Report Calls on
Administration to Re-examine Foreclosure Mitigation
Program

The Congressional Oversight Panel released a report on

Friday saying that the Treasury Department should re-examine the Home
Affordable Modification Program because it 'is targeted at the housing
crisis as it existed six months ago, rather than as it exists right
now,' CongressDaily reported on Friday. The panel, led by
Harvard University law professor Elizabeth Warren, found
that the program is tailored only to certain mortgages, leaving out
others such as interest-only loans that will reset and adjustable-rate
mortgages with payment options. In addition, it does nothing to address
those who are at risk because of job loss. Sen. Jack Reed (D-R.I.)
has unveiled a bill that would fund grants for states and localities to
establish mandatory mediation programs between borrowers and lenders,
authorize $7 billion to states to offer homeowners' grants or subsidized

loans and require lenders to evaluate whether the borrower is eligible
for an affordable modification before initiating a foreclosure. Reed
said last week that he might attach his measure to a major overhaul of
the nation's financial regulatory system. 
href='http://cop.senate.gov/documents/cop-100909-report.pdf'>Click
here to read the panel’s report.

Bank of America Scrambles to

Modify Loans Ahead of Government Deadline

With just weeks remaining to meet the November
deadline set by the Obama administration to sign
up struggling borrowers for a federal program to modify their
mortgages,Treasury Department data is showing that Bank of America is
trailing well behind the other large banks, the

face='Times New Roman' size='3'>Washington Post
size='3'>reported today. The company was also slow out of the box
because it initially took a more conservative approach than some other
banks, requiring that borrowers document their income and complete other

paperwork before granting preliminary approval for a modification. In
August, Bank of America softened the requirement and began authorizing
some modifications without getting all the documents first. Adding to
borrowers' difficulties was a letter sent this summer by Bank of America

that mistakenly informed some of them that they did not qualify for the
administration's foreclosure-prevention program because their loans were

not backed by Fannie Mae or Freddie Mac, the government-controlled
mortgage giants. A progress report released last week by the Treasury
Department showed that only 11 percent (about 95,000) of Bank of
America's delinquent borrowers who were potentially eligible for the
program had been given a loan modification. That compares with 27
percent, or 117,00, for JP Morgan Chase, and 33 percent, or 68,000, at
Citigroup, the Treasury reported. The figure for Saxon Mortgage
Services, which is owned by Morgan Stanley, is 41 percent, or
32,000. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/10/11/AR2009101102206_pf.html'>Read

more.

U.S. Trustee
Calls on Lehman's Probe into Barclays’ Deal to be
Unsealed

U.S. Trustee
face='Times New Roman' size='3'>Diana Adams said on Friday
that documents related to Lehman Brothers Holdings Inc.'s probe of its
asset sale to a Barclays Plc unit should be made public, Reuters
reported on Friday. Earlier this month, Lehman asked a judge to revisit
the Sept. 2008 sale of Lehman's core U.S. brokerage to Barclays Capital,

claiming that the British bank reaped an improper $8.2 billion 'windfall

profit' from excess assets it took over in the deal. About 50 pages of
the request were redacted and not made public due to confidentiality
agreements. Lehman's creditors' committee, Lehman and the trustee
charged with liquidating the remains of Lehman's brokerage business have

sought to unseal the documents. A court hearing on the topic is
scheduled for Oct. 15. 

href='http://www.reuters.com/article/americasMergersNews/idUSN097357520091009'>Read

more.

CIT Debt Swap Struggles,
Bankruptcy Looms

CIT Group Inc.is seeing little interest from
bondholders in a debt exchange offer aimed at repairing its fragile
balance sheet, making bankruptcy increasingly likely, Reuters reported
yesterday.The lender to small and medium-sized businesses said earlier
this month it was looking for investors to approve a large debt exchange

that would reduce its borrowings, or to approve a pre-packaged
bankruptcy.CIT has limited time to work out its debt difficulties. It
has about $3 billion of debt to repay in the fourth quarter, including
both secured and unsecured obligations, according to a CIT quarterly
filing with regulators. 
href='http://www.reuters.com/article/newsOne/idUSTRE59B58420091012'>Read

more.

In related news, CIT Group CEO Jeffrey M. Peek, who
sought to grow the century-old CIT into a major financial player only to

see the company founder during the credit crisis, will resign on Dec.
31, the

size='3'>New York Times reported today. The
company’s board will form a search committee to find his
replacement. 

href='http://dealbook.blogs.nytimes.com/2009/10/13/cit-chief-executive-to-step-down-at-year-end/?ref=business'>Read

more.

