May 12008

 

name='1'>Supreme Court Approves Amendments to Federal Rules of
Bankruptcy Procedure

The U.S. Supreme Court
approved and forwarded to Congress amendments to the Federal Rules of
Bankruptcy Procedure to take effect on Dec. 1,
BNA's Bankruptcy
Law Daily reported yesterday. The amendments,
which were approved by the Supreme Court on April 23, generally reflect
interim rules already in place to implement BAPCPA that were adopted by
almost all bankruptcy courts in August 2005 and are effective until the
final rules are put in place to implement the statute. 

href='http://www.supremecourtus.gov/orders/courtorders/frbk08p.pdf'>Click

here to read the Supreme Court’s approved amendments to
the Federal Rules of Bankruptcy Procedure.

name='2'>Senate Passes Bill to Stabilize Student Lending
Market

The U.S. Senate yesterday

unanimously passed a bill aimed at stabilizing the $85 billion student
loan industry by allowing the Education Department to intervene and
inject liquidity into the market, Reuters reported. Already approved
earlier this month by the House of Representatives, the legislation
would affect loan providers such as Sallie Mae, Bank of America Corp,
Citigroup, JPMorgan Chase & Co. and many others.
size='3'>  Backed by the Bush administration,

H.R. 5715 would allow the Education Department to buy up federally
guaranteed student loans that lenders are unable to sell as securitized
debt. The temporary loan-purchases program would expire in mid-2009. The

bill would also let the Education Department funnel capital for loans to

state guaranty agencies under a 'lender of last resort' program -- not
only for students, but for entire colleges that face loan shortages from

other sources. The Senate added an amendment to the bill that would make

more federal grant money available to about 100,000 students. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/30/AR2008043002382.html'>Read

more.

Mortgage
Lending

name='3'>House Panel Close to Approving Deal on Legal Aid Funds for
Distressed Homeowners

The House Financial
Services Committee approved an amendment to the housing stimulus measure

yesterday that would authorize $35 million in legal aid to borrowers on
the verge of foreclosure,
size='3'>CongressDaily reported. The
amendment, offered by Rep. Ed Perlmutter (D-Colo.) lets Democrats
revisit the issue after an effort by Rep. Melvin Watt (D-N.C.) to fund
for such services through the Neighborhood Reinvestment Corp., a
nonprofit created by Congress to allocate grants for community
revitalization efforts, was unexpectedly defeated last week during a
markup on H.R. 5830. The banking industry launched a last-minute
opposition campaign against the Watt amendment, contending that it was
poorly written and could trigger a wave of class-action litigation
against lenders. The amendment put forward by Perlmutter would make
minor changes to Watt’s amendment, such as authorizing $5 million
less. House Financial Services Chair Barney Frank (D-Mass.) added that
if any concerns linger, he would go to Judiciary Chairman John Conyers
(D-Mich.) to obtain language explicitly ruling out class-action suits
before the overall bill goes to the House floor next week.

The House Financial Services
concludes its mark-up of H.R. 5830 today. 

href='http://www.house.gov/apps/list/speech/financialsvcs_dem/mu050108.shtml'>Click

here to view the live Webcast of the hearing.

name='4'>Countrywide to Testify on Senate Panel Examining the
Treatment of Foreclosed Homeowners

Sen. Charles Schumer (D- N.Y.)
said that Countrywide Financial Corp. will testify next Tuesday at a
U.S. Senate panel hearing examining the treatment of some foreclosed
homeowners in bankruptcy, Reuters reported yesterday. Countrywide is the

target of a federal probe over accusations that it piled on improper
fees, initiated foreclosures too soon and ignored court orders in
several cases involving borrowers who filed for bankruptcy protection.
The hearing will investigate allegations “that mortgage lenders
like Countrywide have abused the bankruptcy system,' according to
Schumer. Countrywide is currently the only company scheduled to testify
at the hearing. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/30/AR2008043002994_pf.html'>Read

more.

name='5'>Mortgage Bankers Oppose New York AG’s Proposal to
Reform Appraisal Practices

The Mortgage Bankers
Association (MBA) opposed plans initiated by New York Attorney General
Andrew Cuomo to reorganize the appraisal business, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. MBA said that Cuomo’s plan should be
withdrawn or at least modified as it conflicts with federal regulatory
guidance and that people in the industry weren't given a chance to
provide input before it was drawn up. In early March,
government-sponsored mortgage investors Fannie Mae and Freddie Mac
announced an agreement with Cuomo aimed at discouraging inflated
appraisals, widely viewed as one cause of the mortgage-default crisis.
The two companies, seeking to avoid the threat of legal action by Cuomo,

agreed to a code of conduct due to take effect Jan. 1. The code bars
lenders and their representatives from pressuring appraisers to supply
inflated estimates of property values. Bank employees who are involved
in making loans wouldn't be allowed to choose appraisers under the code.

