February 142008

 

Mortgage
Lending

name='1'>Bankers Seek to Shift Some Troubled

Loan Risk to the Government

The banking industry,
struggling to contain the fallout from the

mortgage debacle, is urgently shopping proposals to Congress and the
Bush administration that could shift some of

the risk for troubled loans to the federal government, the
Wall

Street Journal reported today. One proposal,
advanced by officials at Credit Suisse

Group, would expand the scope of loans guaranteed by the Federal Housing

Administration. The proposal would let

the FHA guarantee mortgage refinancings by some delinquent borrowers.
Credit Suisse officials have met with

senior officials from the Department of Housing and Urban Development,
which runs the FHA, and other policymakers

to discuss the proposal. If delinquent borrowers default on their
refinanced loans, the federal government would

have to absorb the loss. Another plan gathering support seeks to make it

easier for banks to write off part of

the unpaid balance on loans that exceed a property's value, known as a
'principal charge off.' Loan servicers

worry that if they take big write-offs, they might be sued by investors
who hold mortgage-backed

securities. 

href='http://online.wsj.com/article_print/SB120294935869166831.html'>Read

more.

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name='2'>FBI, SEC Join Complex Probe of Housing

Crisis

FBI officials said
yesterday that they are conducting criminal

investigations of 16 companies for fraud and insider trading in
connection with the subprime mortgage crisis,

while their partners at the Securities and Exchange Commission are
probing nearly two dozen more, the

Washington Post
reported today. Those federal

investigations follow subpoenas from attorneys general in at least four
states and class-action lawsuits that

target home builders, lenders, credit-rating agencies and the banks that

packaged groups of mortgages into

securities.  FBI agents are working
hand-in-hand with the SEC, which has enlisted 100

lawyers as part of its nationwide subprime mortgage working group and
which has made criminal referrals to other

government agencies. Legal experts said that most of the probes are in
the early stages and that if the economic

downturn continues, they could widen. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021303863_pf.html'>Read

more.

name='3'>New York Governor Blasts Bush

Administration on Predatory Lending Policies

Even though predatory
lending was becoming a national problem

several years ago, the Bush administration looked the other way and
aligned itself with the banks, according to a

commentary by
face='Times New Roman' size='3'>New

York Governor Eliot
Spitzer in today’s

face='Times New Roman' size='3'>Washington Post
size='3'>. Spitzer said that state attorneys

general of both parties brought litigation or entered into settlements
with many subprime lenders that were

engaged in predatory lending practices. He wrote that several state
legislatures, including

w:st='on'>New

York

size='3'>'s, enacted laws aimed at curbing such practices. Despite state

officials’ attempts to combat

predatory lending several years ago, Spitzer said that the Bush
administration embarked on an aggressive and

unprecedented campaign to prevent states from protecting their residents

through the Office of the Comptroller of

the Currency (OCC). In 2003, during the height of the predatory lending
crisis, the OCC invoked a clause from the

1863 National Bank Act to issue formal opinions preempting all state
predatory lending laws, thereby rendering

them inoperative. Spitzer said that the OCC also promulgated new rules
that prevented states from enforcing any

of their own consumer protection laws against national
banks.  Despite the opposition

of all 50 state attorneys general and state banking superintendents,
Spitzer wrote that the administration

continued to enforce the new rules. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783_pf.html'>Read

the full

commentary.

name='4'>Freddie Mac Loosens Private Mortgage

Insurance Rules

Government-sponsored mortgage
giant Freddie Mac said today that it is

temporarily changing its rules for private mortgage insurance companies
to allow them to retain more capital and

rebuild their balance sheets, which have been damaged badly by the
housing and credit crises, Dow Jones Newswires

reported. 'Triggered by the ongoing decline in home prices and poor
performance of subprime, Alt A and other

higher-risk mortgages,' Freddie Mac said, 'the temporary change is
intended to allow mortgage insurers to retain

more insurance premiums to pay current claims and rebuild their capital
base.' The new rules take effect on June

1, according to the company. Freddie Mac also said that it is suspending

certain rules that automatically trigger

new requirements for insurers that are downgraded by rating agencies
below a certain level.

