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September 25,
2007
Mortgage
Lending
name='1'>House Bill Would Allow
Bankruptcy Courts to Alter Mortgages
Rep. Brad Miller (D-N.C.)
introduced legislation on
Thursday that would repeal a provision of the Bankruptcy Code that
prohibits a bankruptcy
court from modifying a home mortgage, Reuters reported yesterday. Miller
said that
bankruptcy courts would be allowed to alter mortgages written by
'predatory lenders' in
moves that could save 600,000 Americans from foreclosure.
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h
3609ih.txt.pdf'>H.R. 3609 is co-sponsored by House Finance
Committee Chair Barney
Frank (D-Mass.) and Rep. Linda Sanchez (D-Calif.). Under loan
modifications, the lender and
loan-servicing company change the mortgage terms to make them more
affordable to the
borrower. This can include lower interest rates and forgiving a portion
of the principle.
'Responsible lenders who made loans on reasonable terms have nothing to
worry about in
bankruptcy court,' Miller said.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/24/AR2007092400612.html'>
Read more.
Housing Boom
Implodes, Lawsuits Increase
As the housing boom turns
to bust, hundreds
of lawsuits are being filed on behalf of borrowers who legal advocates
say were shoehorned
into homes beyond their means with creative and onerous mortgages,
the
face='Times New
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Roman'
size='3'>New York Times reported today. The
culprits, borrowers
assert, are brokers, agents, lenders and others who earned lucrative
fees from the loans.
Immigrants and minority borrowers are particularly dependent upon real
estate professionals
because they may not speak fluent English or understand the complex loan
terms and
documents, which can confound native speakers as well. In
w:st='on'>
size='3'>California, home
buyers are not
required to have a lawyer present at closing. However, the state affords
homeowners some
protections not found elsewhere: mortgage brokers here must act in the
fiduciary interest of
their clients. Advocates for borrowers say a similar requirement is
needed nationally
because brokers have a financial incentive to steer borrowers toward
higher-cost loans.
In
size='3'>Washington, some
federal lawmakers
have proposed requiring brokers and lenders to make suitable loans that
benefit
href='http://www.nytimes.com/2007/09/25/business/25broker.html?_r=1&hp=&adxnnl=1&
;oref=slogin&adxnnlx=1190722313-Jp3jnwbu8GevD6Cp7M5HfQ&pagewanted=print'>Read
more.
The
size='3'>House Judiciary
Subcommittee on Commercial and Administrative Law will be holding a
hearing
size='3'>titled “Hearing on Straightening Out the Mortgage Mess:
How Can We Protect
Home Ownership and Provide Relief to Consumers in Financial
Distress?” at 3 p.m. ET
today.
href='http://judiciary.house.gov/oversight.aspx?ID=373'>Click here
to
view the witness list and watch the hearing.
name='3'>Fitch Ratings See More
Liquidity Pressure on Mortgage REITs
Fitch Ratings reported
that mortgage real
estate investment trusts that haven't yet succumbed to the credit storm
are struggling to
secure funding and are facing growing liquidity problems, Dow Jones
Newswires reported
yesterday. 'Recent declines in market values of unsecuritized assets and
the reduction of
advance rates of short-term debt employed to finance these assets have
also triggered margin
calls and consequently reduced liquidity,' said Fitch in its special
report on
size='3'>U.S.
size='3'>mortgage REITs. Fitch
said that over the past year, it has downgraded the issuer default
ratings of several
mortgage REITs, with most of the action centered on the residential side
rather than
commercial. The
companies are dealing
with impeded financial flexibility, difficulties in the origination and
sale of residential
mortgages, asset markdowns that have triggered margin calls and
reduced liquidity, and
limited access to capital, Fitch said.
href='http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20070924%5cACQDJON200709241504D
OWJONESDJONLINE000488.htm&'>Read more.
name='4'>American Home Mortgage
Faces Inquiry over Property Taxes
American Home Mortgage
Investment Corp.
bounced property tax checks for some
w:st='on'>
face='Times New Roman' size='3'>Maryland
size='3'>homeowners, local and state officials said yesterday, and they
have demanded an
explanation from the bankrupt mortgage lender and servicer, the
Associated Press reported
yesterday. The Maryland Commissioner of Financial Regulation filed an
inquiry with American
Home Mortgage on Friday. The
w:st='on'>
face='Times New Roman' size='3'>Maryland
size='3'>regulator asked American Home Mortgage to explain why the
initial checks failed to
clear and to clarify the scope of the incident. In Frederick County, Md.
alone, American
Home Mortgage bounced two checks totaling nearly $59,000 for property
taxes on 12 loans
serviced by the company.
w:st='on'>
face='Times New Roman' size='3'>Frederick
w:st='on'>
size='3'>County
received new, certified checks Friday to cover the
payments.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/24/AR2007092400859_pf.htm
l'>Read more.
name='5'>Nationstar
Halts
face='Times New Roman'
size='3'>U.S.
size='3'>Loans
Nationstar Mortgage, the
subprime unit of
Fortress Investment Group LLC, said it is no longer accepting new loan
applications from
brokers, a signal that the lender is winding down operations, Reuters
reported yesterday.