Lenders wouldn't be able to make loans on the basis of appraisals from
their own employees or from other companies they control. The code also
would bar lenders from using appraisals ordered by mortgage
brokers. 

href='http://online.wsj.com/article_print/SB120960879849358391.html'>Read

more. (Registration required.)

name='6'>Judge Approves Settlement for Clergy Abuse Victims
in
size='3'>Iowa

Bankruptcy Judge
Lee Jackwig
size='3'>yesterday approved a $37 million settlement between the Roman
Catholic Diocese of Davenport, Iowa, and more than 150 people who say
they were sexually abused by its priests, the Associated Press reported.

Judge Jackwig's approval of the diocese's reorganization plan allows the

diocese to start paying the settlement money, which includes proceeds
from the sale of some diocese property. The
w:st='on'>
size='3'>Davenport diocese
and creditors reached a settlement in November that calls for the
diocese to pay $17.5 million, with the rest coming from its insurance
carrier, Travelers Cos. of St. Paul., Minn. The diocese has already paid

nearly $10.7 million to 45 other victims since 2004. 

href='http://www.nytimes.com/aponline/us/AP-Diocese-Settlement.html?sq=bankruptcy&st=nyt&scp=9&pagewanted=print'>Read

more.

name='7'>Senator Looks to Move Credit Card Practices
Legislation

Senate Banking
Chairman
size='3'>Christopher Dodd
(D-Conn.) vowed yesterday to move legislation he is sponsoring that
would curb some credit card practices, even though the Federal Reserve
is scheduled Friday to release rules against abusive and unfair card
terms,
size='3'>CongressDaily reported today. The Fed

is expected to issue its preliminary rules Friday to rein in some
abuses, but Dodd said that he thinks such regulations will not go far
enough. The bill he is sponsoring includes some similar provisions that
are contained in a House version sponsored by Financial Services
Financial Institutions Subcommittee Chairwoman Carolyn Maloney (D-N.Y.),

including a ban on the practice of 'universal default.' Unlike the House

bill, Dodd’s measure would place additional restrictions on
issuing cards to those under 21 years of age, requiring them to obtain
the signature of a parent, guardian or other person who will take
responsibility for any debt.

SEC
Sues Alabama Mayor in Bond Deals

The Securities and
Exchange Commission filed a lawsuit yesterday alleging that an

size='3'>Alabama investment banker
gave more than $156,000 to
face='Times New Roman' size='3'>Jefferson

size='3'>County (

w:st='on'>
size='3'>Ala.) Mayor Larry

P. Langford in undisclosed payments while Langford was arranging
millions of dollars in fees for the banker’s firm, the
New York Times

size='3'>reported today.  The SEC accused
Langford; the banker, William B. Blount; and his firm, Blount Parrish,
of fraud in the underwriting of bond offerings and interest rate swaps.
Those deals have left
w:st='on'>
size='3'>Jefferson

face='Times New Roman'
size='3'>County
size='3'>vulnerable to fluctuations in the municipal bond market, and
for the last two months the county has practiced financial triage to
avoid a bankruptcy filing. If it is unable to renegotiate with its
creditors soon, it could result in a municipal bankruptcy filing among
the largest in U.S. history. 

href='http://www.nytimes.com/2008/05/01/business/01muni.html?ref=business&pagewanted=print'>Read

more.

w:st='on'>
name='9'>U.S.
face='Times New Roman' size='3'> Trustee Opposes Appaloosa Fee
Request in Dana Corp. Case