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Roman'
size='3'> Diocese Plans to File for

Bankruptcy

The Catholic Diocese of
Fairbanks plans to file for bankruptcy after

negotiations to settle sexual abuse claims failed, the Associated Press
reported today. Bishop Donald J. Kettler

said that he anticipates the filing for chapter 11 protection within
five weeks. More than 150 claims were filed

against the Roman Catholic church, alleging abuse by clergy or church
workers between the 1950s and 1980s. The

plaintiffs' lawyer Ken Roosa said 135 of those cases are still pending.
Robert Hannon, chancellor and special

assistant to the diocese, said that quite a few of the cases were
uninsured because the abuse took place decades

ago. 

href='http://www.nytimes.com/aponline/us/AP-Alaska-Sexual-Abuse.html?sq=bankruptcy&st=nyt&scp=2&pagew

anted=print'>Read more.

name='6'>President Bush Signs Economic Stimulus

Bill

President Bush signed the
Economic Stimulus Act of 2008 yesterday,

calling it a 'booster shot' for the American economy, CNN.com reported
yesterday. 'The bill I'm signing today is

large enough to have an impact, amounting to more than $152 million this

year, or about 1 percent of the GDP

(gross domestic product),' the president said in the brief ceremony in
the East Room of the White House. The

government hopes the measure, which will send most Americans tax rebate
checks by May, will either prevent a

recession or make one relatively brief. The package also includes tax
breaks for equipment purchases by

businesses, as well as payments to disabled veterans and some senior
citizens. 

href='http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/index.html?section=cnn_latest'>Read

more.

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

name='7'>U.S.
size='3'> Trustee Seeks Examiner in

size='3'>Summit Logistics
Case

U.S. Trustee
Kelly

Beaudin Stapleton wants a judge to appoint an
examiner to look into details of Summit

Global Logistics Inc.'s plan to go private in a management-led buyout,
the Associated Press reported yesterday.

Stapleton is asking for a probe into the $56.5 million sale, saying 'at
first blush' it seems it will mainly

benefit the logistic firm's management and the company's senior lender,
Fortress Credit Corp., at the expense of

other creditors.
face='Times New Roman'

size='3'>Summit global, an
East Rutherford, N.J.-based shipping

firm, filed for bankruptcy late last month with a deal in hand to sell
its business to an investment vehicle

called TriDec Acquisition. TriDec is owned by a number of

face='Times New Roman' size='3'>Summit
insiders, including Chief

Executive Robert Agresti. As part of the proposed deal,

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10;Roman' size='3'>Summit's

senior lenders - led by Fortress - have

agreed to provide a $5 million loan to fund the chapter 11 case. 

href='http://www.forbes.com/feeds/ap/2008/02/13/ap4652373.html'>Read
more.

Blue
Water Automotive Files for Chapter

11

Blue Water Automotive Systems
Inc., a maker of engineered thermoplastic

auto-parts, filed for chapter 11 protection yesterday, the Associated
Press reported. The Marysville, Mich.-based

company said its largest customer, Ford Motor Co., has agreed to
accelerate a $1.4 million 'progress payment' for

engineering, design and tooling services already performed. A downturn
in the automobile industry, coupled with

an increase in the price of raw materials and certain operational
challenges, created 'severe liquidity

constraints,' Blue Water said. The company's bankruptcy petition lists
assets and liabilities each in the range

of $100 million to $500 million. 
href='http://www.chron.com/disp/story.mpl/ap/fn/5538795.html'>Read

more.

Risky

Mortgages Continue to Inflict Losses at

UBS

Swiss bank UBS revealed
$26.6 billion in exposure to risky

size='3'>U.S.
size='3'>mortgages distinct from subprime loans,

increasing its vulnerability to the global credit crisis and sending its

shares sharply lower, Reuters reported

today. UBS said today that the newly unveiled exposure, announced
together with full-year and fourth-quarter

results, was to so-called Alt-A mortgages, which are of higher quality
than subprime loans but also considered

risky. UBS has taken about $18 billion in write-downs on its exposure
to

w:st='on'>

size='3'>U.S.
size='3'>subprime mortgages, which at the end of

December amounted to a net $27.594 billion, making it one of the biggest

casualties of the global credit crunch.

CEO Marcel Rohner said he could not say if UBS would return to profit in

the first quarter, after posting a

fourth-quarter loss roughly in line with guidance it gave in a profit
warning last month. 

href='http://www.nytimes.com/reuters/business/business-ubs-result.html?_r=1&oref=slogin&ref=business&

pagewanted=print'>Read more.

International

w:st='on'>

name='10'>Japan

face='Times New Roman' size='3'> Corporate Bankruptcy Cases
Increase 5.5 Percent in

January

Private credit research agency
Teikoku Databank Ltd. reported that

Japanese bankruptcy cases increased by 5.5 percent in January over the
previous year to 888 cases, Dow Jones

Newswires reported yesterday. Debts left behind by insolvent companies
slipped 28.8 percent to Y389.06 billion.

The decline in the amount of debt, despite the increasing number of
cases, reflects greater bankruptcies amid

small-sized businesses, Teikoku said. Bankruptcies of large local
businesses in sectors closely related to

domestic demand such as construction, retail and service were also a
noticeable contributor. Insolvencies

remained at a high level in the construction sector, which is still
feeling the blow of a change in the Building

Standard Law last year as well as high raw materials prices, according
to the research company. 

href='http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20080212%5cACQDJON200802122345DOWJONESDJONLINE000979

.htm&'>Read more.