Nationstar is the latest in a series of
w:st='on'>
w:st='on'>
size='3'>U.S.
lenders that have stopped taking loans from independent
mortgage brokers,
citing problems with underwriting quality and outright fraud. Fortress,
a publicly traded
private equity firm and hedge fund, bought Dallas-based Nationstar last
year from home
builder Centex Corp, which received about $540 million from the deal
after taxes. The
company said it originated $4.4 billion in subprime loans in the first
quarter, putting it
among the top 10 U.S. subprime originators.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/09/24/AR2007092400619_pf.htm
l'>Read more.
name='6'>Countrywide to Help
Prevent Foreclosures
Countrywide Financial
Corp., the
largest
face='Times New
Roman' size='3'>U.S.
size='3'>mortgage lender,
said yesterday that it expects to modify terms on nearly 25,000 home
loans this year to help
people avoid foreclosures, Reuters reported today. The company said it
has already modified
more than 17,000 home loans this year and provided assistance on about
35,000 mortgages,
including through repayment plans, postponements of payments and
refinancings. Countrywide's
rate of pending foreclosures as a percentage of unpaid principal rose to
1.2
percent in August from 0.48 percent a year
earlier. Write-downs
could result in a $2.4 billion third-quarter loss, Morgan Stanley
analyst Kenneth Posner has
estimated. On Friday, Moody's Investors Service said banks eased terms
on just 1 percent of
subprime mortgages with rates that reset higher in January, April and
July. Moody's said
that lenders have only recently begun to modify more loans.
href='http://online.wsj.com/article/SB119068324459438213.html'>Read
more. (Registration
required.)
General Motors
The United Automobile
Workers union wielded
its most potent weapon against General Motors yesterday, sending 73,000
workers to picket
lines in its first national strike at GM since 1970, the
face='Times New
Roman' size='3'>New York Times reported today.
Union officials
said they were left no choice but to strike because General Motors was
unwilling to accept
the union’s demand that it protect workers’ jobs and
benefits. GM's unyielding
stance reflects its decision to accept the short-term pain of a strike
at 80 facilities in
30 states to achieve its goals: a lower cost structure and more flexible
workforce to better
compete against surging Japanese automakers like
w:st='on'>
w:st='on'>Toyota and
Honda. GM is
reportedly better positioned to handle a strike now than in earlier
contract talks, as the
majority of its sales and profits are now coming from outside the
w:st='on'>
size='3'>United
States. UAW
membership at GM has
shrunk by more than 80 percent since the 1970 strike, when 400,000
workers were off the job
href='http://www.nytimes.com/2007/09/25/business/25auto.html?ref=business&pagewanted=pri
nt'>Read more.
name='8'>Consumer Group Critical
of Students’ Debit Card Overdraft Fees
The Center for
Responsible Lending said that
college and graduate students are paying more than $960 million in
overdraft fees a year
while using combined identification and debit cards issued by
universities,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday.
The group estimated that students pay $3 in fees for every $1 borrowed
in the form of an
overdraft, with an average penalty of $34. Center for Responsible
Lending Director Eric
Halperin said that a single overdraft transaction can lead to a
'cascade' of charges. As an
example, he cited a student interviewed for the study who was hit with
$245 in fees over
four days on $13 in purchases. More than 100 universities have granted
selected banks
'exclusive marketing services' on their campuses through the cards,
according to the
report. The report was released in
conjunction with the House
Financial Services Committee markup of H.R. 946 sponsored by Rep.
