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May 30, 2008
Study Finds Disparities in Mortgage
Fees
A study prepared for the Department of Housing and Urban Development and
the Urban Institute showed that minorities and people without college
degrees pay more in mortgage fees than do white applicants and those
with a higher education, the New York Times reported today. The
study of 7,560 mortgages that were guaranteed by the Federal Housing
Administration found that black borrowers on average paid $415 more in
closing costs than their white counterparts after accounting for
differences between the borrowers. Hispanic borrowers paid $365 more.
Also, those living in neighborhoods where all adults have a college
education typically paid $1,100 less in fees than those where no
residents had a college education. Additionally, loans made by mortgage
brokers were typically $300 to $425 more expensive than those made
directly by deposit-taking banks, thrifts or credit unions.
href='http://www.nytimes.com/2008/05/30/business/30lend.html?ref=business&pagewanted=print'>Read
more.
Foreclosed Properties Create Large Tax
Bills for Housing Speculators
Those Americans who purchased second or even third homes during the real
estate boom a few years ago may lose their properties in foreclosure and
then stagger into bankruptcy under the weight of a sizable tax bill, the
New York Times reported today. Bankruptcy lawyers say they are
seeing a wave of foreclosures among owners of second homes in such a
position, owners who thought they had found sound advice for financial
security. Many who borrowed more than their homes are now worth are
finding out that the difference between the amount they borrowed and the
second home's sale price in foreclosure will ultimately be considered
taxable income as forgiven debt. Congress, deciding the tax impact was
just too much for the nation's already distressed homeowners, passed
limited relief at the end of last year. Under the Mortgage Forgiveness
Debt Relief Act, which is effective from Jan. 1, 2007, through Dec. 31,
2009, a homeowner does not have to pay tax on debt forgiven by a lender
- if the loan is backed by the property the homeowner lives in.
href='http://www.nytimes.com/2008/05/30/business/30tax.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Trustee Balks at Frontier's Severance
Plan
U.S. Trustee Diana G. Adams objected to Frontier Airline Holdings Inc.'s
proposed severance agreement for its senior executives, saying it is too
early in the chapter 11 case to assess the need for such a plan,
Bankruptcy Law360 reported yesterday. ”The case is in its
early stages and the debtors have not yet filed schedules, statements of
financial affairs or monthly operating reports,” Adams said in her
motion. “At this time, when the debtors' financial condition in
chapter 11 and their future operations outside of bankruptcy are
virtually unknown, the debtors should not reduce their cash flow or
attempt to enrich their executives at the expense of other
employees.” Adams' motion also said that the debtors have provided
no evidence for their assertion that the amount of the proposed
severance payments do not exceed 10 times the mean severance payments
made to noninsider employees in 2008.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=57647'>Read
more. (Registration required.)
Linens 'N Things Receives Approval for $700
Million DIP Loan
Bankruptcy Judge Christopher S. Sontchi granted final
approval to Linens 'n Things' debtor-in-possession loan request,
allowing the company to access up to $700 million in financing while it
is under chapter 11 protection, Bankruptcy Law360 reported
yesterday. Linens 'n Things, which filed for chapter 11 on May 2, had
previously been granted interim approval of DIP financing up to $400
million. Judge Sontchi issued a number of other orders relating to
Linens 'n Things' first-day motions at hearings on Tuesday and
Wednesday, including the approval of the retention and employment of
Richards, Layton & Finger PA as debtors' counsel and Morgan, Lewis
& Bockius LLP as special counsel.
href='http://bankruptcy.law360.com/secure/printview.aspx?id=57633'>Read
more. (Registration required.)
Bear Stearns Deal Approved by
Shareholders
Several hundred Bear Stearns' stockholders yesterday voted to approve
their company's sale to J.P. Morgan Chase & Co. for $1.4 billion,
ending the investment bank's existence and sealing a deal made in haste
two months ago amid one of the most terrifying bank runs in history, the
Wall Street Journal reported today. Bear Stearns' Chairman
James Cayne said that the investment bank ran into 'a hurricane' and
summed up his feelings on the firm's demise as 'remorse' as opposed to
'anger.' In early 2007, before the rout, Bear's market capitalization
was $25 billion.
href='http://online.wsj.com/article/SB121207047572429315.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Sea Containers' Unsecured Creditors Dispute $268
Million Deal
Sea Containers Ltd.'s unsecured creditors' committee has objected to a
proposed $268 million settlement between the company and two of its
pension funds, saying that the settlement is based on implausible
contingencies and improper application of British law, Bankruptcy
Law360 reported yesterday. The proposed settlement would give the
two pension schemes a $194 million general unsecured claim on the debtor
and a $5 million administrative expense claim, and it would create a $69
million reserve fund to equalize normal retirement age between men and
women in the schemes, for a total of $268 million. The committee said
that the settlement relied on a U.K. law that would set the value of the
pensions at the amount at which their liabilities could likely be bought
out on the market. However, the committee said that that the law would
only take effect under certain conditions that have not been
met.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=57638'>Read
more. (Registration required.)
