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March 4, 2009
Legislators Temper Mortgage
Relief Bill
House Democrats have reached an agreement to narrow
the impact of legislation allowing bankruptcy judges to modify primary
mortgages of chapter 13 debtors, the
face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Under the current version of the legislation, a
bankruptcy judge could cut the principal balance of a homeowner's
mortgage, lower the interest rate and extend the terms. The compromise
would limit a homeowners' ability to ask a bankruptcy judge for help if
they have already received or been offered a loan modification that
lowered their payments to 31 percent of their income. The compromise
version would also require a homeowner to share with the lender any
profit from the eventual sale of the home if a bankruptcy judge lowers
the principal balance. In addition, it gives preference to
lowering a homeowner's interest rate over cutting the principal balance.
The House could take up the bill as soon as tomorrow.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/03/AR2009030303332_pf.html'>Read
more.
One in Five Homeowners
“Underwater”
First American CoreLogic reported that at least one in
five U.S. homeowners who have mortgages-- or about 8.3 million people --
owed more on their homes by the end of 2008 than their homes were worth,
according to the
face='Times New Roman' size='3'>Washington Post
size='3'>today.
size='3'>That is an increase of at least two percent from the 7.6
million people who had no home equity at the end of September, according
to the report. Another 2.2 million homeowners are approaching negative
equity levels. Nevada has the highest proportion of mortgage-holding
homeowners with negative equity, 55 percent, according to First American
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/04/AR2009030400911_pf.html'>Read
more.
Senators to Push Consumer
Protection Legislation
Sens. Charles Schumer (D-N.Y.) and Dick Durbin
(D-Ill.) plan to introduce legislation this week that would create a
consumer protection agency responsible for regulating financial products
much like the Consumer Product Safety Commission does for consumer
products,
size='3'>CongressDaily reported yesterday. The
bill is based on a proposal by Harvard University law
professor
face='Times New Roman' size='3'>Elizabeth Warren
and has been championed by consumer groups, which
argue that banking regulators are too close to the subjects that they
oversee and typically place concerns of safety and soundness over
consumer protection. As an example, they note that the Federal Reserve
waited until the subprime housing crisis occurred before issuing rules
to regulate home mortgages. Financial Services Roundtable President
Steve Bartlett said such a proposal would further fragment the nation's
regulatory structure and create overlap and potential conflicts of
interest among agencies, specifically noting how a provision in the
omnibus spending bill to give the FTC more power to regulate home
mortgages will exacerbate problems.
AFL-CIO to Support
Nationalizing Banks
The AFL-CIO’s executive council today will call
on the Obama administration to speed the nationalization of problem
banks to stimulate lending and lift the sagging economy, the
size='3'>New York Times reported today.
AFL-CIO officials asserted that the administration’s practice of
giving billions of dollars in dribs and drabs to distressed banks had
failed to restore their solvency, leaving them as zombie banks that
largely refrain from lending, thereby contributing to the
economy’s decline. AFL-CIO leaders said that they did not favor
long-term nationalization of banks, but rather temporary trusteeships in
which the government would take a controlling stake in a bank, clean up
its balance sheet, then spin it off.
href='http://www.nytimes.com/2009/03/04/business/04private.html?ref=business&pagewanted=print'>Read
more.
Mortgages Ltd. Case
Creditors in the turbulent Mortgages Ltd. bankruptcy
proceeding have joined the debtor in staunch opposition to the
investors’ committee of proposed reorganization plan,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The investors’ committee fails to offer “adequate
information” necessary for an informed judgment about the plan,
and neglects in particular to explain the factors — namely shadowy
investor dealings — that contributed to Mortgages Ltd.’s
demise, the unsecured creditors’ committee claims. Additionally,
the disclosure statement fails to clarify liabilities in connection with
potential litigation against the debtor and its affiliates, including
Greenberg Traurig LLP, over the company’s collapse, the committee
says. Read
more. (Registration required.)
Bernanke Blasts AIG for
'Irresponsible Bets' that Led to Bailouts
Federal Reserve Chairman Ben S. Bernanke delivered an
unusually harsh rebuke to American International Group yesterday,
expressing rare public exasperation over having to repeatedly bail it
out, the Washington Post reported today. Bernanke acknowledged
that the 'AIG situation is obviously a very uncomfortable one.' However,
he maintained that because the company has ties to major financial firms
across the globe, its collapse 'would be devastating to the stability of
the world financial system.' The Fed chairman did his best to counter
the lawmakers' frustrations with his own. 'I share your concern. I share
your anger. It's a terrible situation,' he said. 'But we're not doing
this to bail out AIG or their shareholders, certainly. We're doing this
to protect our financial system and to avoid a much more severe crisis
in our global economy.'
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/03/03/AR2009030303810_pf.html'>Read
more.