Chicago Cubs File for
Bankruptcy, Plan Sale to Ricketts Family

The Chicago Cubs filed for bankruptcy as part of a
plan by owner Tribune Co. to sell the baseball team to the family of TD
Ameritrade Holding Corp.’s founder, Joe Ricketts, Bloomberg News
reported yesterday. Chicago National League Ball Club LLC listed assets
and debts of more than $1 billion yesterday in documents in U.S.
Bankruptcy Court in Wilmington, Delaware. The transfer has been approved

by Major League Baseball’s other owners. Under a process approved
last month by Bankruptcy Judge

face='Times
















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size='3'>Kevin Carey, Tribune will transfer
the Cubs to a new entity controlled by the Ricketts family. Tribune, the

bankrupt newspaper and TV company, is to keep a 5 percent stake in the
team.The deal, worth about $845 million, would bring Tribune creditors
$740 million, according to court records. 

href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aof8PFmuyR8E#'>Read

more.

GM, Tengzhong Reach Deal on
Sale of Hummer Brand

General Motors Co. has finalized a deal to sell its
Hummer brand to Chinese firm Sichuan Tengzhong Heavy Industrial
Machinery Co. Ltd. for a reported $150 million in a deal helping the
formerly bankrupt company reduce its bevy of brands,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported on Friday.

Under the terms of the arrangement, the Chinese firm will acquire
Hummer-related intellectual property, including its brand, trademark and

trade names, as well as specific IP licenses needed for manufacturing of

the vehicles, the companies said. Tengzhong also will assume existing
dealer agreements, the companies said. Tengzhong will acquire 80 percent

of Hummer through the deal by way of a private investment entity, while
entrepreneur Suolang Duoji will purchase the remaining 20 percent.
Subject to approvals by U.S. and Chinese authorities, the sale agreement

would provide for the continuation of manufacturing operations in the
U.S. in Shreveport, La., until at least June 2011, with an optional one
year extension, preserving more than 3,000 U.S. jobs in the
near-term. 
href='http://bankruptcy.law360.com/print_article/127575'>Read
more. (Subscription required.)

Philly Papers Asset Sale to
Local Interests Nixed

Bankruptcy Judge

face='Times


































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size='3'>Stephen Raslavich on Thursday struck
down a proposed sale of nearly all the Philadelphia Newspapers
LLC’s assets to a consortium of local interests, citing objections

from the U.S. Trustee and a representative from virtually every creditor

group, but noted the sale could be approved if amended,

face='Times


































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size='3'>Bankruptcy Law360 reported on Friday.

Judge Raslavich simultaneously approved the debtors' motion to retain
SafirRosetti as an internal investigator over the objections of the U.S.

Trustee for Region 3, who had argued that the debtor has failed to show
such assistance was warranted. 

The circumstances of the asset sale would be unremarkable

if not for the “regrettably quite high” degree of animosity
that exists between the debtors and their creditors, Judge Raslavich
said. Read
more. (Subscription required.)

Failures of Small Banks
Grow, Straining FDIC

The number of banks seized by the Federal Deposit
Insurance Corp. reached 98 on Friday, highlighting a growing divide
between struggling small banks and large institutions like Goldman
Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing
stronger as the economy improves, the

face='Times


































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size='3'>New York Times reported on Sunday.
Many analysts say that the toxic commercial real estate loans could sink

hundreds of small lenders over the next few years and place a
significant drag on the economy.Already, the bank failures are placing
enormous strain on the FDIC and its fund, which keeps depositors whole.
Flush with more than $50 billion only two years ago, the fund recently
fell into the red. 

href='http://www.nytimes.com/2009/10/11/business/economy/11banks.html?_r=1&em=&pagewanted=print'>Read

more.

SEC Investigating KB
Home’s Accounting Practices

KB Home's disclosed late Friday that the Securities
and Exchange Commission is investigating its accounting practices,
the
size='3'>Wall Street Journal reported
yesterday. KB, the fifth-largest U.S. homebuilder in terms of completed
sales last year, said in the filing that it is cooperating with the
investigation. In mid-2005, KB agreed to pay $3.2 million to settle
federal allegations that its mortgage unit engaged in poor lending
practices. The U.S. Department of Housing and Urban Development charged
that a KB subsidiary made it possible for ineligible borrowers to get
mortgages guaranteed by the Federal Housing Administration. In its SEC
filing on Friday, KB said that the housing market continues to suffer
from a glut of homes available for sale, foreclosures, unemployment and
tight lending standards. 

href='http://online.wsj.com/article/SB10001424052748703790404574467183012011134.html?mod=WSJ_hps_LEFTWhatsNews'>Read

more. (Subscription required.)

Unsecured Creditors' File
Rival Plan in Broadcast Company’s Bankruptcy

Young Broadcasting Inc.'s unsecured creditors have
filed a reorganization plan challenging the company's plan to sell its
assets to its senior lenders for $220 million, proposing instead to
reinstate the lenders' debt and sell substantially all of the equity in
the reorganized company to its noteholders through a rights offering
that would raise $38 million in new capital,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The company's noteholders, some of which
belong to the creditors committee, would automatically get

size='3'>pro rata shares of 10 percent of the
equity in the new company.Noteholders that are qualified institutional
buyers would also get the right to buy pro rata shares of preferred
stock and Class A new common stock in the company through a rights
offering, which would raise $38 million in new capital for the
reorganized company. Holders of general unsecured claims will receive
the lesser of
face='Times New Roman' size='3'>pro rata
size='3'>shares of $1 million, or 10 percent of their allowed claims.
Existing equity would be wiped out. 
href='http://bankruptcy.law360.com/print_article/127782'>Read
more. (Subscription required.)