U.S. Trustee
Diana Adams
size='3'>objected to a $2.5 million fee request by the lawyers and
financial advisers of hedge fund Appaloosa Management LP in Dana
Corp.’s chapter 11 case,
size='3'>Bankruptcy Law360 reported
yesterday.
size='3'>Adams said that the hedge
fund had not met its burden for showing the substantial benefit of its
involvement, since it had never entered into an investment agreement
with Dana despite “protracted” participation in the case.
The fees are sought on behalf of Appaloosa's lawyers, from White &
Case LLP, and its financial advisers, Blackstone Advisory Services
LP.
size='3'>Adams argued that Appaloosa
was a “losing bidder” that stood in contrast to
Centerbridge, which was “intimately involved” in the
restructuring plan that aided Dana's exit from bankruptcy in early
February. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54667'>Read

more. (Registration required.)

name='10'>Turnaround Under Way, GM Is Still Bleeding
Cash

Three years into its
turnaround plan, General Motors has greatly improved its primary
business — selling cars — yet money keeps flowing out of the

company by the billions, the
size='3'>New York Times reported today.
GM’s automotive profit rose to $392 million in the first quarter
from $231 million a year ago, as it overcame sharply lower demand for
big, profitable vehicles in
face='Times New Roman' size='3'>North America
size='3'>with higher sales in every other global sales
region. However, it
lost $3.25 billion as it struggled with a bankrupt former parts
division, a strike at a major supplier and home loans made by its
finance arm that have gone bad. The loss included a $1.45 billion
write-down in the value of GM’s interest in its finance arm, GMAC,

which was a consistent source of profits for GM until the housing market

turned sour. It also included a $731 million noncash charge related to
support of a reorganization effort at the parts supplier Delphi Corp., a

spinoff that may sap money from GM’s coffers even longer than
expected. GM blamed a strike at a Detroit-based supplier, American Axle
& Manufacturing, for $800 million of its first-quarter loss. The
strike began more than two months ago and shows no signs of ending
soon. 

href='http://www.nytimes.com/2008/05/01/business/01auto.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read

more.

w:st='on'>
name='11'>Mesa

size='3'>, Hawaiian Airlines Settle Trade Secrets Case for $52.5
Million

Mesa Air Group Inc.
agreed to pay $52.5 million to Hawaiian Airlines and drop its appeal of
the $80 million judgment initially awarded in their ongoing trade
secrets case, Bankruptcy

Law360 reported yesterday. The settlement,
disclosed by the airlines on Wednesday, stipulates that

size='3'>Mesa will pay the
total amount in a cash payment within two days of the approval of the
settlement by the U.S. Bankruptcy Court for the District of
Hawaii.
face='Times New Roman' size='3'>Mesa
size='3'>, which agreed to the settlement without admitting any
wrongdoing, said that it will pay the settlement with the bond that the
company had previously posted with the bankruptcy court. The court will
return the remaining funds from the bond, $37.5 million, to

size='3'>Mesa. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54654'>Read

more. (Registration required.)

New

Century Loan Officer Receives 3-Year Prison Sentence

The U.S. Department of
Justice said that a former loan officer at shuttered subprime mortgage
lender New Century Financial Corp. has been sentenced to three years in
prison and ordered to pay roughly $800,000 to the government and victims

of a kickback scheme he operated for over four years,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Renato Gonzales Quiazon acknowledged that
while working at New Century Mortgage, he devised a scheme to
fraudulently obtain loan kickbacks and drain funds from borrowers'
escrow accounts, reaping more than $500,000 between January 2000 and
October 2004. In
2000 Quiazon entered into an agreement with an independent mortgage
broker, Alfonso Barretto, who let Quiazon use his name and broker's
license on loans that Quiazon then processed through New Century
Mortgage, according to DOJ. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54683'>Read

more. (Registration required.)

name='13'>Unsecured Creditors Reach Agreement on Amended Ziff Davis
Plan

Days after its unsecured
creditors’ committee raised a host of concerns about Ziff
Davis Media Inc.'s
reorganization plan and disclosure statement, the magazine publisher has

resolved the issues with an amended plan,

size='3'>Bankruptcy Law360 reported
yesterday. Ziff
Davis filed amended versions of both documents on Tuesday that addressed

the complaints of the unsecured creditors, a group that includes trade
creditors and holders of over 60 percent of the company’s
unsecured subordinated notes totaling $186 million. The amended plan
converts over $428 million in funded indebtedness to new common stock of

reorganized Ziff Davis Media and a new note that will not exceed $57.5
million, and it provides for two pools of cash for distribution to
general unsecured creditors. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=54731'>Read

more. (Registration required.)