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February 12,
2008
Mortgage
Lending
name='1'>Lenders Step Up Effort to Avert
Foreclosures
Prodded by the Bush
administration, six major mortgage lenders are due to announce today a
stepped-up effort to rescue homeowners on the brink of foreclosure,
the Wall Street
Journal reported today. Under the latest plan,
dubbed Project Lifeline, the lenders promise to seek contact with
homeowners who are 90 or more days overdue on their mortgages. In some
cases, homeowners will be given the chance to 'pause' their foreclosure
for 30 days while lenders try to work out a way to make the loans
affordable. Homeowners wouldn't qualify for the program if they are in
bankruptcy, if they already have a foreclosure date within 30 days or if
the loan was for an investment or vacant property. Unlike the plan
announced in December to freeze interest rates at current levels on
certain adjustable-rate loans, this latest effort is to involve all
kinds of home loans, not just subprime mortgages, a higher-cost variety
for people with blemished credit records or high debt in relation to
income. The participating banks, which service about half of the
size='3'>U.S.
size='3'>mortgage market, are Bank of America Corp., Citigroup Inc.,
Countrywide Financial Corp., J.P. Morgan Chase & Co., Washington
Mutual Inc. and Wells Fargo & Co. -- all members of the Hope
Now Alliance.
href='http://online.wsj.com/article_print/SB120276908653960265.html'>Read
more. (Registration required.)
name='2'>Mortgage Crisis Spreads Past Subprime
Loans
Industry data and
economists are revealing that as home prices fall and banks tighten
lending standards, people with good credit histories are falling behind
on their payments for home loans, auto loans and credit cards at a
quickening pace, the New
York Times reported today. The rise in prime
delinquencies, while less severe than the one in the subprime market,
nonetheless poses a threat to the battered housing market and weakening
economy, which some specialists say is in a recession or headed for
one. The bursting of
that bubble has led to steep losses across the financial industry.
American International Group said on Monday that auditors found it may
have understated losses on complex financial instruments linked to
mortgages and corporate loans. The running turmoil is also stirring
fears that some hedge funds may run into trouble. At the end of
September, nearly 4 percent of prime mortgages were past due or in
foreclosure, according to the Mortgage Bankers Association.
href='http://www.nytimes.com/2008/02/12/business/12credit.html?_r=1&hp=&oref=…'>Read
more.
name='3'>Analyst Predicts Mortgage Loan Write-downs Could Total $175
Billion
A Bear Stearns analyst
said that financial firms in the S&P 500 index ultimately will
suffer $125 billion to $175 billion in mortgage and credit-related
write-downs, CNN Money.com reported yesterday. Thus far, these firms
have recognized about $115 billion in write-downs. Merrill Lynch &
Co. and Citigroup Inc. have taken the brunt of the hits, with $22.5
billion and $21.6 billion in write-downs, respectively, over the past
two quarters, according to Bear Stearns analyst Jonathan Golub.
Mortgage-related problems in the
w:st='on'>
size='3'>United States
size='3'>will result in a total of $250 billion to $300 billion in
economic losses worldwide, of which the S&P financial firms will end
up 'owning' $100 billion to $120 billion, Golub wrote. They will
recognize another $25 billion to $55 billion in other credit-related
writedowns.
href='http://money.cnn.com/2008/02/11/news/companies/writedowns/index.htm'>Read
more.
name='4'>White House Does Not Foresee a
w:st='on'>
size='3'>U.S.
size='3'>Recession
The White House predicted
yesterday that the economy would escape a recession and that
unemployment would remain low this year, though it acknowledged that
growth had already slowed, the
size='3'>New York Times reported today.
Presenting the White House’s annual report to Congress on the
economy, Edward P. Lazear, chairman of the White House Council of
Economic Advisers, acknowledged that the plunge in housing and mortgage
markets had yet to hit bottom and that growth would be low in the first
half of 2008.
size='3'>However, administration officials are counting on a lift this
summer from the $168 billion economic stimulus package that Congress
passed last week and from the Federal Reserve’s recent decisions
to reduce short-term interest rates.
href='http://www.nytimes.com/2008/02/12/business/12econ.html?ref=business&pag…'>Read
more.
w:st='on'>
name='5'>Arizona
face='Times













New










Roman'
size='3'> Bankruptcy Filings Increase 63
Percent
size='3'>Arizona
at elevated levels as the 967 statewide filings in January represented a
63 percent gain over January 2007, the Arizona Republic
reported today.
size='3'>Chapter 7 bankruptcies in January accounted for nearly three in
four filings both in the
w:st='on'>
size='3'>Phoenix
and statewide. Many homeowners and real estate investors haven't been
able to work out solutions with creditors so have opted for bankruptcy,
said Phoenix-based attorney Diane Drain.
href='http://www.azcentral.com/news/articles/0211biz-bankruptcy0212-ON.html'>Read
more.