Carolyn Maloney (D-N.Y.)
that would require banks to provide a warning to ATM customers when they
are about to make
an overdraft. The House Financial Services Committee will be marking up
H.R. 946
href='http://www.responsiblelending.org/pdfs/billion-dollar-deal.pdf'>Click
here to read the Center for Responsible Lending’s
report.
for Social Security Reforms
The Department of Treasury
released a report
yesterday that put the cost of the gap between what Social Security is
expected to need to
pay out in benefits and what it will raise in payroll taxes in coming
years at $13.6
trillion, the Associated Press reported yesterday. It said that delaying
necessary changes
reduces the number of people available to share in the burden of those
changes and is unfair
to younger workers. 'Not taking action is thus unfair to future
generations. This is a
significant cost of delay,' the report said. In another key finding, the
report said that
'Social Security can be made permanently solvent only by reducing the
present value of
scheduled benefits and/or increasing the present value of scheduled tax
increases.'
href='http://news.yahoo.com/s/ap/20070924/ap_on_go_ca_st_pe/bush_social_security'>Read
more.
href='http://www.ustreas.gov/cgi-bin/redirect.cgi?http://www.treas.gov/press/releases/hp572.
htm'>Click here to read the Treasury Department’s report.
/>
name='10'>Pacific Lumber Workers
Denied Severance, for Now
A bankruptcy court ruled
on Friday that
Pacific Lumber Co. would not be allowed to pay 63 workers it fired
shortly before entering
chapter 11 nearly $950,000 in severance pay before the court confirmed a
reorganization
plan, Bankruptcy
Law360
size='3'>reported yesterday.
size='3'>Shortly before filing for bankruptcy on Dec. 1, 2006, Pacific
Lumber and its
subsidiary Scotia Pacific LLP announced that they would fire over 100
employees in an effort
to cut costs, effective Jan. 31. Sixty-three of those employees were
offered 60 days' wages
as severance pay, with additional severance for employees who had worked
at the company for
more than five years. Pacific Lumber contended that because the payments
were due
post-petition, they should be considered as post-petition wages, which
would have the
priority of an administrative claim. Judge
size='3'>Richard Schmidt disagreed, saying
that the workers'
severance was compensation for work done pre-petition. Judge Schmidt
noted that while the
relevant case law would allow the company to pay pre-petition wages if
all creditors with
higher priority claims consented, one such creditor—Marathon
Structured Finance Fund,
a secured lender—had already objected.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=35765'>Read
more.
(Registration required.)
w:st='on'>
face='Times New Roman' size='3'>
name='11'>U.S.
face='Times New
Roman' size='3'> Wants Court Approval of Marcal's Superfund
Deal
The U.S. Department of
Justice has urged a
federal bankruptcy court to sign off on a $3 million settlement deal it
made with bankrupt
Marcal Paper Mills Inc. over pollution claims involving
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Roman'
size='3'>New Jersey's
w:st='on'>
size='3'>Lower
face='Times New Roman'
size='3'>Passaic
face='Times New
Roman' size='3'>River
size='3'>,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported
yesterday. Representatives of the Environmental and Natural Resources
Division of
the Justice Department argued in a
court filing Thursday
that the bankruptcy court should approve the settlement over the Lower
Passaic River Study
Area Cooperating Parties Group's objections. A hearing on the settlement
agreement is
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=35732'>Read
more. (Registration required.)
name='12'>Calpine Cuts Estimated
Return in Bankruptcy Plan
Bankrupt power producer
Calpine Corp. lowered
an estimated return for existing shareholders under a revised disclosure
statement filed
yesterday at the U.S. Bankruptcy Court for the Southern District of New
York, Reuters
reported yesterday. The company puts its estimated enterprise value on
leaving bankruptcy at
between $19.2 billion and $21.3 billion with a midpoint of $20.3
billion. Judge
Burton Lifland
size='3'>will hold
a hearing on the disclosure statement today. The San Jose, Calif.-based
company said that it
expects to receive confirmation of its reorganization plan by the end of
href='http://www.nytimes.com/reuters/business/business-calpine-disclosure.html?pagewanted=pr
int'>Read more.
name='13'>Judge Denies Bid for
Early Appeal on Enron Bankruptcy Ruling
U.S. District Judge Shira
Scheindlin rebuffed a bid
for an early appeal of a 2006 ruling in Enron's bankruptcy case, the
Associated Press
reported yesterday. Judge Scheindlin says an appeal now could delay a
long-awaited trial of
lawsuits by Enron creditors against the company's banks. In August,
Scheindlin overturned
last year's decision by U.S. Bankruptcy Judge Arthur
Gonzalez, who was
overseeing the Enron case. Judge Scheindlin says Judge Gonzalez was
wrong to rule that
holders of claims against a bankrupt company could see those claims
wiped out if they
bought them from a seller who engaged in 'inequitable conduct,' such as
fraud. The trial is
set to start in March. R
href='http://www.kltv.com/global/story.asp?s=7122103'>ead
more.
name='14'>Rising Costs Could Sap
Steelmakers' Profits
The world's steelmakers
could face
significantly higher costs next year as raw-materials prices rise,
threatening the
industry's string of big profits if it can't successfully pass on the
costs to industries
ranging from car makers to construction, the
size='3'>Wall Street Journal reported today.
