October 172007

 

Mortgage
Lending

name='1'>Housing Industry

Lobbying Against Mortgage-Modification Bankruptcy
Bill

Much of the housing industry
has launched a

high-profile assault against a bill that would make it easier for
bankruptcy judges to

refashion home mortgages that are on the verge of foreclosure, leaving
the sponsor of the

bill to openly express concern about its prospects,
CongressDaily reported today.

Groups such as the Mortgage Bankers Association, the National
Association of Home Builders

and the Financial Services Roundtable have started a coalition in
opposition to the bill

sponsored by Rep. Brad Miller (D-N.C.), which would allow a borrower to
ask a bankruptcy

judge to reduce the interest rate and extend the length of a mortgage if

the foreclosure

process has been started. Miller said yesterday that he is concerned
that the housing

industry has gotten a head start on lobbying over consumer and civil
rights groups that

favor the measure, which was approved Oct. 4 by the House Judiciary
Commercial and

Administrative Law Subcommittee on a 5-4 vote. The Mortgage Bankers
Association contends

that Miller’s bill would give bankruptcy courts too much leeway to

rewrite loans

without legal or economic restraints. MBA also contends that the change
would cause risk

premiums charged on mortgages to increase as much as 2 percent -- saying

lenders would be

unsure about profits from the loan, since the terms could be changed at
a judge's discretion

and thus could scare away potential investors in the secondary
market.

name='2'>Commentary: Behind

Subprime Woes, a Cascade of Bad Bets

The underlying
assumptions of the subprime

lending binge of the past few years-- in which people act prudently,
unemployment stays low,

lenders keep lending and house prices rise -- are now surfacing in the
form of more

defaults, foreclosures and other investment losses, according to
a

face='Times New Roman' size='3'>Wall Street Journal
size='3'>commentary

today. Should house prices fall by 10 percent over the next two years --

an outcome analysts

see as entirely possible -- losses stand to be staggering. Thomas
Zimmerman, head of

mortgage credit research at UBS in New York, estimates that in such a
scenario losses due to

defaults could wipe out as much as 16 percent of the nearly $600 billion

in subprime-backed

securities issued in 2006. In August, such losses were equivalent to
less than 1 percent of

the total. The jobs market also plays a key role. If the unemployment
rate ticks upward by a

percentage point or more, Zimmerman believes losses due to defaults
could easily exceed 20

percent -- enough to hit even some of the most highly rated
securities. 

href='http://online.wsj.com/article/SB119258727851561561.html?mod=hpp_us_pageone'>Read

more. (Registration required.)

name='3'>Mortgage Originations

Expected to Plunge

The Mortgage Bankers
Association predicted that the

nation's mortgage business won't halt its current slide anytime soon
with mortgage

originations expected to fall 18 percent next year and decline another 6

percent in 2009,

the Associated Press reported today. The gloomy mortgage outlook is
driven by the shrinking

flow of cash to lenders from increasingly risk-averse investors, as well

as slower overall

economic growth. Total mortgages written are expected to decline nearly
15 percent this year

to $2.31 trillion from $2.73 trillion last year. Originations are
expected to fall at a

slightly steeper 18 percent next year, then begin to decline at a slower

6 percent rate in

2009. The erosion is expected to ease as a projected 5 percent rise in
mortgages for people

buying homes in 2009 partially offsets an expected 18 percent drop-off
that year in

mortgages for homeowners who refinance. 

href='http://www.nytimes.com/aponline/business/AP-Mortgage-Bankers-Forecast.html?pagewanted=

print'>Read more.

name='4'>Wells

size='3'>Fargo

size='3'>, Other
w:st='on'>

size='3'>U.S.
size='3'>Banks Hurt by Credit

Losses

Wells Fargo and
other

size='3'>U.S. regional banks
reported

disappointing third-quarter results yesterday, hurt by loan losses that
may rise further as

the
face='Times New Roman'

size='3'>U.S.
size='3'>housing slump deepens,

Reuters reported yesterday. Banks are struggling as tight capital
markets force them to

write down some holdings as investors take less risk. Meanwhile, falling

housing prices are

making it harder for homeowners to refinance, adding to delinquencies,
and leaving some

commercial real estate borrowers strapped for cash. San Francisco-based
Wells Fargo wrote

down $490 million for mortgages, and said that home equity losses rose
more than fivefold to

$153 million. Wells Fargo expects the latter to rise in the fourth
quarter and stay

'elevated' in 2008. Minneapolis-based U.S. Bancorp set aside $199
million for credit losses,

up 47 percent. Nonperforming assets rose to $641 million from $565
million on June 30, hurt

by two mortgage customers that declared bankruptcy. 

href='http://www.nytimes.com/reuters/business/business-banks-results.html?pagewanted=print'>

Read more.

name='5'>Banks’ Safety Net

for Lenders May Have Holes

Wall Street reaction to
Monday’s

proposal by three large banks that would start a fund to serve as buyer
of last resort for

structured investment vehicles (SIVs) has been less then enthusiastic,
the

face='Times New







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mp;#13;




&a

mp;amp;#13;


&#

10;Roman' size='3'>New York Times reported
today. 

