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October
5, 2007
Mortgage
Lending
name='1'>Homeowner Relief Legislation Advances
Two measures looking to provide
financial relief for homeowners facing foreclosure or in bankruptcy
advanced in the House of Representatives yesterday, the Associated Press
href='http://www.abiworld.org/AM/TemplateRedirect.cfm?template=/CM/ContentDisplay.cfm&ContentID=48835'>H.R.
3648, which would give a tax break to homeowners who have mortgage
debt forgiven as part of a foreclosure or a reworking of a loan, passed
the House by a 386-to-27 vote. While the measure is anticipated to
reduce the taxes of some strapped homeowners by $650 million, it also
looks to help offset that by limiting a tax break available on the sale
of second homes. Another measure,
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3609ih.txt.pdf'>H.R.
3609, was narrowly approved by the House Judiciary Subcommittee on
Commercial and Administrative Law The bill would allow judges to order
mortgage lenders to ease terms for homeowners in bankruptcy proceedings.
The legislation was opposed by Republicans on the panel and has been
sent to the full Judiciary Committee.
href='http://biz.yahoo.com/ap/071004/congress_mortgages.html?.v=1'>Read
more.
name='2'>Senators Aim for Deal on Bankruptcy
Code
Senate Majority Whip Dick
Durbin (D-Ill.) said yesterday that he and Sen. Arlen Specter
(R-Pa.) are trying to strike a deal on legislation to tweak the
Bankruptcy Code to save potentially hundreds of thousands of troubled
borrowers from losing their homes, The
Hill reported today. After discussions on
sponsoring legislation jointly had stalled, Durbin and Specter on
Wednesday introduced separate bills to use the Code to help avert a wave
of foreclosures in the subprime mortgage market. However, the two
senators are searching for a bipartisan compromise that they can push
through the Judiciary panel, where Durbin is a member and Specter is the
top Republican. The law, established in 1970, currently allows the terms
of mortgages for second homes and family farms. Under the Durbin
proposal, bankruptcy courts would be able to adjust mortgages on primary
residences of chapter 13 debtors. By contrast, the Specter bill would
grant more modest powers to bankruptcy judges to help borrowers stave
off foreclosure. It would also apply to a smaller pool of borrowers:
homeowners whose mortgages were issued prior to Sept. 26, 2007, who seek
relief in the next seven years.
href='http://thehill.com/the-executive/durbin-specter-aim-for-deal-on-bankruptcy-code-2007-10-05.html'>Read
more.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:s2136is.txt.pdf'>Click
here to view the text of S. 2136, introduced by Sen. Durbin,
and
href='http://frwebgate.access.gpo.gov/cgi-bin/getpage.cgi?dbname=2007_record&page=S12534&position=all'>click
here for Sen. Specter's introductory remarks for S. 2133 (bill text
not yet available).
name='3'>FDIC Chair Urges Servicers to Convert
Loans
Federal Deposit Insurance
Corp. Chairman Sheila Bair urged loan servicers to consider wholesale
conversions of certain adjustable-rate subprime loans into fixed-rate
products to prevent major housing problems from escalating, the
Wall Street Journal
reported today. Such rate changes are difficult, though,
because many of these subprime mortgages were securitized and packaged
into trusts. As the loan quality has deteriorated, major Wall Street
banks have experienced sizable losses. Bair recommended making the
wholesale adjustments for owner-occupied mortgages where borrowers are
current on the loans. This would exclude homes bought by speculators.
Her suggestion would most likely affect loans that have a low starter
rate for two or three years and reset to much higher rates. 'Keep it at
the starter rate,' Bair said. 'Convert it into a fixed rate. Make it
permanent.'
href='http://online.wsj.com/article/SB119154525624049715.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='4'>Lawsuit Scrutinizes Executive Compensation at
Countrywide
Vice Chancellor John
Noble of
face='Times New Roman'
size='3'>Delaware
of Chancery ruled Tuesday in favor of a demand by the shareholder, the
Louisiana Municipal Police Employees' Retirement System, for corporate
documents to determine if Countrywide Financial Corp. improperly timed
awards of stock options to executives, the
size='3'>Wall Street Journal reported.
Countrywide, which is registered in
w:st='on'>
size='3'>Delaware
slashing its payroll and is expected to post a large third-quarter loss,
reflecting a surge in defaults on home mortgages and a drop in loan
volume. Lawyers representing the retirement system, known as Lampers,
which has held shares in Countrywide since 1997, last year raised
questions about whether it timed awards of options just before positive
news or when the stock price was at a low to maximize gains for
executives. Countrywide last October refused a request by Lampers for
access to corporate records, arguing that the shareholder hadn't shown
credible evidence of wrongdoing. In December, Lampers sued Countrywide
in the chancery court over access to the records.
href='http://online.wsj.com/article/SB119151602221249020.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='5'>Prosecutors Begin Probe of Failed Bear Stearns’
Funds
Federal prosecutors have
launched a criminal investigation into two mortgage-related hedge funds
at Wall Street firm Bear Stearns Cos. that collapsed during the summer,
the Wall Street
Journal reported today. The
size='3'>U.S.
in
size='3'>Brooklyn
Bear Stearns for information related to the hedge funds, whose failure
cost investors $1.6 billion. Bear's two funds, High-Grade Structured
Credit Strategies Fund and a riskier sister vehicle known as High-Grade
Structured Credit Strategies Enhanced Leverage Fund, were launched in
2003 and 2006, respectively, and managed by Ralph Cioffi, a former Bear
mortgage salesman. Until this past spring, the funds had enjoyed a
series of up quarters. But when the market for subprime home loans
turned south, so did many of the funds' holdings.
href='http://online.wsj.com/article/SB119153584467349392.html?mod=us_business_whats_news'>Read
more. (Registration required.)
name='6'>Analysis: High Court's Fraud Case Widely Seen as Stand-In
for Enron
As the Supreme Court
considers the case of
size='3'>Stoneridge Investment Partners v.
