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March 5, 2008
Mortgages
Commentary: Let
Bankruptcy Judges Step In
Congress should pass
legislation to repeal the principal-residence exception in chapter 13
bankruptcies to authorize the country's approximately 400 bankruptcy
judges to assist in sorting out the mortgage mess, according to a
commentary in today’s
size='3'>Atlanta Journal-Constitution by
Prof. Lynn LoPucki. Financially distressed
homeowners with mortgages under about $1 million could file for chapter
13 bankruptcy; they would have to propose a plan to pay all their
disposable income to mortgage and nonmortgage creditors for at least
three years. As part of each homeowner's plan, he or she could get
mortgage relief that included reduction of the mortgage balance to the
current value of the house, reduction of the interest rate to current
market rate and perhaps more time in which to pay. At minimum, however,
each homeowner would pay the house's full value or the mortgage's full
amount (whichever was lower) plus interest at the current market
rate.
href='http://www.ajc.com/opinion/content/opinion/2008/03/05/mortgageed_0306.html'>Click
here to read the full commentary.
Judge Lectures
Countrywide but Decides Not to Punish It in
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Mortgage Case
The Countrywide Financial Corporation,
the largest American mortgage lender, did not show “bad
faith” in the handling of a
w:st='on'>Texas
will not be sanctioned merely for unprofessional and unethical conduct,
a federal judge ruled yesterday, Bloomberg News reported today.
Countrywide and two law firms it used showed “a disregard for the
professional and ethical obligations of the legal profession and
judicial system,” Judge Jeff Bohm of
Court
Justice Department official to consider punishing the company for its
conduct. But to impose sanctions, Judge Bohm wrote, he would have had to
find “clear and convincing evidence of conduct that is in bad
faith, vexatious, wanton or undertaken for oppressive reasons.”
Judge Bohm urged Countrywide to re-evaluate its policies and improve the
accuracy of its records on payment history after reviewing a personal
bankruptcy case brought by William Allen Parsley, who had a mortgage
with Countrywide. Donald Walton, the trustee for the southeast region
that includes
w:st='on'>Florida
lawyers had been punished at least three times for inaccurate court
filings since 2004.
href='http://www.nytimes.com/2008/03/06/business/06country.html?scp=1&sq=parsley&st=nyt'>Read
more.
Thornburg Mortgage Stock
Plummets
Shares of mortgage lender and investor Thornburg Mortgage Inc. in
York
analysts said the company faced bankruptcy because of defaulting
financing agreements, the Houston Chronicle reported today.
Thornburg disclosed Wednesday evening that JPMorgan Chase & Co.
issued a default notice after Thornburg failed to meet a $28 million
margin call. That notice triggered cross-defaults on agreements
Thornburg had with other lenders. Wednesday's disclosure of default
notices could lead Thornburg to file for bankruptcy, RBC Capital Markets
analyst Jason Arnold wrote in a research note.
href='http://www.chron.com/disp/story.mpl/ap/fn/5597357.html'>Read
more.
Paulson Defends
Opposition to Durbin's Cramdown Plan
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Treasury Secretary Paulson yesterday defended his opposition to a
measure to allow a bankruptcy judge to refashion home mortgages in
foreclosure despite a plea by Senate Majority Leader Whip Durbin that
the measure would be the only stick to force lenders to rework at-risk
loans, Congress Daily reported today. At a hearing of the
Senate Financial Services Appropriations Subcommittee, which Durbin
chairs, Paulson argued that the administration's effort to get lenders
to voluntarily renegotiate subprime loans is starting to have an
effect. Bankers have led opposition to Durbin's proposal, which
would allow a judge to adjust the principal of a loan if it were in
foreclosure, a provision referred to as a 'cramdown.' Lenders argue the
cramdown would raise mortgage costs because they would be unsure whether
they would generate sufficient profit if the loan terms could later be
rescinded.
Ziff Davis Media Files for
Bankruptcy
Ziff Davis Media Inc.,
the publisher of PC Magazine and the video-game magazine EGM, filed for
bankruptcy yesterday, Bloomberg News reported.
size='3'>Ziff Davis Media said it plans to swap a new $57.5 million
senior secured note and at least 88.8 percent of the common stock in the
reorganized company for $225 million of existing senior debt. The New
York-based company said that it has a debt-restructuring agreement with
senior noteholders, but that subordinated noteholders haven't agreed to
the restructuring. Holders representing more
than 80 percent of Ziff Davis Media's outstanding senior floating-rate
notes have agreed to the company's restructuring plan and will provide
$24.5 million to fund operations during the chapter 11 reorganization
and after the company emerges from bankruptcy.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a6bISm6.ln5E&refer=home'>
face='Times New Roman' size='3'>Read more.
GM to Assist
w:st='on'>Delphi
w:st='on'>Delphi
General
Motors Corp. will
temporarily forgo a roughly $2 billion payment from Delphi Corp., at a
time when the Detroit auto maker is undertaking an expensive overhaul,
the Wall Street Journal reported today. The financing pact with
GM could help
size='3'>Delphi
emerging from bankruptcy court protection. GM had expected to be paid at
least $2.25 billion in cash from the $6.1 billion in financing its
former parts unit needs to exit chapter 11, but
w:st='on'>
size='3'>Delphi
up creditors due to the tightening in debt markets. To reduce the amount
of cash Delphi needs to raise, GM has agreed to take $2 billion from
Delphi in the form of a note that can be paid back over time,
size='3'>Delphi
GM has also agreed to finance all or part of an $825 million,
second-term loan included in the $6.1 billion package,
w:st='on'>
size='3'>Delphi said. The plan
requires court approval.
href='http://online.wsj.com/article/SB120476430061215129.html?mod=hps_us_whats_news'>Read
more (subscription required).
Peoples Choice Financial Plan Filed
Peoples Choice Financial
filed a reorganization plan with the U.S. Bankruptcy Court along with a
related chapter 11 disclosure statement, BankruptcyData.com reported
today. The plan provides, among other things, that the company transfer
all of its assets to one of three liquidating trusts on the effective
date of the plan. Prior to the plan's effectiveness, the company will
sell substantially all of its assets. The privately-held mortgage banker
filed for chapter 11 protection on March 20, 2007, listing total
pre-petition assets of $4.7 billion.
Pacific Lumber Interim Approval
Sought
Pacific Lumber filed a motion
with the U.S. Bankruptcy Court seeking entry of an interim order,
BankruptcyData.com reported today. The order authorizes the company
to incur post-petition indebtedness and grants post-petition priming
security interests and super-priority claims. It also permits the
repayment of the pre-petition line of credit with Bank of America
National Trust and Savings Association and certain other pre-petition
lenders, authorizes the use of certain cash collateral (including cash
collateral in which certain pre-petition secured parties may have an
interest), modifies the automatic stay to allow certain actions with
respect to the Company's post-petition indebtedness and grants certain
other relief.
TRICOM Plan
Filed
TRICOM filed a joint
prepackaged reorganization plan, BankruptcyData.com reported today.
TRICOM also filed a motion for entry of an order scheduling a combined
hearing on adequacy of the pre-petition solicitation procedures,
adequacy of the disclosure statement and confirmation of the plan and
establishing procedures for objecting to the disclosure statement and
plan; approving form and manner of notice of the combined hearing on the
disclosure statement and confirmation of the plan and granting related
relief.