Many investors and analysts describe the fund as a
stopgap that will relieve

some pressure but not address more intractable problems with mortgage
securities held by

SIVs. “It’s very much a partial fix,” said Ethan S.
Harris,

chief U.S. economist for Lehman Brothers. But

he said that when

combined with the efforts of the Federal Reserve, which has cut interest

rates and stepped

up lending to financial institutions, the fund should be “an
important cushioning of

the blow to the capital market.” Depending on how popular the fund

is, it could end up

with a large share of the SIV’s outstanding balance of $320
billion. 

href='http://www.nytimes.com/2007/10/17/business/17credit1.html?_r=1&oref=slogin&ref

=business&pagewanted=print'>Read more.

name='6'>Bishop Asks

size='3'>San

Diego Parishioners to Help
Pay

Settlement

The Roman Catholic
Diocese of San Diego hopes

to raise $25 million in donations to help pay its portion of a $198.1
million settlement

reached last month with childhood sexual abuse victims, the
San Diego Union-Tribune
size='3'>reported yesterday. If

the “Embracing Our Mission” campaign is not successful, Brom

said that the

diocese has only two other properties that could be sold – its
headquarters in

Bay
w:st='on'>Park
size='3'>and St. Francis

Seminary in Linda Vista. The diocese's portion of the settlement is $183

million, with about

half coming from religious orders and insurance, according to a
financial breakdown

accompanying Brom's letter. The
face='Times New Roman'

size='3'>San Bernardino diocese, which
used to be part of

the

size='3'>San Diego diocese,

will pay the

remaining $15 million. The

size='3'>San Diego diocese hopes to use

$40 million from

selling some property, including the former University of San Diego High

School in Linda

Vista, the former

size='3'>Marian
face='Times New Roman'

size='3'>Catholic
face='Times New

Roman' size='3'>High School
size='3'>in

w:st='on'>
size='3'>South

w:st='on'>
size='3'>Bay

size='3'>and a parcel in
w:st='on'>Oceanside
size='3'>purchased for a

school that was never built. 

href='http://cfx.signonsandiego.com/news/metro/20071016-9999-1m16diocese.html'>Read

more.

name='7'>Werner Creditors Settle

with Steelworkers

Werner Holding Co.'s
unsecured creditors, who

are directing the defunct ladder manufacturer's chapter 11 proceedings,
have settled the

claims of the United Steelworkers Union,

size='3'>Bankruptcy Law360 reported yesterday.

The deal would put

to rest the claims of the United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy,

Allied Industrial and Service Workers' International Union, which was
the

collective-bargaining representative of many former Werner employees and

is a member of the

AFL-CIO. The settlement would provide for the continuation of the union
members' retirement

life insurance plans until Oct. 31, at which point the plan would shut
down and each

eligible retiree would receive a $5,000 unsecured claim. The union would

receive a nominal

“Class 4” $495,000 claim exclusively for voting purposes. In

exchange, the USW

would drop its claims, including its contention that Werner must
continue to provide its

retirees with a life insurance benefit, according to court
documents. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=37666'>Read

more.

(Registration required.)

First

Magnus Files

Wind-Down Plan

First Magnus Financial
Corp. said in its

reorganization plan filed on Monday that it would have between $28
million and $44 million

left in its coffers after wrapping up the company, selling off its
assets and paying secured

creditors with the proceeds,
size='3'>Bankruptcy

Law360 reported yesterday. The lender told the

court it owed

approximately $93 million in unsecured claims, of which $13.5 million
was its payroll debt,

$24.4 million its accounts and notes payable, $35 million its debt to
First Magnus Capital

and $20 million its subordinated debt owed to insiders. The company,
which filed for

bankruptcy in August amid the subprime mortgage meltdown, has stopped
operating and has

reduced its workforce to 66. That number will drop further, it said, as
the liquidation plan

is executed. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=37607'>Read

more. (Registration required.)

Kitty

Hawk Inc. Files for

Chapter 11

Kitty Hawk Inc. filed for

chapter 11

protection on Monday, marking the second time the Dallas-based freight
transportation

company has reorganized since 2000, the

size='3'>Dallas Business Journal reported
yesterday. The company,

which owns Kitty Hawk Cargo Inc., Kitty Hawk Aircargo Inc., Kitty Hawk
Ground Inc. and KH

Ground Inc., said in its bankruptcy petition that it has $40 million in
book value assets

and total estimated liabilities of $31 million. The company reported a
loss for its first

fiscal quarter of 2007 of $11.6 million or 22 cents a share, which the
company said came as

a result of an industry-wide slowdown as 'a variety of industries face
weak demand for their

own products.'