April 102008

 

House

Panel Votes to Protect Federal Student

Loan Stability

The House Education and
Labor Committee approved a bill yesterday

aimed at ensuring that the current turmoil in the nation's credit
markets does not hamper students or their

parents from obtaining the loans they need to attend college,

size='3'>CongressDaily reported. House
Education and Labor Committee Chairman George

Miller (D-Calif.) said that some lenders have been reducing their
lending activity in the federally guaranteed

student loan program, while others have indicated they might increase
their activity. Although students have

yet to encounter widespread difficulties obtaining the loans they need
for college, Miller said that the bill is

aimed at preventing any future problems. 'As we have seen far too often,

shocks in the financial markets can come

as a surprise, leaving those affected little time to react,' he said.
H.R. 5715 would reduce borrowers' reliance

on more expensive private loans by increasing the annual loan limits on
federal student loans by $2,000 for all

students and boosting the total amounts students can borrow over the
course of their education. It also would

give parents an additional six months to defer repaying their children's

student loans.

Mortgage
Lending

name='2'>House Chairman Warns Mortgage Investors to

Not Limit Loan Restructuring

House Financial Services
Chairman Barney Frank (D-Mass.) served

notice to investors in mortgage-backed securities at a hearing yesterday

that they better start allowing at-risk

loans to be restructured or he will push through legislation that would
remove legal liability for loan servicers

that restructure them on their own, CongressDaily

reported today. Echoing the frustrations of many
lawmakers and regulators, Frank said that

servicers have been hampered in restructuring many of the 2 million
loans that are scheduled to set at higher

interest rates within the next two years because of investors who feel
they would be shortchanged under new

terms. He said that a Bush administration plan to encourage lenders to
restructure at-risk loans has been

ineffective because of the threat of investor lawsuits, and thus is
readying a bill by Rep. Michael Castle

(R-Del.) that would prohibit the investor from suing the servicer if it
acts in the best interest of the overall

pool while modifying a loan. Frank's staff has narrowed the
Castle-sponsored bill to pick up support, limiting it

to workout plans initiated before 2011 and specifically to
owner-occupied properties. It would have to remain in

place for five years, and the new loan could not result in additional
points and fees. Frank's remarks highlight

how the House will likely craft a much broader housing bill than a
Senate measure expected to pass today. The

Senate bill would provide more than $4 billion to states to buy and
rehabilitate vacant, foreclosed homes, as

well as $13 billion in tax breaks.

In related news, the House
Financial Services will continue it's two

part hearing today titled 'Using FHA for Housing Stabilization and
Homeownership Retention.” The hearing is

set to start at 10 a.m. ET today in room 2128 of the
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size='3'>House
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size='3'>Office
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size='3'>Building. 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/press041008.shtml'>

face='Times New Roman'

color='#0000ff' size='3'>Click here for the witness
list.

name='3'>Buyer Pushes to Complete

size='3'>Sale

of AHM's Loan Servicing
Business

The company that
purchased American Home Mortgage Corp.’s

(AHM) loan servicing business a few months ago is now pushing the
bankruptcy court to force the bankrupt lender

to close the deal,

size='3'>Bankruptcy Law360

reported yesterday. AH Mortgage Acquisition Co. Inc.
filed a motion Tuesday in the U.S. Bankruptcy

Court for the District of Delaware seeking to compel AHM to finally
close on the $500 million sale of the

servicing business. Once it filed for bankruptcy in August, AHM
immediately sought to sell its servicing

business. The lender decided to seek a stalking-horse bidder for the
sale, and AH Mortgage Acquisition, which is

owned by billionaire Wilbur L. Ross Jr., emerged as the only bidder. In
October, the court conducted a sale

hearing and entered an order on Oct. 30 authorizing the sale of the
servicing business to AH Mortgage

Acquisition. However, the purchaser was not yet licensed to service
mortgage loans, so the business could not yet

be handed over to it. At the initial close on Nov. 16, AH Mortgage
Acquisition paid the purchase price to AHM,

but the lender maintained actual ownership of the servicing
business. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=52540'>Read

more. (Registration

required.)

name='4'>Metropolitan Mortgage Sheds Insurance Unit

for $52 Million

Bankrupt Metropolitan
Mortgage & Securities Inc. will sell its

major asset, Western United Life Assurance Co., for $52 million to
Global Life Holdings LLC,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. A hearing on the

sale of the company to the newly formed Global Life is set for May 2 in
the

face='Times New Roman' size='3'>Thurston
County
size='3'>(Wash.) Superior Court,

bringing to fruition a deal that would

deliver significant cash to the Metropolitan noteholders, according
to

w:st='on'>
size='3'>Washington state

insurance commissioner Mike Kreidler. The insurance commissioner was
granted receivership of Western United on

March 2, 2004, to protect the company and its policyholders from the
bankruptcy of its parent company,

Metropolitan Mortgage & Securities, Inc. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=52564'>Read

more. (Registration

required.)

