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June 9, 2008
Despite
Critics, Bank of America Remains Firm on Countrywide Buyout
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Though many investors have been skeptical, Bank of America CEO Kenneth
D. Lewis confirmed his company's commitment to the buyout of Countrywide
Financial, which is expected to close by the end of September, the
New York Times reported yesterday. The $4 billion deal received
a boost on Thursday when the Federal Reserve endorsed Bank of America's
buyout offer. However, there are many critics of the deal as Countrywide
stands at the center of the mortgage storm and is being buffeted not
only by woeful financial results but also by intense scrutiny from state
and federal regulators. Bankruptcy judges have become vocal about what
they consider dubious tactics taken by Countrywide against troubled
borrowers. The credit risk in Countrywide's loan portfolio is immense,
analysts say. At the end of the first quarter, Countrywide had $95
billion in loans held for investments on its books, many of them
adjustable-rate mortgages written on properties in California, where
prices are still falling. Some $34 billion of the loans held for
investment are home equity lines of credit and second liens, riskier
because they are more likely to generate losses when home values
fall.
href='http://www.nytimes.com/2008/06/08/business/08country.html?ei=5087&em=&e…'>Read
more.
House
Solidly Behind Tax Credit Proposal
Members of the House of Representatives are presenting a unified front
on a housing tax credit that advocates say could play a key role in the
building and rehabilitation of affordable residences, providing impetus
for the private sector to help in the construction of more than 1.5
million units, CongressDaily reported today. Created under the
Tax Reform Act of 1986, the credit reduces taxes for real-estate
investors on specific projects, allowing them to either use the tax
breaks or sell them to other investors to raise capital for
construction. With such inducements, developers are required to make
rents no more than 30 percent of an area's median gross income,
especially targeting the homeless, elderly and disabled. The Senate did
not include the provision in its $13 billion housing-tax package that
passed in April even though Senate Finance Committee members Gordon
Smith (R-Ore.) and Maria Cantwell (D-Wash.) have sponsored a similar
version that has almost 20 co-sponsors. But a decision was made at the
time of the Senate debate not to push for a floor vote on the measure
and allow the House to do the heavy lifting.
name='3'>Mortgages with No Money Down Still Available
Despite the bursting of the housing bubble, lending programs through
Freddie Mac and Fannie Mae still allow prospective homebuyers to qualify
to borrow up to 105 percent of the purchase price, the Washington
Post reported today. Freddie Mac says its 'HomePossible' mortgages
can help buyers with limited credit or savings, including teachers,
firefighters and members of the military. The two government-chartered
companies are extending such offers with potentially conflicting
mandates to uphold prudent lending standards and make homeownership more
attainable. Although borrowers are sometimes required to show they have
money in the bank to draw upon in a crunch, Freddie Mac said that people
can qualify for its no-money-down purchases with no cash reserves.
However, borrowers must undergo homeownership education. Such programs
can reduce delinquency rates by about 34 percent, the company
said.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/08/AR20080…'>Read
more.
Rural
Areas Take Worst Economic Hit as Gas Tops $4 Average
Gasoline prices reached a national average of $4 a gallon for the first
time over the weekend, adding more economic strain to rural portions of
the United States, the New York Times reported today.
Nationwide, Americans are now spending about 4 percent of their
take-home income on gasoline. By contrast, in some counties in the
Mississippi Delta, that figure has surpassed 13 percent. A survey by the
Oil Price Information Service, a fuel analysis firm, late last month
found that the gasoline crisis is taking the highest toll, as a
percentage of income, on people in rural areas of the South, New Mexico,
Montana, Wyoming and North and South Dakota.
href='http://www.nytimes.com/2008/06/09/business/09gas.html?hp=&pagewanted=pr…'>Read
more.
name='5'>Developer LandSource Seeks Bankruptcy
Protection
LandSource Communities Development LLC, a large California property
developer backed by the California Public Employees' Retirement System,
the biggest public U.S. pension fund, said yesterday that it had filed
for bankruptcy protection, Reuters reported today. LandSource said that
it had received commitments for debtor-in-possession financing from a
group of lenders led by Barclay's Bank, including a $135 million
revolving line of credit. LandSource's primary investment is The Newhall
Land and Farming Company, which owns 15,000 acres of land north of Los
Angeles. LandSource is a joint venture between home builder Lennar Corp.
and LNR Property Corp., which each have a 16 percent stake, and MW
Housing Partners, which holds a 68 percent stake.
href='http://www.nytimes.com/reuters/business/business-landsource.html?sq=ban…'>Read
more.
Judge
Endorses Reorganization Plan in Pacific Lumber Case
Bankruptcy Judge Richard Schmidt on Friday endorsed the
reorganization plan proposed by Marathon and Mendocino Redwood Co. for
Pacific Lumber Co.'s, Bankruptcy Law360 reported. Judge Schmidt
pointed out in his ruling that noteholders would be paid their
secured claim in cash under the MRC/Marathon plan, whereas the other
proposed reorganization plan failed to provide the general unsecured
creditors with any kind of recovery, in addition to other problems.
MRC/Marathon filed its first amended joint plan of reorganization for
the debtors last month, flanked by the unsecured creditors' committee
and counting numerous federal officials and environmentalists among its
supporters.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=58530'>Read
more. (Registration required.)
Sharper
Image Seeks Exclusivity Extension
Liquidating gadget retailer Sharper Image Corp. has asked the judge
overseeing its chapter 11 proceedings to extend its exclusive control of
reorganization for about three extra months because it needs the extra
time to maximize the value out of its remaining assets, Bankruptcy
Law360 reported on Friday. Sharper Image filed a motion Thursday in
the U.S. Bankruptcy Court for the District of Delaware, seeking to have
its exclusive right to file a chapter 11 plan extended through Sept. 16
and its exclusive right to lobby for support of a plan extended until
Nov. 15. Sharper Image's exclusive filing and solicitation rights are
slated to expire on June 18 and Aug. 17, respectively.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=58573'>Read
more. (Registration required.)
Cookie
Company Looks to Avoid Chapter 11
Cookie purveyor Mrs. Fields Famous Brands LLC may have to file for
bankruptcy if it cannot convince enough senior noteholders to vote for a
plan that would cut $145 million in debt from its balance sheet,
Bankruptcy Law360 reported on Friday. Mrs. Fields' announcement
comes as it wrestles with a $10.25 million interest payment that is due
in September. The company said that it had reached an agreement with
noteholders holding roughly $195.7 million in senior secured notes that
would result in either an out-of-court debt restructuring or a
prepackaged chapter 11 plan. Mrs. Fields said that it would commence an
exchange offer for the notes no later than June 30.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=58590'>Read
more. (Registration required.)
Hockey
Team Co-Owner Files for Chapter 11
A Silicon Valley financier who owns a stake in the NHL's
Nashville Predators has filed for personal chapter 11 bankruptcy two
weeks after being accused of loan fraud, the Associated Press reported
on Friday. William 'Boots' Del Biaggio III, 40, scion of a prominent San
Jose banking family, has at least $57 million in unpaid personal and
business loans, credit card bills and other financial obligations,
according to his filing in U.S. Bankruptcy Court for the Northern
District of California. One known outstanding debt is $10 million for
his share of the Predators, which Craig Leipold sold to Del Biaggio's
group in August for $193 million.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/06/AR20080…'>Read
more.