Scientific-Atlanta, many experts are saying
that the outcome of the dispute will help determine the integrity of the
financial system and that the case is viewed as a stand-in for one of
the most notorious frauds of the past decade – Enron, the
Washington Post
reported today. At issue in the case is whether a group
of investors (Stoneridge) can seek damages against two technology
companies (Scientific-Atlanta and Motorola) for allegedly allowing
Charter Communications to inflate its revenue through a series of
sham deals in 2000. A lower court ruled that because Scientific-Atlanta
and Motorola did not make public statements about the deals on which
investors based their decision to buy or sell Charter stock, the
third-party companies were not on the hook for fraud when it came to
light. In ruling on this case, the high court also could tip the balance
of a lawsuit that Enron shareholders filed against Credit Suisse,
Merrill Lynch and other banks that allegedly helped the
size='3'>Houston
firm disguise its financial problems. That case is on hold, but a
judgment in support of investors could revive it.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/10/04/AR2007100402254_pf.html'>Read
more.
name='7'>Calpine's Shareholders Denied Request for
Stay
Bankruptcy Judge
Burton R. Lifland
refused an attempt by Calpine Corp.'s shareholders’
committee to stay the company's bankruptcy proceedings until after the
committee appeals the approval of the energy company's disclosure
statement, Bankruptcy
Law360 reported yesterday. “A delay of
the confirmation process may seriously jeopardize the debtors’
ability to emerge from chapter 11 within the time frame to maintain
their $8 billion favorable exit financing intact – financing terms
that would be near impossible to replicate under current market
conditions,” Lifland said in his ruling. He added that should the
current financing commitment expire, Calpine would incur up to $800
million in additional interest expenses.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=36676'>Read
more. (Registration required.)
name='8'>Government Wins Time in Dana Superfund Feud
After being denied their
stay request from the bankruptcy court, federal prosecutors have been
granted a temporary reprieve by a Manhattan district court judge to
resolve a spat over the proposed estimation procedures for determining
environmental claims in Dana Corp.'s chapter 11 case,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. In his order, Bankruptcy Judge
Burton Lifland
size='3'>emphasized that he was not convinced that the government would
prevail in its bid, a requirement that must be satisfied for the
bankruptcy court to issue a stay. However, District Court Judge Shira
Scheindlin differed slightly, choosing to soften rather than uphold
Judge Lifland’s ruling. “The motion is granted to the extent
that the discovery period is extended by 60 days, thereby extending
the date of the financial estimation hearing, which had been scheduled
for Jan. 14, 2008,” according to Judge Scheindlin’s order.
Federal prosecutors had sought a stay in the Dana case while the
district court mulled the government's earlier request to move the
estimation dispute to the higher court.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=36643'>Read
more. (Registration required.)
face='Times New Roman' size='3'>
name='9'>Union
size='3'> Says GM Health Plan Misses Drug
Savings
Even though General
Motors and the United Automobile Workers have just reached a major
settlement aimed at easing the automaker’s health care liability,
the union’s umbrella organization says the company’s board
has not done all that it could to hold drug costs down, the
New York Times
size='3'>reported today. In a letter yesterday to federal securities
regulators, the AFL-CIO criticized GM for keeping Nexium, an expensive
name-brand medicine, on its health plan’s approved-drug list last
year at a time when some other big companies were dropping the drug in
favor of cheaper generics. Other companies also include Nexium on their
preferred-drugs lists, but GM’s two main domestic rivals have
taken steps to limit the use of Nexium. The AFL-CIO letter notes that
Percy Barnevik, the retired chairman of the drug’s maker,
AstraZeneca, is a longtime member of the GM board. It did not, however,
provide any evidence that Barnevik played a role in keeping Nexium on
the preferred list or that his presence on the board influenced the
decision by GM's pharmacy benefits manager.
href='http://www.nytimes.com/2007/10/05/business/05conflict.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
International
name='10'>German Business Bankruptcies Decrease in July, but
Personal Cases Continue to Rise
The number of German
companies filing for bankruptcy in July slipped more than half a
percent, the country's Federal Statistics Office said Friday, but
personal cases continued to rise, the Associated Press reported
yesterday. The agency, Destatis, said that 2,631 companies filed for
bankruptcy in
size='3'>Germany,
size='3'>Europe
down 0.7 percent from July 2006. From January to July, the number of
corporate bankruptcies fell 9.5 percent, with 16,876 cases filed. For
personal bankruptcies, the number of cases filed in July rose 21.2
percent to 9,501, while the number of cases filed from January to July
increased 20 percent to 61,931. The combined number of bankruptcy
filings, including businesses, consumers and self-employed workers, were
up 12 percent to 14,464 in July and up 9.5 percent in the first seven
months, with 97,166 cases filed.
name='11'>Number of Bankrupt British Pensioners Increases by 700
Percent in Five Years
Nearly 8,000 people aged
65 or over in the
w:st='on'>United
Kingdom
size='3'>bankruptcy – up from 900 in 2002, the
face='Times New Roman' size='3'>London Independent
size='3'>reported today. A predicted increase of 400,000 in the number
of older people by 2010 will place an increased burden on publicly
funded services such as home care providers or nursing homes and
lead to additional costs for the NHS, according to the Local Government
Association. With more than a third of the population likely to be over
50 by 2025, and the over-nineties forming the fastest-growing age group,
debt problems among pensioners is likely to worsen, experts say.
href='http://news.independent.co.uk/uk/this_britain/article3028736.ece'>Read
more.