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March 3, 2009
House Lawmakers Discussing
New Restrictions to 'Cramdown' Measure
Lawmakers are discussing whether to tighten language
in the mortgage cramdown legislation to clarify that chapter 13
bankruptcy is a last resort only after efforts at voluntary mortgage
modifications fail, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Led by Rep. Ellen Tauscher, (D-Calif.), a group
of Democratic centrists pushed last week to lengthen from 15 to 30 days
the advance warning borrowers must give to lenders before seeking a
judicial modification. Borrowers would also have to prove they provided
the lender with statements of income, expenses and debt. The
legislation's fate remains up in the air after Democratic leaders last
week postponed a vote on the measure. That vote, originally scheduled
for today, is now likely to happen no earlier than Wednesday due to a
snowstorm that disrupted the House schedule.
href='http://online.wsj.com/article/SB123603052547013583.html?mod=article-outset-box'>Read
more. (Subscription required.)
Citigroup to Allow Jobless
to Pay Less on Mortgage Loans
Citigroup Inc. announced a new program today that will
temporarily lower mortgage payments to an average of $500 a month for
certain borrowers who have recently lost their jobs and are at least 60
days behind on their mortgage payments, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Borrowers will be allowed to make the lower
payments for three months and Citigroup will waive interest and
penalties during this period. To qualify for the program, borrowers must
live in the home and have a mortgage that is owned and serviced by
CitiMortgage. The program applies only to loans of $417,500 or
lower.
href='http://online.wsj.com/article/SB123604815369915983.html#mod=testMod'>Read
more. (Registration required.)
Banks Work to Kill FTC
Omnibus Provision
Banks are protesting a provision tucked into the
omnibus appropriations bill that would allow the Federal Trade
Commission (FTC) to issue rules on cracking down on predatory mortgages
and allow state attorneys general to enforce the language and all
consumer lending covered under the Truth In Lending Act,
face='Times New Roman'>
size='3'>CongressDaily reported today. Sen.
Byron Dorgan (D-N.D.) inserted the language into the $787 billion
spending bill because he believed that the country needs 'more cops on
the beat' to track predatory lending. The Senate is considering the
omnibus this week and is attempting to pass it and send it to President
Obama for his signature by Friday, when the continuing resolution
funding most of the government expires. Lenders oppose the move because
the Federal Reserve and banking regulators already have exclusive
authority to enforce TILA violations for insured-depository
institutions, including mortgages and other consumer transactions. The
Fed recently updated its rulemaking over mortgage lending after
complaints that it was too lax during the housing bubble buildup earlier
this decade. Under the new Fed rules, lenders would have to determine if
the borrower had the ability to repay a loan, verify income and assets
of a customer, and restrict prepayment penalties during the first years
of a loan.
Sunrise Senior Living May
Have to File for Bankruptcy
Sunrise Senior Living Inc. may have to reorganize
under bankruptcy protection if it cannot reach agreements with lenders
to restructure debt, the company said in a regulatory filing, adding
that it has sufficient cash balances to meet obligations through March
31, Reuters reported yesterday. The company
noted in the filing that the economic downturn had caused the price of
many stocks, including its own, to decline, and that credit was tight.
The company currently cannot borrow additional funds under the bank
credit facility and has significant debt maturing in 2009 and 2010. As
of December 31, 2008, the company's total debt was $636.1 million and
had $29.5 million of cash and cash equivalents. It posted a net loss of
$439.2 million for the year.
href='http://uk.reuters.com/article/marketsNewsUS/idUKN0233112620090302'>Read
more.
Judge Dismisses
Congoleum’s Bankruptcy Case
Bankruptcy Judge
face='Times






New
Roman'
size='3'>Kathryn Ferguson on Thursday rejected
floor covering maker Congoleum Corp.’s reorganization plan and
ordered dismissal of its more than five-year-old chapter 11 case,
Reuters reported yesterday. Congoleum, which is appealing the ruling,
filed for chapter 11 protection in December 2003, citing a need to
resolve legal claims against the company related to the use of asbestos
in its products decades ago. In an opinion on Feb. 26, Judge Ferguson
wrote that the company had submitted an 'unconfirmable' bankruptcy plan,
citing issues with payments to two lawyers for some of the asbestos
claimants.
href='http://www.reuters.com/article/companyNews/idUSN0242979720090302'>Read
more.
U.S. Oil Explorer Seeks
Bankruptcy
Hallwood Energy LP, a U.S. explorer and developer of
oil and natural gas in Texas and Arkansas, has filed for bankruptcy
protection, citing falling energy prices and a lack of new financing,
Bloomberg News reported yesterday. The company and five affiliates
listed from $50 million to $100 million in assets and more than $100
million in debt in chapter 11 papers filed yesterday. Hallwood Energy, a
unit of Hallwood Group Inc., has oil and gas leases covering about
199,000 acres in the Arkoma Basin in Arkansas, and the Delaware Basin in
western Texas. Hallwood Energy, formed in 2005 by a merger of three
companies, has about $115 million of secured debt to Hall Phoenix Inwood
Ltd. and about $30 million of unsecured debt, according to bankruptcy
court papers.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aLrqrq8fPXy8&refer=home'>Read
more.
