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May 7, 2008
Bush
Administration Threatens Veto of Housing Stimulus
Package
As the House of Representatives
votes on its housing stimulus package today, the Bush Administration
issued a “Statement of Administration Policy” yesterday
threatening to veto the package, which looks to nearly double the FHA's
loan portfolio by granting it authority to insure an additional $300
billion of mortgages. The administration's statement said that the
measure is 'overly burdensome and prescriptive' as it would 'force FHA
and taxpayers to take on excessive risk and jeopardize FHA's financial
solvency.'
href='http://www.whitehouse.gov/omb/legislative/sap/110-2/saphr3221-r.pdf'>Click
here to read the Bush Administration’s “Statement of
Administration Policy” on the Foreclosure Prevention Act of
2008.
name='2'>Countrywide Financial Admits Loan Officers Made
Errors
Mortgage lender Countrywide
Financial Corp., which is under investigation for inflating certain
borrowers' fees, acknowledged at a Senate Judiciary Committee hearing
yesterday that it made errors and pledged to take steps to improve
its operations, the Associated Press reported. Steve Bailey, chief
executive for loan administration at Countrywide, said that the company
will hire an outside auditor to review its actions in cases involving
homeowners who have filed for bankruptcy court protection. Bailey,
however, disputed accusations made by hundreds of borrowers in
size='3'>Pennsylvania
w:st='on'>
size='3'>Florida
that the company has sought to collect inflated fees and other payments
by filing inaccurate bankruptcy documents. The Justice Department is
currently investigating thes accusations. Katherine Porter, a professor
at the
size='3'>University of
w:st='on'>
size='3'>Iowa
mortgage companies and servicers have improperly sought repayment for
attorneys' fees and other costs without fully disclosing or documenting
the fees. Sen. Charles Schumer (D-N.Y.) said that Bank of America Corp.,
which agreed to buy Countrywide in January for approximately $4 billion,
should reconsider the deal's price tag. If the purchase price for
Countrywide was 'based in part on profits from these bad practices, Bank
of America should demand a lower price, because these practices will not
be allowed to continue,' he said.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/05/06/AR2008050602315_pf.html'>Read
more.
name='3'>Commentary: For FHA, a Huge Task and Uncertain
Role
The Federal Housing
Administration has a big new role to play in untangling the mortgage
mess, but even the agency itself does not know whether it can or should
handle some of the tasks it is being asked to perform, according to a
commentary in today’s
size='3'>Washington Post. Just about every
major housing proposal being examined by Congress has the FHA helping
refinance troubled borrowers into its government-backed mortgages. The
proposals come at a time of financial stress for the FHA. For the first
time in its 74-year history, it may need taxpayer money to fund its
flagship home-buying program next year. The Bush administration supports
FHA modernization, but yesterday threatened to veto the FHA expansion
championed by Rep. Barney Frank (D-Mass.). The federal government
'should not be the lender of last resort, with the private sector
dumping bad loans on FHA,' said Roy A. Bernardi, deputy secretary of the
Department of Housing and Urban Development, which includes the
FHA.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/05/06/AR2008050602985_pf.html'>Read
more.
name='4'>Treasury Secretary Sees Credit Crisis Waning
Treasury Secretary Henry
Paulson said
w:st='on'>
size='3'>U.S.
size='3'>financial markets are emerging from the credit crunch and that
'the worst is likely to be behind us,' marking possibly the most
optimistic comments yet from the Bush administration on the financial
crisis, the Wall Street
Journal reported today. Paulson's comments
reflect Treasury's view that the administration and the Fed have already
taken steps necessary to quell the situation. Bolstering that notion,
the White House Tuesday threatened to veto legislation that has become
the cornerstone of the Democrats' response: a rescue plan that would
provide government insurance for some $300 billion in troubled
mortgages. Paulson was careful to predict that there would be further
'bumps along the road,' and that it will take 'some months longer' for
the market distress to fully dissipate.
href='http://online.wsj.com/article_print/SB121011652297872261.html'>Read
more. (Registration required.)
size='3'>Vallejo
size='3'> to Become Largest
w:st='on'>
size='3'>Calif.
face='Times New Roman' size='3'>City
to File for Bankruptcy
size='3'>Vallejo is set to become the
largest
face='Times New Roman'
size='3'>California
to declare bankruptcy after its city council voted unanimously to file
for protection to solve the San Francisco Bay Area suburb's spiraling
budget crisis, the Associated Press reported today. City Manager Joseph
Tanner had advised filing for bankruptcy before the city's fiscal year
ends on June 30 because Vallejo faces a projected budget deficit of $16
million and has no money in its reserves. The decision came about
when two years of negotiations with the police and firefighter
unions failed.
name='6'>Tropicana Holders Seek Court-Appointed
Trustee
Bondholders who are owed
hundreds of millions of dollars by Tropicana Entertainment LLC asked a
judge to put the casino operator under the control of a court-appointed
administrator, saying the company's leader steered it into financial
distress, the Wall
Street Journal reported today.