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

name='5'>Delphi May Ask Court to Enforce
Investment Plan

Delphi Corp. said yesterday
that it might ask a bankruptcy court to

force equity investors led by Appaloosa Management LP to go through with

a $2.55 billion investment plan to

support the auto parts maker's exit from bankruptcy, Reuters
reported.

size='3'>The Appaloosa-led group notified Delphi on Friday that it had
terminated the proposed investment, the

same day
size='3'>Delphi

size='3'>had expected to begin the final steps of emerging from
bankruptcy. Delphi's board has formed a special

litigation committee and engaged independent legal counsel to consider
possible legal remedies, including asking

the court to force the investors to complete the plan,

w:st='on'>

size='3'>Delphi said in a filing with
federal securities regulators. Delphi

also said yesterday that the Internal Revenue Service and the Pension
Benefit Guaranty Corp. have extended until

May 9 waivers that allow the company to defer contributions to its
pension funds until its emergence from

bankruptcy. 
href='http://news.yahoo.com/s/nm/20080409/bs_nm/delphi_dc_1'>Read
more.

name='6'>Lehman Says It Liquidated Three Investment

Funds

Lehman Brothers Holdings
Inc., the fourth-largest

size='3'>U.S.
size='3'>securities firm, said today that it

liquidated three investment funds because of “market
disruptions,” Bloomberg News reported. The

funds' assets, valued at $1 billion on Feb. 29, were taken onto Lehman's

balance sheet, the New York-based firm

said in a Securities and Exchange Commission filing yesterday. The bank
also bought “deteriorated

assets” with a value of $800 million from other unidentified
funds, Lehman said. The world's biggest banks,

including Citigroup Inc. and UBS AG, have recorded $232 billion in asset

writedowns and credit losses since the

beginning of 2007. Lehman raised $4 billion from a stock sale this
month, seeking to quell speculation

that the firm is short of capital. 

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aJIblcSJ8u.Q'>Read

more.

Fuel
Costs Just Part of Airlines’ List

of Woes

Record-high fuel prices
and the industry’s fragile finances

have led to a new round of bankruptcies among smaller carriers in recent

weeks, including ATA Airlines, Skybus

and Aloha Airgroup, the

size='3'>New York

Times reported today. Bigger airlines are
shrinking their fleets to cut fuel costs,

even as demand for travel remains strong — meaning flights are
growing more crowded and unpleasant. Layoffs

are also beginning again for a business that, to many of its customers,
is already suffering service problems. It

feels that way to airline workers, too, and as the industry’s
decline accelerates, passengers can expect

harried and grumpy gate agents and flight attendants. Moreover, all
across the air travel system in the

United

States, equipment

— air traffic control systems,

airplanes, airline computer systems — is aging and in many cases
overtaxed. In the near term, airlines

cannot raise fares fast enough to cover rising fuel costs; oil settled
at a record price yesterday at $110.87 a

barrel. That has plunged the industry back into the red after a brief
two-year run of profits. A Merrill Lynch

analyst, Michael Linenberg, expects the industry to lose $1.9 billion
this year. 

href='http://www.nytimes.com/2008/04/10/business/10air.html?ref=business&pagewanted=print'>Read

more.

Small

Businesses Fight to Scuttle Tax

Proposals

Advocates for small
businesses are fighting changes in tax laws

that the Bush administration says are aimed at cracking down on tax
cheating, particularly by the self-employed,

the New York
Times reported today. One

proposal that is part of President Bush’s budget would require
detailed reporting of credit card

transactions to the Internal Revenue Service. Another would require most

owners of small businesses to report any

payments above $600 to corporations, like Federal Express, for services.

However, one important change was added

in closed-door budget negotiations in 2006 requiring federal, state and
local agencies to withhold a percentage

of payments from contractors — touching everything from the
cleaning of schools to the paving of roads to

supplying military uniforms. The new rule does not take effect until
2011, but its passage lit a fire under

small-business groups who say it is unfair and who are fighting for its
repeal. 

href='http://www.nytimes.com/2008/04/10/business/smallbusiness/10tax.html?ref=business&pagewanted=print'>Read

more.

name='9'>Sharper Image Chairman Resigns

Sharper Image Corp. said that
its chairman, Jerry W. Levin, will resign

to pursue a possible acquisition of the beleaguered specialty
electronics retailer, the Associated Press reported

today. San Francisco-based Sharper Image, which filed for bankruptcy
protection in February, says Levin will step

down, effective immediately, and will work with other investors in an
effort to buy some or all of the company.

CEO Robert Conway says Sharper Image will consider any proposal he
makes.

International

name='10'>Asian Carrier Shuts Down, Stranding

Thousands

Oasis Hong Kong Airlines,

a long-haul budget carrier that tried to

offer premium service and spacious seats at low prices, suddenly went
into liquidation yesterday and canceled all

flights, the New York
Times reported

today. The bankruptcy filing by Oasis stranded thousands of passengers
in Hong Kong,

w:st='on'>London

and

w:st='on'>
size='3'>Vancouver

size='3'>. High jet fuel prices have taken a heavy toll on the airline
industry and particularly on low-margin

budget carriers trying to compete on price. It is the fourth budget
carrier worldwide to halt operations in the

last week and a half, with Aloha Airgroup, ATA Airlines and Skybus
Airlines also shuttering operations. 

href='http://www.nytimes.com/2008/04/09/business/worldbusiness/09cnd-oasis.html?_r=1&oref=slogin&ref=busi

ness&pagewanted=print'>Read more.

name='11'>Bank of

w:st='on'>
size='3'>England

size='3'>Cuts Key Rate

The Bank of England, acting to
stimulate a slowing economy, cut its base

lending rate by a quarter-point to 5 percent today, the lowest level in
17 months, the Associated Press reported.

The widely expected decision came in the face of contrary pressures from

rising inflation and fears about growth

due to sagging house prices and falling consumer confidence. The Bank of

England's head of markets, Paul Tucker,

last week said rates would fall 'gradually' and that the central bank
was prepared to tolerate increased slack in

the economy to counterbalance inflationary pressures. Bank Governor
Mervyn King told a legislative committee last

month that a rate cut was probably needed to bolster consumer
confidence, and he said he expected inflation to go

as high as 3 percent before retreating. 

href='http://www.nytimes.com/aponline/business/AP-Britain-Interest-Rates.html?_r=1&oref=slogin&ref=busine

ss&pagewanted=print'>Read more.