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August 31, 2007
Mortgage
Lending
name='1'>Bush Will Offer Relief for Some on Home
Loans
President Bush, in his
first response to families hit by the subprime mortgage crisis, plans to
announce several steps today to help Americans who have credit
problems meet the rising cost of their housing loans, the
New York Times
size='3'>reported today. Bush will be calling for the Federal Housing
Administration to change its federal mortgage insurance program in a way
that would let an additional 80,000 homeowners with spotty credit
records sign up, beyond the 160,000 likely to use it this year and next.
The main objective of the assistance package is not to affect the stock
markets but to help low-income homeowners, many of them concentrated in
certain neighborhoods in several distressed areas of the country, such
as
size='3'>Ohio
w:st='on'>
size='3'>Michigan
href='http://www.nytimes.com/2007/08/31/business/31home.html?_r=1&hp=&oref=slogin&pagewanted=print'>Read
more.
name='2'>Investors Account for Large Proportion of Mortgage
Defaults
A survey by the Mortgage
Bankers Association (MBA) found that mortgages on properties that aren't
occupied by the owner - mostly investment homes - account for between 21
and 32 percent of the defaults on prime-quality home loans in Arizona,
California, Florida and Nevada, states where overdue payments are
mounting fast, the Wall Street Journal reported today. When the
market was hot, many speculators bought homes hoping to flip them for a
quick profit, but now some investors have 'simply walked away from their
mortgages,' said Doug Duncan, chief economist of the MBA. The darkening
outlook for the housing sector has prompted economists at Goldman Sachs
Group to predict that home prices nationwide will fall an average of
about 7 percent both this year and next. Alarmed by such prospects, a
group of top executives from home-building and supply companies are
scheduled to meet next Wednesday with Federal Reserve Chairman Ben
Bernanke to argue for Fed actions to support the housing
industry.
href='http://online.wsj.com/article/SB118851838516214091.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='3'>Commentary: Why a
w:st='on'>
size='3'>U.S.
size='3'>Subprime Mortgage Crisis Is Felt Around the
World
The current global
financial turmoil—set off by problems with
w:st='on'>
size='3'>U.S.
size='3'>subprime mortgages—has prompted a backlash in some
quarters against such new finance vehicles like derivatives and
structured products, the
size='3'>New York Times reported today. More
broadly, it has led to a better understanding of the downside of
spreading risk so well as it can be felt in all corners of the world,
unsettling hedge funds, banks and stock markets as far away as
size='3'>Australia
size='3'>Thailand
size='3'>Germany.
Foreign politicians and regulators are seeking a role in the oversight
of American markets, banks and rating agencies. The head of the Council
of Economic Analysis in
w:st='on'>
size='3'>France
size='3'>has called for complex securities to be scrutinized before
banks are authorized to buy them. According to JPMorgan, there are about
$1.5 trillion in global collateralized debt obligations, and about $500
billion to $600 billion in structured-finance C.D.O.s, referring to
those made up of bonds backed by subprime mortgages, slightly safer
mortgages and commercial mortgage backed securities.
href='http://www.nytimes.com/2007/08/31/business/worldbusiness/31derivatives.html?ref=business&pagewanted=print'>Read
more.
name='4'>Bear Stearns Funds Denied Bankruptcy Relief for
Now
Bankruptcy Judge
Burton Lifland denied Bear
Stearns Cos. bankruptcy protection for two failed hedge funds it
managed, but granted the investment bank 30 days to refile before
investors can seize assets, the Associated Press reported yesterday.