Lyondell Chemical's $8
Billion DIP Package Approved
Judge
face='Times New Roman' size='3'>Robert E. Gerber
size='3'>on Sunday approved more than $8 billion in debtor-in-possession
financing for Lyondell Chemical Co.,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Approval of the DIP financing package
follows the January resolution of a dispute between Lyondell and a group
of creditors that claimed that Access Lenders LLC was getting
preferential treatment in the package. The creditors provided greater
creditor participation in designing the package. The creditors,
including private-equity firms Appaloosa Management LP, Apollo
Management VII LP, Ares Management LLC, Bayerische Landesbank, DZ Bank
AG, Highland Capital Management LP, Kohlberg Kravis Roberts & Co.,
W.R. Huff Asset Management Co. LLC, Silver Point Capital LP and Western
Asset Management Co., claimed that Access Lenders was an affiliate of
Lyondell's primary private-equity shareholder.
href='http://bankruptcy.law360.com/articles/89437'>Read
more. (Subscription required.)
U.S. Likely to Keep the
Reins on Fannie and Freddie
Lawmakers and company executives are beginning to
quietly acknowledge that despite assurances that the takeover of Fannie
Mae and Freddie Mac would be temporary, the giant mortgage companies
will most likely never fully return to private hands, the
face='Times New Roman'>New York
Times reported today. Regulators have ordered
the companies to oversee a vast new mortgage modification program, to
buy greater numbers of loans, to refinance millions of at-risk
homeowners and to loosen internal policies so they can work with more
questionable borrowers. Lawmakers have given the companies access to as
much as $400 billion in taxpayer dollars, a sum more than twice as large
as the pledges to Citigroup, Bank of America, JPMorgan Chase, General
Motors, Wells Fargo, Goldman Sachs and Morgan Stanley combined.
Regulators defend those actions as essential to battling the economic
crisis, pointing out that Fannie and Freddie are basically the only
lubricants in the housing market at this point.
href='http://www.nytimes.com/2009/03/03/business/03mortgage.html?_r=1&ref=business&pagewanted=print'>Read
more.
Rescue Funds
By easing the terms of its $150 billion rescue package
for the American International Group, the government is trying to buy
time for the financial conglomerate to slim down and reinvent itself as
a simple property and casualty insurer, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. The government will meanwhile take a preferred
stake in the company’s assets in its fourth attempt to stanch the
flow of problems from the insurance giant. The worldwide life insurance
division and its Asian insurance operations are being taken off the
block because they are too hard to sell for a reasonable price in the
current market, and are essentially being used to repay expensive
government loans. The company said Monday that it would create a new
holding company, called A.I.U. Holdings, and install its domestic and
foreign property and casualty insurance businesses there — with
more than 44,000 employees and customers in 130 countries.
href='http://www.nytimes.com/2009/03/03/business/03insure.html?ref=business&pagewanted=print'>Read
more.
“Bad Bank”
Funding Plans Begin to Emerge
The Obama administration, filling in some of the
blanks in its bank bailout, is considering creating multiple investment
funds to purchase the bad loans and other distressed assets that lie at
the heart of the financial crisis, the
face='Times






New
Roman'
size='3'>Wall Street Journal reported today.
The Obama team announced its intention to partner with the private
sector to buy $500 billion to $1 trillion of distressed assets as part
of its revamping of the $700 billion bank bailout last month. No
decision has been made on the final structure of what the administration
is calling a private-public financing partnership, but one leading idea
is to establish separate funds to be run by private investment managers.
The managers would have to put up a certain amount of capital.
Additional financing would come from the government, which would share
in any profit or loss.
href='http://online.wsj.com/article/SB123603913648314649.html#mod=testMod'>Read
more. (Subscription required.)
GM to Buy Delphi Steering
Line
General Motors Corp. is set announce that it will buy
Delphi Corp.'s global steering business as a critical move in the
continuing restructuring of both troubled companies, the
face='Times New Roman'>Wall
Street Journal reported today.GM has been in
talks with Delphi for several weeks in hopes of buying some of the
auto-parts maker's plants that are central to GM's vehicle
manufacturing. The steering business, based in Saginaw, Mich., is the
first in what will likely be a series of purchases GM will make from
Delphi. Terms of the steering-business deal aren't expected to be
disclosed. GM is expected to turn around and try to sell the steering
business as soon as possible.The deal is subject to various hurdles, and
could potentially need approval from the Treasury Department, which has
a major say in GM's operations after giving it a $13.4 billion
loan.
href='http://online.wsj.com/article/SB123604350126715241.html'>Read
more. (Subscription required.)
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