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April 24, 2009
name='1'>Congress to Focus on Cramdown, Credit Cardholder’s
Bill of Rights and Mortgage Fraud Legislation Next
Week
Both the Senate and the House of
Representatives will be acting on legislation addressing cramdown of
home mortgages, consumer credit card protections and reducing fraud in
the origination of mortgages. While negotiations on the details of the
cramdownprovisions are still being negotiated by stakeholders and Sen.
Dick Durbin (D-Ill.), the provisions will likely be voted on in the
Senate as a part of a larger housing reform measure. The House of
Representatives has scheduled a vote for next week on H.R. 627, the
“Credit Cardholder’s Bill of Rights,” which
passed the House Financial Services Committee this week. Finally, the
House Financial Services Committee has scheduled a mark-up session on
Tuesday, April 28, for H.R. 1728, the “Mortgage Reform and
Anti-Predatory Lending Act.”
href='http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h627ih.txt.pdf'>Click
here to read H.R. 627, the “Credit Cardholder’s Bill of
Rights.”
href='http://www.house.gov/apps/list/speech/financialsvcs_dem/h.r._1728--mortgage_reform_and_anti-predatory_lending_act.pdf'>Click
here to read H.R. 1728, the “Mortgage Reform and
Anti-Predatory Lending Act.”
Analysis:
Tracking Loans Through a Firm That Holds Millions
Created by lenders seeking to
save millions of dollars on paperwork and public recording fees every
time a loan changes hands, MERS is a confidential computer registry for
trading mortgage loans, the New
York Times reported today. From an office in
the Washington, D.C. suburbs, it played an integral, if unsung, role in
the proliferation of mortgage-backed securities that fueled the housing
boom. However, with the collapse of the housing market, the name of MERS
has been popping up on foreclosure notices and on court dockets across
the country, raising many questions about the way this controversial but
legal process obscures the paths of mortgage ownership. In the last few
years, banks have initiated tens of thousands of foreclosures in the
name of MERS — about 13,000 in the New York region alone since
2005 — confounding homeowners seeking relief directly from lenders
and judges trying to help borrowers untangle loan ownership.
href='http://www.nytimes.com/2009/04/24/business/24mers.html?ref=business&pagewanted=print'>Read
more.
Autos
U.S. Said
to Seek a Chrysler Plan for Bankruptcy
The Treasury Department is
directing Chrysler to prepare a chapter 11 bankruptcy filing as soon as
next week, the New York
Times reported today. The company faces a
deadline of April 30 to come up with a viable business plan supported by
its creditors, the United Automobile Workers union and Fiat, the Italian
car company that wants to acquire a stake in Chrysler.The Obama
administration has told Chrysler it will provide up to $6 billion in new
financing, on top of the $4 billion in loans it has already given the
company, if Chrysler can complete a deal by next Thursday with a cost
structure that gives it a chance of survival. Treasury now has an
agreement in principle with the UAW, whose members’ pensions and
retiree health care benefits would be protected in the event of a
bankruptcy filing.Moreover, under this outcome, Fiat would complete its
alliance with Chrysler while the company is under bankruptcy
protection.
href='http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&ref=business&pagewanted=print'>Read
more.
Analysis:
Plight of Carmakers Could Upset All Pension Plans
Decisions that the government
will make soon on the future of General Motors and Chrysler could
accelerate the decline of traditional pension plans, the
face='Cambria' size='3'>New York Times
size='3'>reported today. Pension experts predict that a government
takeover of the two giant plans would spur other auto companies and all
types of manufacturers to abandon such benefits for competitive reasons.
With or without a bankruptcy filing, the government is quietly making
the preparations that would be needed to take over Chrysler’s
pension plan, with its 255,000 participants. The future of General
Motors’ pension plan is also unclear. GM has until June 1 to come
up with an acceptable business plan, but even if it declares bankruptcy,
it still may try to keep its pension plan afloat. GM’s plan for
hourly workers, which covers 485,000 people, was in reasonably good
shape until last fall’s market turmoil, and would not require cash
contributions until 2013. For traditional pension plans, “maybe
this is their last stand,” said
size='3'>Jeffrey B. Cohen, a partner with the
law firm Ivins, Phillips & Barker in Washington who was chief
counsel for the Pension Benefit Guaranty Corp.from 2005 to 2007. If the
automakers’ plans fail, he added, “the biggest domino will
have fallen for the PBGC.”
href='http://www.nytimes.com/2009/04/24/business/24pensions.html?ref=business&pagewanted=print'>Read
more.
Delphi
Receives Extension to File Reorganization Plan
Bankruptcy Judge
face='Cambria' size='3'>Robert Drain yesterday
approved a motion extending the deadline for Troy, Mich.-based Delphi
Corp. to submit its plan to its lenders until May 4, the Associated
Press reported yesterday. The lenders will then have until May 8 to
approve it. Delphi Attorney Jack Butler says that talks
continue between Delphi, its former parent General Motors Corp. and the
federal auto task force. While progress has been made, Butler said that
the sides need more time to finalize a deal.A court hearing on
Delphi’s reorganization plan has been scheduled for May
7.
$1.4 Billion in Quarter, but Beats Analysts’
Forecast
Ford Motor Co. said today that it
lost $1.4 billion in the first quarter and that it did not plan to seek
federal aid even as its two domestic rivals faced the possibility of
bankruptcy, the New York
Times reported today. Ford, the only Detroit
automaker not being kept afloat by the government, said that it had
$21.3 billion in cash as of March 31, after going through $3.7 billion
of its automotive cash reserves in the quarter. That is better than the
$7.2 billion it used in the fourth quarter, even though sales were lower
from January to March. Excluding one-time items, including the benefit
of a debt restructuring and a charge related to the potential sale of
its Volvo brand, Ford lost $1.8 billion after taxes, or 75 cents a
share. That is roughly $1 billion less than analysts expected, but $2.3
billion worse than the profit it posted a year ago.
href='http://www.nytimes.com/2009/04/25/business/25ford.html?ref=business&pagewanted=print'>Read
more.