The bondholders asked Bankruptcy Judge
face='Times New Roman' size='3'>Kevin Carey to
put the company under the control of a chapter 11 trustee, saying
that Tropicana Entertainment CEO William J. Yung shouldn't be allowed
'unfettered control over a significant chapter 11 proceeding involving a
multi-jurisdictional, highly regulated gaming enterprise with over $2.5
billion of creditor claims.' The bondholders account for more than $700
million of Tropicana's debt. The group includes Citigroup Global
Markets, Harbinger Capital Partners, Highland Capital Management, Lehman
Brothers Holdings Inc. and a Merrill Lynch & Co. unit.
href='http://online.wsj.com/article_print/SB121012489245972757.html'>Read
more. (Registration required.)
name='7'>Pacific Lumber Seeks Approval of Settlement
Pacific Lumber Co. and
its subsidiaries (Palco) have asked the U.S. Bankruptcy Court for the
Southern District of Texas to approve a global settlement reached on May
1 following months of negotiations and two weeks of confirmation
hearings, Bankruptcy
Law360 reported yesterday. Palco’s
debtors – including Pacific Lumber,
w:st='on'>
size='3'>Scotia
size='3'> Development LLC, Britt Lumber Co. Inc., Salmon Creek LLC
and Scotia Inn Inc. – support the reorganization plan proposed by
MRC/Marathon, a plan that is widely supported by federal officials and
environmentalists. A hearing on the matter has been tentatively
scheduled for May 15.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=55258'>Read
more. (Registration required.)
Approves Delta Financial's Employee Incentive Plan
Bankruptcy Judge
Christopher S.
Sontchi approved Delta Financial Corp.'s
motion to institute an incentive plan for its remaining employees, as
the company prepares to liquidate,
size='3'>Bankruptcy Law360 reported yesterday.
The details of the incentive plan are under seal because it includes
explicit information about employee salaries and benefits. According to
Delta's court filings, the plan involves five employees and would pay at
most $165,000 to all employees combined.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=55356'>Read
more. (Registration required.)
name='9'>Beazer Homes Gets Default Notice from
Trustee
Beazer Homes USA Inc. has
received a default notice from the trustee of holders of $103 million in
junior notes because the company has failed to provide annual and
quarterly audited financial statements, the
size='3'>Wall Street Journal reported today.
The notice alleges that this default will become an event of default if
it's not remedied within 30 days, according to Beazer's filing with the
Securities and Exchange Commission late Tuesday.
face='Times New Roman' size='3'>The Atlanta-based home builder has said
it expects to provide the required financial statements to bondholders
by May 15 after completing a restatement process. Beazer, which
discovered possible accounting problems during a review of its lending
practices, has delayed filing audited financial statements for months
because it says it's necessary to restate certain results, which could
impact fiscal years 1998 through 2007.
href='http://online.wsj.com/article/SB121012716187172927.html?mod=us_business_whats_news'>Read
more. (Registration required.)
Seeks Approval to Pay Interest to Banks
The Federal Reserve is
formally asking Congress for authority -- starting this year -- to pay
interest on commercial-bank reserves in an effort to gain better control
over interest rates and to attain more leverage to battle the credit
crunch, the Wall Street
Journal reported today. In 2006, Congress gave
the Fed permission to pay interest on reserves -- the sums banks keep on
deposit at the Fed -- but it delayed the effective date of the
legislation until 2011 to postpone the cost to the Treasury. Banks are
required by law to hold a certain fraction of their deposits in reserve
accounts at the Fed, but they receive no interest on these deposits. If
they earned interest from the Fed, banks would have no incentive to lend
out excess reserves for less. That would make the Fed's benchmark
federal-funds rate, which banks charge on overnight loans to each other,
less likely to plunge below the Fed's official target, currently set at
2 percent.
href='http://online.wsj.com/article_print/SB121011673771072231.html'>Read
more. (Registration required.)