Judge Lifland denied Bear Stearns' chapter 15 request, which would allow
the funds to seek bankruptcy protection in the
size='3'>U.S.
liquidating in the
size='3'>Cayman Islands. The nation's
fifth-largest investment bank must now petition under either chapter 7
or chapter 11 of the bankruptcy code to protect it from investors in the
U.S. Liquidators working to unwind the Cayman Island-based funds
estimate Bear Stearns' High-Grade Structured Credit Strategies Master
Fund could see recoveries of $25 million. The High-Grade Structured
Credit Strategies Enhanced Leverage Master Fund could see recoveries of
less than $50 million.
href='http://biz.yahoo.com/ap/070830/bear_stearns_bankruptcy.html?.v=1'>Read
more.
w:st='on'>
name='5'>Sale
face='Times New Roman' size='3'>of H&R Block’s Loan Unit Is at
Risk
H&R Block said yesterday
that the sale of its subprime lending unit, Option One Mortgage, might
fall apart as credit markets deteriorate, Reuters reported today. The
company, which reported yesterday that its quarterly loss had more than
doubled, said that it planned to stop offering home loans through Option
One. H&R Block said that it might sell only the loan servicing
business to the private equity firm Cerberus Capital Management, which
agreed in April to buy the entire unit. The company is negotiating with
Cerberus to waive some closing requirements and close before a Dec. 31
deadline but said there was “no assurance” any transaction
would occur. “The mortgage origination market is in the midst of
the most severe dislocation that it has seen in years, maybe the most
severe since the 1930s,” H&R Block CEO Mark A. Ernst
said.
href='http://www.nytimes.com/2007/08/31/business/31block.html?ref=business&pagewanted=print'>Read
more.
name='6'>Mortgage Firm Sells $500 Million in Stock to Raise
Cash
Thornburg Mortgage, a
jumbo-mortgage specialist that was forced to stop making new loans, has
sold $500 million of convertible preferred stock to raise cash,
Bloomberg News reported yesterday. Thornburg said that the proceeds
would help the company, based in
w:st='on'>Santa
Fe
face='Times New Roman' size='3'>N.M.
size='3'>, resume making loans and buying mortgage-backed securities.
The sale was completed four hours after it was announced. The
transaction follows the Countrywide Financial Corporation’s sale
of $2 billion of similar securities to Bank of America last week.
Mortgage lenders like Countrywide and Thornburg are turning to costlier
financing after being shut out of the short-term debt market. Thornburg
had to sell more than a third of its mortgage assets this month to meet
obligations it could not refinance.
href='http://www.nytimes.com/2007/08/31/business/31thornburg.html?ref=business&pagewanted=print'>Read
more.
Revokes Supermarket Chain's Bid for Le-Nature's Bottling
Plant
Bankruptcy Judge
M. Bruce McCullough revoked
the sale of the Le-Nature's bottling plant to a supermarket chain
yesterday, saying the chain intimidated a competing entity into dropping
out of the bidding, the Associated Press reported yesterday. Judge
McCullough ruled that Giant Eagle acted in bad faith in its bid to buy
the closed Latrobe plant for $20 million. He awarded the sale to
competitor Cadbury Schweppes Beverage Group, the beverage arm of
U.K.-based Cadbury Schweppes PLC, for $19 million. Cadbury Schweppes,
however, told the judge yesterday that it now does not want to buy the
plant and will sell it if forced to go through with the purchase. Giant
Eagle said it will appeal McCullough's ruling, which came after
court-appointed bankruptcy trustee
size='3'>R. Todd Neilson requested that the
supermarket chain's purchase be revoked.
href='http://www.delmarvanow.com/apps/pbcs.dll/article?AID=/20070831/NEWS01/70831004'>Read
more.
Criticizes Prosecutors for Not Revealing Bill-Padding
Bankruptcy Judge
Judith K. Fitzgerald
size='3'>criticized federal prosecutors for not alerting her to
allegations that accounting firm L. Tersigni Consulting PC was illegally
padding bills while advising asbestos claimants in large chapter 11
cases, Bankruptcy
Law360 reported yesterday. As she signed off
on approving Charter Oak Financial Consultants LLC as the new financial
advisers to the asbestos committee for W.R. Grace & Co., Judge
Fitzgerald ordered all bankruptcy officials to alert her to any
suspected wrongful billing practices as soon as possible. Federal
prosecutors had instructed Bradley M. Rapp, the LTC employee who first
alerted law enforcement to the suspicious bills, not to tell the court
while the investigation was pending.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33759'>Read
more. (Registration required.)