Regulators
See Risk in U.S. Bank Stakes
A draft report from the Financial
Stability Oversight Board, which consists of officials from the Federal
Reserve and the Treasury Department, among others, says U.S. ownership
of individual banking firms 'is not an objective,' and that any such
occurrence would be temporary, the
size='3'>Wall Street Journal reported today.
Regulators are currently finalizing 'stress tests' at the nation's 19
largest banks designed to gauge their ability to withstand a prolonged
downturn. They could result in firms being forced by the government to
seek additional capital as a buffer, perhaps through further capital
injections from the Treasury or the conversion of the government's
preferred stock into common equity.As a result of the stress tests and
any follow-up capital injections, 'the government has the potential to
acquire a substantial portion of the outstanding common shares of a
participating institution,' the report said.The draft report, which
could be released in coming days, said that if the government ends up
with an ownership stake, the 'Treasury will maintain the goal of keeping
the period of government ownership as temporary as possible.' This could
take the form of encouraging private capital to replace federal
investments. Additionally, the report says the Treasury would seek to
sell at least 20 percent of any common equity it acquires from firms
each year.
href='http://online.wsj.com/article/SB124051525463449225.html'>Read
more. (Subscription required.)
General
Growth Adds Subsidiaries to Chapter 11 Filing
Less than a week after General
Growth Properties Inc. (GGP) filed the largest real estate bankruptcy in
U.S. history, 28 of the mall operations giant's properties and
affiliated entities have also filed chapter 11 petitions,
Bankruptcy Law360
size='3'>reported yesterday. With the inclusion of the 28 subsidiaries
that filed for chapter 11 on Wednesday, the total number of GGP regional
shopping centers and other subsidiaries seeking to reduce and
restructure their debts in chapter 11 proceedings now stands at 167.The
day-to-day operations and businesses of all of GGP's shopping centers
and properties will continue as usual, the company said
yesterday.
href='http://bankruptcy.law360.com/articles/98242'>Read more.
(Subscription required.)
U.S. Trustee
Objects to Charter's Bankruptcy Plan
The U.S. Trustee overseeing the
bankruptcy case of cable TV operator Charter Communications said that
the company’s disclosure statement is 'deficient' and 'fails to
contain adequate information,' Reuters reported yesterday. The U.S.
Trustee, calling for a change of language in the plan, said that Charter
did not explain the grounds for releasing its directors, financial
advisers, former officers, attorneys, employees and other parties from
liability.Charter postponed a hearing on its reorganization plan to May
5 from April 29. The case is In
re Charter Communications, U.S. Bankruptcy
Court, Southern District of New York, No. 09-11435.
href='http://www.reuters.com/article/ousiv/idUSBNG40617220090424'>Read
more.
Madoff
Investors Who Suffered Net Loss Safe from Clawbacks
Irving Picard, the
court-appointed trustee of Bernard Madoff's defunct firm, said that
investors who had a net loss due to Madoff’s fraud won't be asked
to return funds they withdrew from his firm in recent years, the
Wall Street Journal
size='3'>reported today. Picard said he would not seek to recover funds
from 'net losers' in the fraud, referring to those who lost more than
they withdrew over time. Hundreds of investors recently received letters
that sought the return of funds they redeemed from the Madoff firm as
many as six years before the firm collapsed -- the time limit allowed
under New York law. Picard’s announcement yesterday means that he
likely will not recoup the entire $735 million he requested over the
past week from 223 investors, though it is too early too know how much
less will be eligible for clawbacks.
href='http://online.wsj.com/article/SB124053265828750823.html'>Read
more. (Subscription required.)
Developer Files for Chapter 11, Plans to Exit Southeastern U.S.
Market
Opus South Corp. filed for
chapter 11 protection as part of the company's decision to exit the
southeastern U.S. market, the
size='3'>Business Journal of Milwaukee
size='3'>reported yesterday. The deterioration of the commercial and
residential real estate markets in the Southeast prompted the division
and some of its subsidiaries to file for bankruptcy, Opus South said.
The company has developed more than 27 million square feet of space
since its founding in 1981. The firm estimates that it owes between 200
and 999 creditors between $50 million to $100 million, according to
bankruptcy documents. The company's estimated assets are between $50
million and $100 million.
href='http://www.bizjournals.com/milwaukee/stories/2009/04/20/daily74.html'>Read
more.
SEC Plans
to End Broker Vote Rule, in Win for Activists
In a major win for activist
investors, the Securities and Exchange Commission plans to toss out
decades-old rules in a move that will give activists significantly more
power to determine who sits on corporate boards, the
face='Cambria' size='3'>Wall Street Journal
size='3'>reported today.The rule change centers on whether brokers are
allowed to vote on their clients' behalf in director elections. Since
1937, brokers have been able to vote their clients' shares, and have
typically voted in favor of standing managements and boards. However,
starting in January, the SEC will change those standards as it is
expected to announce the rule change as early as next week. Brokers
won't be able to vote their clients' shares. Since many small
shareholders simply don't vote, that will give more power to
institutional and activist shareholders who do.
href='http://online.wsj.com/article/SB124052371403949911.html#mod=testMod'>Read
more. (Subscription required.)
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