Autos
Judge Allows Delphi to Boost Bankruptcy
Financing
Bankruptcy Judge Robert Drain yesterday allowed Delphi
Corp. to increase by $254 million the size of the bankruptcy loan that
will finance the auto-parts supplier while it looks for a way out of
chapter 11, the Associated Press reported. Judge Drain approved Delphi's
request to borrow more than it expected, bringing the company's total
bankruptcy financing to $4.35 billion. The Troy, Mich.-based company
asked to increase the financing after more investors than expected
signed up to buy pieces of it when it was syndicated.
href='http://biz.yahoo.com/ap/080529/delphi_bankruptcy.html?.v=1'>Read
more.
Ford Motor Gets Sideswiped as Credit Unit's
Outlook Dims
Ford Motor Co., whose plan to return to profit next year has been
derailed by a plunge in sales of trucks and sport-utility vehicles,
faces a second blow from the worsening plight of its once-lucrative Ford
Motor Credit unit, the Wall Street Journal reported today.
Unlike General Motors Corp.'s lending operation, GMAC LLC, Ford Credit
steered away from home mortgages, and so hasn't racked up big losses
from the nation's housing slump. Ford's predicament, however, is similar
to that of many mortgage lenders. Delinquencies are rising on its loans
-- especially those for big trucks -- and some of its borrowers owe more
than their vehicles are worth.
href='http://online.wsj.com/article_print/SB121210714077731261.html'>Read
more. (Registration required.)
19,000 Employees Take GM's Buyout
Offer
General Motors said yesterday that 19,000 hourly workers - a quarter of
a unionized work force that already has been drastically pared down -
have accepted buyouts, the New York Times reported today. Most
of the workers will depart within the next month, as GM formulates a
plan to deal with plummeting demand for sport utility vehicles and
pickup trucks while gasoline prices climb above $4 a gallon. The
proportion of GM workers who took a buyout is more than triple the
acceptance rate at Ford, where 4,200 of 54,000 workers took deals
offered as part of a similar program.
href='http://www.nytimes.com/2008/05/30/business/30auto.html?ref=business&pagewanted=print'>Read
more.
Airlines
Merger Talks Appear to
Be Over for United and US Airways
United Airlines and US Airways decided yesterday that they would not
continue talks on a possible merger, the New York Times
reported today. The discussions apparently bogged down over the
difficulty of combining the two airlines' various labor contracts. US
Airways, which merged with America West in 2005, faced additional costs
under its pilots' contract if it entered into another merger so soon.
United's decision not to pursue the merger marks the second time in a
month that it has failed to reach a deal with another major airline,
only this time it was the company that spurned the idea. The board of
Continental Airlines decided on April 27 not to continue discussions
with United, saying that a deal was not in the airline's best interest.
United has held talks since then with Continental about a marketing
agreement.
href='http://www.nytimes.com/2008/05/30/business/30air.html?ref=business'>Read
more.
Silverjet Opts to Halt Flights,
Keeps Looking for Investors
Silverjet PLC, the unprofitable U.K. business-class
airline, today became the latest carrier to cease operations after
failing to secure emergency funds from an investor, the Wall Street
Journal reported. Silverjet said that it opted to halt flights
after failing to receive the proceeds of a $5 million drawdown request
made under a loan facility with U.A.E. and U.S.-based development fund
Viceroy Holdings LLC. The airline, which had been operating flights from
London's Luton Airport to New York and Dubai, said it continues to talk
with potential investors to support the company.
href='http://online.wsj.com/article_print/SB121213381623032309.html'>Read
more. (Registration required.)
Banks Step up Fed Loans, Investment
Firms Scale Back
The Federal Reserve's emergency loans to banks climbed to the highest
level on record even as Wall Street investment companies scaled back
their borrowing, the Associated Press reported yesterday. A Fed report
yesterday said that the investment companies averaged $12.3 billion in
daily borrowing over the past week, down from $14.2 billion the previous
week. Banks averaged a record total $15.95 billion in daily borrowing
for the week ending May 28, compared with $13.5 billion for the previous
week. The previous high of $14.4 billion came in the week ending May
14.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/05/29/AR2008052901858_pf.html'>Read
more.