The industry is set
to begin talks next month with big producers of iron ore, a crucial
ingredient for
steelmaking, over next year's prices. The group is set to demand a 50
percent price
increase, compared with the 9.5 percent increase last year. Steelmakers
undoubtedly will
pass on some of the higher costs to their customers in the auto,
appliance and construction
industries. The cost pressures also could prompt more consolidation in a
still-fragmented
industry as steel producers seek more bargaining clout and economies of
scale.
href='http://online.wsj.com/article/SB119067587611337987.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='15'>TROUBLED COMPANIES IN
THE NEWS
The business news
articles below are taken
from the U.S. Business Journal’s Daily Summary of Troubled &
Fast Growing U.S.
Companies which is published by Bastien Financial Publications.
size='3'>ABI
size='3'>Members
receive a 50% discount off of our regular subscription rate of $500 when
subscribing to the
complete Daily Summary.
To subscribe email steve@creditnews.com
title='mailto:steve@creditnews.com'
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>ABI
37
Circuit City Stores Inc.’s stock price slipped
almost 2%, capping
a 14% drop over the past week, when the
w:st='on'>Richmond,
w:st='on'>Va.
retailer reported a sharp drop in its second quarter earnings, which in
turn has cast doubt
on its expansion plans.
Dell Inc.,
the Round Rock, Tx.
PC maker which has been trying to revive sales after two years of
slowing business, is ready
to announce an agreement to sell its desktop and notebook computers
through Gome Group, the
biggest electronics retailer in
w:st='on'>China. While strong in the
w:st='on'>
w:st='on'>U.S.
relatively small share of the overseas market and currently sits in
fourth place in the
Chinese market.
General Motors
Corp.,
Workers Union
members walk out of its eighty
w:st='on'>U.S. factories after the
passing of a national
labor agreement deadline. GM stated it is committed to working with the
UAW, and union
president Ron Gettlefinger stated the union is anxious to get the strike
behind it, but
insists a “fair and equitable deal” must be reached.
Macklowe
Properties faces a
potential crisis that, according to one view, could ultimately bring
down the giant
real-estate company. Last winter, the company, controlled by Harry
Macklowe and his
son Billy, bought seven buildings in
w:st='on'>New York
City from Equity Office Properties Trust for $6.8
billion, plus
another $700 million in assumed debt. The acquisition surprised
observers with the rapidity
of the deal, which was completed in less than two weeks at a
surprisingly high price of
$1,000 per square foot. While that allowed Macklowe to build on its
other prime locations in
the Big Apple, more than $5 billion of the debt that Macklowe took on to
do the deal was in
the form of short-term facilities that must be paid back by February,
including $1.2 billion
in a bridge loan. Another problem is that even if Macklowe wants
to refinance its debt
it would be difficult given current tough conditions in the commercial
mortgage market. If
Macklowe were to default on the bridge loan, Deutsche Bank and Fortress
Investment Group,
which hold 70% of the loan, could snap up Macklowe’s interests in
eleven commercial
buildings in
York
Simplicity
Inc. and
face='Times New Roman' size='3'>Graco Children’s Products
are recalling about a
million cribs following reports of three infant deaths connected to the
products. Simplicity
is the manufacturer of the cribs but the Graco name appears on some of
them. Graco is a unit
of Atlanta, Ga.-based Newell Rubbermaid Inc., the consumer-products
maker.
Spacehab
Inc., a Webster, Tx.
provider of commercial space services, reported a fourth quarter net
loss of $13.2 million,
including a noncash charge of $14.2 million, on revenue of $12.8
million. That compares with
a slight profit in the year-earlier fourth quarter on sales of $14.6
million. For the year,
Spacehab lost $16.3 million, up from a $12.4 million loss a year ago, on
revenue of $52.8
million, up from revenue of $50.7 million in the prior year. Separately,
Spacehab has until
10/3 to regain compliance with minimum per-share listing requirements to
be listed on
Nasdaq.
Triton Operations
LLC, which
does business as Webster
Hardwoods, says it
will shutter a sawmill in
Crosse
County,
December, resulting
in the loss of eighty jobs. The company, with operations in
w:st='on'>Wisconsin,
w:st='on'>California
w:st='on'>
hardwood lumber
products and railroad ties.