w:st='on'>
name='9'>Kara
w:st='on'>
size='3'> Homes
face='Times




New
Roman' size='3'> Modifies
Reorganization, Draws Criticism
Kara Homes Inc. amended
its reorganization plan to consolidate an accounting affiliate of the
bankrupt homebuilder in a move that a building material supplier
suggested may be a way to avoid payment claims,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Kara Service, which is owned 90 percent
by
face='Times New Roman' size='3'>Kara
size='3'>Homes
percent by company founder Zuhdi Karagjozi, filed a chapter 11 petition
on Monday.
size='3'>Kara
face='Times New Roman' size='3'>Homes
size='3'>said that Kara Service’s chapter 11 filing date should be
deemed Oct. 5, 2006–the same day as
w:st='on'>
size='3'>Kara
face='Times New Roman'
size='3'>Homes
filing date–to avoid prosecution actions under chapter 5 of the
bankruptcy code. Strober Building Supply Inc., a party-in-interest in
the case, objected to the “improper ‘13th hour’”
modification in a letter to the court yesterday. The court approved a
settlement between Strober,
w:st='on'>
size='3'>Kara
face='Times New Roman' size='3'>Homes
and hedge fund Plainfield Specialty Holdings II Inc.
earlier this week. Under the agreement, Strober transferred more than $2
million in claims to
w:st='on'>
size='3'>Plainfield
is sponsoring the home builder’s reorganization plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33692'>Read
more. (Registration required.)
name='10'>Global Power Objects to More Than $200 Million in
Claims
Power-plant equipment
manufacturer Global Power Equipment Group Inc. is trying to fend off
more than $200 million in claims submitted by several energy
companies, Bankruptcy
Law360 reported yesterday. Global Power on
Wednesday filed 10 objections in a
w:st='on'>
size='3'>Delaware federal
bankruptcy court seeking to reduce or disallow the claims. The
objections came a day after the manufacturing firm announced it had
reached an agreement with its creditors’ committee on the terms of
its reorganization plan. Global Power filed objections to two General
Electric Co. claims that total more than $66 million. Global Power
asserted in its objection that GE has not substantiated the
claim.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33690'>Read
more. (Registration required.)
Asks Firms to Detail Top Executives' Pay
Stepping up its campaign
to shed light on the mysteries of executive pay, the Securities and
Exchange Commission (SEC) has sent letters to nearly 300 companies
across
face='Times New Roman'
size='3'>America
size='3'>critiquing disclosures in this year's proxy statements and
demanding more information, the
size='3'>Wall Street Journal reported today.
The SEC's requests could set up a confrontation over details the agency
wants that companies say are competitive and should remain secret. The
federal securities regulator, for example, wants to know more about the
targets and benchmarks companies use when they tie pay to performance.
Companies are racing to set up emergency meetings of their board
compensation committees to answer the questions. Some are considering
lobbying as a group against certain SEC requests, such as providing more
information about specific performance goals.
href='http://online.wsj.com/article/SB118851491281613993.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='12'>Banks Pare Borrowing from Fed Reserve
The Federal Reserve said
yesterday that borrowing from the Fed's discount window dropped to
$1.101 billion as of Wednesday, about half the $2.001 billion level
reported a week earlier, the
size='3'>Wall Street Journal reported today.
The change suggests the Fed has managed to calm markets even though
banks haven't taken its strong encouragement to borrow at the discount
window. As a credit crisis deepened two weeks ago, the Fed cut the rate
on the loans it makes directly to banks by half a percentage point, to
5.75 percent and extended the period for loans from one day to 30. Last
week, four big banks borrowed $500 million each to support the Fed's
efforts to rebuild confidence in the system. Average borrowing during
the week was $1.315 billion, up $115 million from a week earlier. A year
ago, the average weekly borrowing was $52 million under the Fed's
primary credit program.
href='http://online.wsj.com/article/SB118851006465713892.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB118851006465713892.html?mod=hpp_us_whats_news'>