Blockbuster Hires Law Firm
to Explore Restructuring
Movie-rental chain Blockbuster Inc.has hired law firm
Kirkland & Ellis LLP to explore restructuring options, from
refinancing its debt to filing for bankruptcy protection if the company
cannot quickly resolve its liquidity issues, the
face='Times New Roman'>Wall
Street Journal reported today. Blockbuster is
in an increasingly difficult position as the ground beneath the
video-rental market has shifted and the company has faced stiff
competition from online rival Netflix Inc., pioneer of DVD rentals by
mail. Blockbuster has also been scrambling in a tough credit climate to
restructure hundreds of millions of dollars in debt, including a
revolving credit facility and a term loan, both due in August.
href='http://online.wsj.com/article/SB123612951090424809.html'>Read
more. (Registration required.)
File for Chapter 11
Masonite International Inc. said yesterday that it had
reached an agreement in principle with committees representing its bank
lenders and noteholders on the terms of a restructuring plan, under
which the company expects to seek bankruptcy protection and could cut
its debt by nearly $2 billion,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported. Masonite said that it has already reached an
agreement in principle with members of the steering committee
representing its senior secured lenders and representatives of an ad hoc
committee representing holders of its senior subordinated notes due in
2015 on the terms of a restructuring plan. The company is also
soliciting support from its broader lender and bondholder
constituencies, Masonite said.
href='http://bankruptcy.law360.com/articles/89740'>Read more.
(Registration required.)
Bankruptcy Filing Halts
“Extreme Makeover” Home Foreclosure
A Clayton County, Ga., couple living in an
“Extreme Makeover” home delayed foreclosure yesterday for a
second time by filing for chapter 13 protection, the
face='Times New Roman'>Atlanta
Journal-Constitution reported today. In the
bankruptcy filing, Milton and Patricia Harper said they owe $100,000 to
$500,000 to creditors and have about the same amount in assets. The
Harper home was rebuilt for free when the television show’s
producers learned the family was having septic tank problems. In
addition to the $450,000 remodeling, the show gave the family $200,000
in cash. The couple borrowed against the house to start a business and
ended up with a $450,000 mortgage. After struggling for several years
with finances, the couple faced foreclosure in August. The house was
saved then by a loan modification. After defaulting on that loan, the
house was again up for auction yesterday.
href='http://www.accessatlanta.com/entertainment/content/entertainment/stories/2009/03/03/extreme_makeover_foreclosure.html'>Read
more.
Dealership Debt Forces
Former Football Star to File for Bankruptcy
Former New Orleans Saints running back Deuce
McAllister has filed for bankruptcy protection for a car dealership he
owns in Mississippi, the Associated Press reported yesterday. McAllister
is in a dispute with Nissan’s financing arm as Nissan says that he
owes more than $6.6 million and nearly $300,000 in interest. The company
says McAllister defaulted on a deal, then exceeded his credit line.
McAllister said yesterday that he filed for bankruptcy to protect his
inventory and is searching for an investor. McAllister also owns a
luxury vehicle dealership in Jackson.
href='http://nbcsports.msnbc.com/id/29498372/'>Read more.
Ex-Leaders of Countrywide
Profit from Bad Loans
Stanford L. Kurland, Countrywide’s former
president, and his team at PennyMac have been buying up delinquent home
mortgages that the government took over from other failed banks,
sometimes for pennies on the dollar, the
size='3'>New York Times reported today. As
hundreds of billions of dollars flow from Washington to jump-start the
nation’s staggering banks, automakers and other industries, a new
economy is emerging of businesses that hope to make money from the
various government programs that make up the largest economic rescue in
history.While some critics are distressed that Kurland and his team are
back in business, the executives say that PennyMac’s operations
serve as a model for how the government, working with banks, can help
stabilize the housing market and lead the nation out of the recession.
href='http://www.nytimes.com/2009/03/04/business/04penny.html?_r=1&ref=business&pagewanted=print'>Read
href='http://www.nytimes.com/2009/03/04/business/04penny.html?_r=1&ref=business&pagewanted=print'>
Enterprise Rent-A-Car to
Buy Assets of Bankrupt Rival
Enterprise Rent-A-Car said that it agreed to buy
certain assets of Advantage Rent-A-Car Inc. out of bankruptcy for $19
million, Reuters reported yesterday. Enterprise said that the
transaction is expected to close in April if approved by the bankruptcy
court. Advantage Rent-A-Car filed for bankruptcy protection in December
and said that it would explore strategic alternatives, including a
possible sale or merger. Rental car companies, like Advantage, Hertz
Global Holdings Inc. and Avis Budget Group Inc., have been hurt by the
slowing economy as customers cut their discretionary spending on travel,
translating to lower rentals. The case is
face='Times New Roman' size='3'>In re Advantage Rent-A-Car
Inc., No.08-46369 U.S. Bankruptcy Court,
District of Minnesota.
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