BofA Appeals Approval of
Taylor Bean, FDIC Loan Deal

Bank of America Corp.has appealed a bankruptcy judge's

approval of a mortgage loan agreement between Taylor Bean & Whitaker

Mortgage Corp. and the Federal Deposit Insurance Corp. in its role as
the receiver for Colonial BancGroup Inc.,

face='Times
















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size='3'>Bankruptcy Law360 reported yesterday.

Bank of Americaclaims that the deal violates an injunction it secured in

a separate case against Colonial related to approximately $1 billion in
cash and loans. Bankruptcy Judge

face='Times
















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size='3'>Jerry A. Funk approved the
stipulation on Sept. 29. Bank of America had objected to it on Sept. 17,

arguing that the agreement is an “attempted end run” by the
FDIC around an injunction a district court has issued blocking Colonial
from disposing of cash and loans that allegedly belong to Bank of
America.In August, Bank of America secured a restraining order barring
Colonial from disposing of over $1 billion in loans and cash it held for

the financial giant. 
href='http://bankruptcy.law360.com/print_article/127796'>Read
more. (Subscription required.)

Jeweler’s Proposed
Reorganization Plan Settles Merrill, Family Claims

Bankrupt jeweler Fred Leighton Holding Co. filed a
reorganization plan on that includes a court-supervised asset sale, an
auction of some of its jewelry stock and a settlement with dissident
family members who had been involved in extensive and contentious
litigation,

size='3'>Bankruptcy Law360 reported yesterday.

Also included in the plan is an auction of certain jewelry at Christie's

Inc. in New York on Oct. 21. A full list of the jewelry up for auction
will be submitted as part of a plan supplement, according to the Fred
Leighton plan.Proceeds from the asset and jewelry auctions, as well as
the balance of Fred Leighton's properties, will be transferred to
Merrill Lynch Mortgage Capital Inc., Fred Leighton's pre-bankruptcy
lender and leading creditor. 
href='http://bankruptcy.law360.com/print_article/127804'>Read
more. (Subscription required.)

U.S. Trustee Balks at
Filene's Basement Deal

Acting U.S. Trustee

face='Times
















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size='3'>Roberta A. DeAngelis on Friday
objected to a deal among bankrupt Filene's Basement Inc., former parent
Retail Ventures Inc. and shoe retailer DSW Inc. to wipe out $70 million
in claims related to loans, bills and other obligations,

face='Times
















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size='3'>Bankruptcy Law360 reported yesterday.

DeAngelis’ objection said that the release and exculpation
provisions of the settlement are too broad. In particular, DeAngelis
took issue with the mutual release provision containing a release by all

creditors who vote in favor of the plan of reorganization or
liquidation.The provision is inappropriate because it doesn't appear
that all creditors have been provided notice of the proposed release
language, the trustee's motion said. 
href='http://bankruptcy.law360.com/print_article/127692'>Read more.
(Subscription required.)

BofA to Hand over
Documents Related to Its Merrill Deal

Bank of America Corp.agreed to hand over documents
that detail the legal advice it received during its purchase of Merrill
Lynch & Co., a reversal after months of resisting such a move,
the
size='3'>Wall Street Journal reported today.
The new, more-conciliatory legal approach is in part intended to pave
the way to a settlement of various investigations and is designed to
ease pressure on the bank as it works to restore stability amid the
unexpected departure of CEO Kenneth Lewis at the end of 2009.The board
voted to waive the attorney-client privilege Friday. On Monday, the bank

informed New York Attorney General Andrew Cuomo's office that it had
reversed course and would waive its right to keep private its dealings
with attorneys. 

href='http://online.wsj.com/article/SB125538611836381155.html?mod=WSJ_hps_sections_news'>Read

more. (Subscription required.)

Magna Seeks January
Auction of Maryland Racetracks

Magna Entertainment Corp., owner of the Pimlico Race
Course and Laurel Park, has asked a bankruptcy judge for permission to
auction its Maryland racetracks early next year, under the condition
that potential buyers promise not to move the Preakness race out of the
state, the

size='3'>Baltimore Sun reported today. The
prospect of Maryland's marquee horse-racing event being sold to
out-of-state buyers prompted state lawmakers to pass a law earlier this
year granting the government rights to seize the Preakness under eminent

domain - and Magna alleged in court papers last week that state
intervention is unconstitutional and creates a 'chilling effect' on its
efforts to sell the Maryland tracks.However, with Magna's request that
bidders pledge to leave the race in Maryland, government leaders were
optimistic that Maryland will keep its Triple Crown race without a
fight. In asking for a Jan. 8 auction date Magna also asked for a Nov. 2

deadline for potential buyers to submit bids. 

href='http://www.baltimoresun.com/sports/horse-racing/bal-md.magna13oct13,0,3812927,print.story'>Read

more.

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