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October
23, 2007
More
Debtors Look to Chapter 13 to Try to Stave Off
Foreclosure
An increasing number of
homeowners have filed for bankruptcy under chapter 13 to try and stave
off foreclosure proceedings while the homeowner works out a plan to pay
off mortgage debt and other obligations, the
size='3'>Wall Street Journal reported today.
Last month, as the nation's housing slump continued, consumer bankruptcy
filings increased almost 23 percent from a year earlier -- representing
nearly 69,000 people -- according to the American Bankruptcy Institute.
Overall, consumer bankruptcy filings were up 44.76 percent during the
first nine months of this year. About four in 10 filers today are filing
under chapter 13 -- up from three in 10 two years ago -- and BAPCPA was
designed to foster more filings under chapter 13 repayment plans.
Consumer advocates are warning homeowners that those who are most likely
to benefit from filing chapter 13 are those facing foreclosure because
of a temporary financial setback, but who expect to be able to cover
their mortgage payments in the future.
href='http://online.wsj.com/article/SB119309633953367729.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Mortgage
Lending
name='2'>Legislation Looks to Create Standard for Mortgage
Issuers
House Democrats
introduced an anti-predatory lending bill yesterday that would create a
national standard for mortgage originators and impose legal liability on
investment firms that purchase, repackage and sell mortgages in the
secondary market,
size='3'>CongressDaily reported yesterday. The
bill spells out that brokers and lenders would have to adhere to
requirements such as a uniform licensing standard and a mandate that
they make full, complete and timely disclosures to consumers. The
provision does not require the originator to be a fiduciary agent of the
borrower. It would also prohibit brokers from receiving a yield spread
premium and establish a floor for minimum state licensing and
registration standards, and if states fail to enact such requirements,
HUD would later issue rules for originators in those states to act
solely in the best interest of the consumer. The bill also would set
minimum standards for mortgages so borrowers could demonstrate the
ability to repay the loan. Refinanced loans must have a net tangible
benefit to the borrower and escrow must be included and originators must
make a good-faith effort to verify income. Federal banking regulators
will jointly write the rule spelling out specifics in consultation with
the FTC.
href='http://www.house.gov/apps/list/press/financialsvcs_dem/subprimeleg.pdf'>Click
here to read the text of the H.R. 3915.
name='3'>Creditors Object to American Home
Transaction
American Home Mortgage
Investment Corp.'s creditors have objected to the proposed sale of the
bankrupt mortgage lender's Ginnie Mae portfolio of loans to MidFirst
Bank, saying that the deal could harm the value of the debtor's
estates, Bankruptcy
Law360 reported yesterday. The unsecured
creditors’ committee said in their filing that the asset purchase
agreement between American Home and MidFirst provided no ceiling on the
amount of damages the purchaser could assert against the debtors and had
no time limit for bringing claims. The unsecured creditors also added
that American Home could receive as little as $58,000 for the rights to
service the federally issued loans, which are worth an estimated $450
million.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38151'>Read
more. (Registration required.)
w:st='on'>
name='4'>Chicago
face='Times New Roman' size='3'> Home Builder Plans to File for
Bankruptcy
Crippled by the downturn
in the housing market, Neumann Homes, one of Chicago's largest
home-building companies, said yesterday that it plans to file for
bankruptcy, the Chicago
Tribune reported today. Neumann, based
in
size='3'>Warrenville,
w:st='on'>
size='3'>Ill., said that
it closed all of its sales, production and customer service offices and
has laid off 110 employees since Oct. 1, retaining a staff of about 20.
The shutdown came after months of financial difficulties. It announced
in March that it had restructured its credit agreements to give the
company $25 million in additional capital. Neumann said the downturn
in
size='3'>Michigan
significantly, adding that it had lost $60 million in the last two years
in the
size='3'>Detroit market
alone.
href='http://www.chicagotribune.com/business/chi-tue_neumann_1023oct23,0,4602608.story'>Read
more.
name='5'>Interstate Bakeries Requests Approval for Exit
Financing
Interstate Bakeries Corp.
filed a bankruptcy court motion seeking approval to get as much as $400
million in exit financing Silver Point Finance LLC when it emerges from
chapter 11, the
size='3'>Cincinnati Business Journal reported
yesterday. The company's common stock would
be canceled, and existing shareholders would not receive any
distribution. The pre-petition lenders' funded debt of about $450
million would be exchanged for $250 million in second lien notes, $165
million of convertible secured notes and $35 million of class A common
stock, each to be issued by the reorganized company. Holders of general
unsecured claims would receive about 25.9 percent of the outstanding
shares of common stock of the reorganized company in the form of class B
common stock and the opportunity to participate in a rights offering
entitling them to subscribe for an additional $50 million of class B
common stock.
