResCap, which provided risky home loans at the peak
of the residential real estate bubble, is struggling with losses on
those mortgages in the current housing slump. GMAC said its recently
approved status as a bank-holding company has 'increased the importance
of its support for ResCap.'
href='http://online.wsj.com/article/SB123141743627264131.html'>Read
more. (Subscription required.)
name='8'>Citicorp Objects to Tousa Cash Extension
Request
The administrator of Tousa Inc.'s revolving credit facility has opposed
the bankrupt homebuilder's request for extended use of cash collateral,
claiming that the money was being squandered by creditors in pursuit of
unrealistic claims against senior lenders, Bankruptcy Law360
reported yesterday. The court's first cash collateral order in June 2008
allowed the creditors' committee to tap funds to challenge prepetition
claims and liens of secured lenders for a period ending Friday. Further,
the creditors' complaint against the first-lien lenders has already been
dismissed twice, and the litigation timetable has been extended and is
no longer tied to confirmation of a reorganization plan, the bank
said. Read
more. (Subscription required.)
Backstop Sought for Municipal
Bonds
The incoming Obama administration is proposing a coordinated effort by
the Federal Reserve and the Treasury Department to provide a funding
backstop for the $2.7 trillion municipal-bond market, the Wall
Street Journal reported today. The plan calls for the Fed and the
Treasury to design a facility similar to the program set up for the
commercial-paper market that has helped ease financing conditions for
companies in need of short-term funds. States like California are facing
budget deficits, but may face an inability to finance in the marketplace
as they run out of cash. The flow of as much as $42 billion of red ink
in 41 states and the District of Columbia will need to be stanched by
midy-ear fiscal 2009, according to the Center on Budget and Policy
Priorities. Budget deficits already are projected in 38 states for the
next fiscal year, and combined gaps for the remainder of this fiscal
year, as well as 2010 and 2011, are estimated to run as high as $370
billion.
href='http://online.wsj.com/article/SB123133877256260815.html'>Read
more. (Subscription required.)
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