href='http://www.bizjournals.com/cincinnati/stories/2007/10/22/daily10.html?ana=from_rss'>Read
href='http://www.bizjournals.com/cincinnati/stories/2007/10/22/daily10.html?ana=from_rss'>
Want Enron Creditors' Ruling Reconsidered
Two banks that
unsuccessfully opposed an Enron Creditors Recovery Corp. motion to
appeal have filed a formal motion for reconsideration with the
court, Bankruptcy
Law360 reported yesterday. Enron filed the
complaint against creditors Caisse de Dépôt et Placement du
Québec and National Australia Bank as part of an effort to recover
cash transfers made in the days leading up to the company's bankruptcy
filing. Enron sued to recover the transfers on the grounds that the
money changed hands when the company was insolvent, arguing further that
the transfers were not reasonably equivalent and that Caisse and NAB
were secondary recipients of several of the transfers, rather than
initial transferees. Caisse and NAB asked the court to dismiss the
complaint, as did six other defendants named in Enron's suit, arguing
that the transfers were protected under safe harbor provisions set forth
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38062'>Read
more. (Registration required.)
face='Times New Roman' size='3'>
name='7'>Delphi
size='3'> Creditors Oppose Class Action
Settlements
Five of Delphi Corp.'s
creditors objected on Friday to agreements that the company reached
earlier this year to settle securities and employment class actions
pending in a multidistrict litigation, saying that the proposed
settlements were unfair to senior creditors,
size='3'>Bankruptcy Law360 reported yesterday.
Castlerigg Master Investments Ltd., CR Intrinsic Investors LLC, Davidson
Kempner Capital Management LLC, Elliot Associates LP and SPCP Group LLC,
which filed the joint objection, said in their motion that they held
senior notes from
size='3'>Delphi
total principal value of about $420 million. The five creditors said
that the stipulated settlements were unfair because they would make the
settlement classes' claims in
face='Times New Roman' size='3'>Delphi
size='3'>'s estate equivalent to those of general unsecured creditors,
including senior noteholders.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=38079'>Read
more. (Registration required.)
Gallery's Store Closings Spur Worry Among Landlords
Landlords of some of the
520 stores that Movie Gallery Inc. aims to close are worried that the
company could depress business at 35 shopping centers around the country
by posting going-out-of-business signs, the
size='3'>Wall Street Journal reported today.
In papers filed Friday with the U.S. Bankruptcy Court in
size='3'>Richmond
w:st='on'>
size='3'>Va.
landlords asked a judge to restrict the manner in which the company
closes its stores. Movie Gallery, they said, shouldn't be allowed to
post 'Going Out of Business at This Location' signs.
face='Times New Roman'>Movie Gallery, based in
size='3'>Dothan
w:st='on'>
size='3'>Ala.
$1.4 billion in liabilities and $892 million in assets, according to its
bankruptcy petition. To cut costs, the company plans to shut down 520
stores, saying it expects to save about $70 million in rent. Bankruptcy
Judge Douglas
Tice last week gave the company permission to
begin closing stores and sell leases at an auction set for Nov. 15. The
landlords said they were 'surprised' by Judge Tice's decision to approve
the auction of leases and asked him to rescind it.
href='http://online.wsj.com/article/SB119310267665567909.html?mod=us_business_whats_news'>Read
more. (Registration required.)
name='9'>Dispute over Breakup Fee Continues in Sallie Mae Merger
Case
While an investor group
headed by J. C. Flowers & Company abruptly agreed to waive a
provision prohibiting SLM Corp., parent of the student lender Sallie
Mae, to find another buyer, the underlying dispute remained over the
termination of the merger, the
size='3'>New York Times reported today. The
Flowers group, which includes JPMorgan Chase and Bank of America, claims
that the terms of its contract with SLM allow it to terminate the merger
because a recent change in federal law reduced subsidies to lenders like
SLM, causing a “material adverse effect” on its future
earning potential and therefore its merger value. After President Bush
signed the College Cost Reduction and Access Act on Sept. 27, the
Flowers group reduced its offer to $50 a share from $60. SLM said that
reduction meant it had a right to demand the merger agreement’s
$900 million breakup fee. Unless it closes by Feb. 15, 2008, the merger
agreement will end.
href='http://www.nytimes.com/2007/10/23/business/23sallie.html?ref=business&pagewanted=print'>Read
more.
name='10'>Congressman Looks to Introduce Corporate Tax-Cut
Bill
House Ways and Means
Committee Chairman Charles Rangel (D-N.Y.) has drafted legislation that
would trim the 35 percent in taxes that companies now pay to between 30
and 31 percent, the Wall
Street Journal reported today. The change
would be funded in part by eliminating an existing tax deduction for
manufacturers aimed at keeping production in the
United States. The proposal, which
Rangel plans to introduce later this week as part of a broad tax bill,
is unlikely to make it through Congress this year, he acknowledged.
However, the bill looks to set the stage for a future debate about
taxes. Rangel's corporate proposal is similar to an idea floated in a
Treasury Department report released in July. The report suggested that
getting rid of many of the tax preferences now available to corporations
-- including the manufacturing deduction -- would generate enough
revenue to reduce the corporate tax rate to 27 percent.
href='http://online.wsj.com/article/SB119310700005768051.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB119310700005768051.html?mod=hpp_us_whats_news'>