Autos
name='6'>Specialty Car-Parts Maker Files for
Bankruptcy
Holley Performance
Products Inc., a maker of high-performance engine parts for drag-racing
enthusiasts, filed for bankruptcy today saying that a late 1990s
expansion left it with too much debt, Bloomberg News reported yesterday.
The Bowling Green, Ky.-based company said that it owed lenders holding
first and second liens about $200 million, more than the company's
assets are worth, according to Holley CFO Thomas W.
Tomlinson. Holley and four of its affiliates
filed for bankruptcy protection about two years after the company
renegotiated the terms on part of the 12.5 percent notes that were due
last year. Holley's majority shareholder, funds managed by Kohlberg
& Co., quit providing the company the cash it needed to make
interest payments, according to court papers. The case is
In re Holley Performance
Products Inc., 08-10256, U.S. Bankruptcy
Court, District of Delaware (
w:st='on'>
size='3'>Wilmington
size='3'>).
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=a5ZlErkZqqfE'>Read
more.
w:st='on'>
name='7'>U.S.
face='Times New Roman' size='3'> Trustee Battles Global
Motorsport
U.S. Trustee
Kelly Beaudin
Stapleton wants to block Global Motorsport
Group Inc. from offering what she called 'inappropriate' protections to
the leading bidder in a potential auction of the company's assets, the
Associated Press reported yesterday. 'The circumstances set forth are
not all intended to promote a healthy auction process,' Stapleton said
in documents filed Friday in the U.S. Bankruptcy Court in Wilmington,
Del. Global Motorsport, an international supplier of after-market parts
and accessories for Harley-Davidson Inc. motorcycles, has a leading bid
of $16 million lined up from Dae-II USA Inc. The company has proposed to
pay Dae-II up to $300,000 in expense reimbursements, and if its bid
loses at auction, a $500,000 break-up fee. Stapleton called the amount
of the expense reimbursement 'excessive' because the bankruptcy court
usually grants reimbursements that are 1 percent of the purchase price,
while Global Motorsport's request for $300,000 is closer to 2
percent.
href='http://money.cnn.com/news/newsfeeds/articles/apwire/b676e65ff1cc48ccc0f…'>Read
more.
GM
Offers Buyouts to Hourly Workers
General Motors Corp., eager to
lower wages and staunch the kinds of losses it saw in 2007, said today
that it is offering a new round of buyouts to all 74,000 of its U.S.
hourly workers who are represented by the United Auto Workers, the
Associated Press reported. Workers will be given the details of the
buyouts over the next several weeks. The company said that most of those
who accept are expected to leave by July 1. GM won't say how many
workers it hopes to shed, but under its new contract with the UAW, it
will be able to replace up to 16,000 workers doing non-assembly jobs
with new employees who will be paid half the old wage of $28 per hour.
Ford Motor Co. and Chrysler LLC already have announced similar buyout
offers.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/12/AR20080…'>Read
more.
name='9'>Pacific Lumber Resolves $1 Billion in
face='Times New Roman' size='3'>Qui Tam
size='3'>Claims
The debtors in Pacific
Lumber Co.'s chapter 11 case have reduced their potential liabilities,
agreeing to pay a smaller sum to resolve several claims stemming from
two qui tam
lawsuits that sought up to $1 billion from the bankrupt
timber company and its affiliates,
size='3'>Bankruptcy Law360 reported yesterday.
Under a joint stipulation, the nine nondischargeable claims brought
by
size='3'>qui tam relators on behalf of the
state of
size='3'>California
States, which together sought up to $1 billion, will be allowed for $1
each. Three additional
size='3'>qui tam claims brought by the
United States are to be dismissed with prejudice. A
hearing on the
agreement has been scheduled for Feb. 28.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=46751'>Read
more. (Registration required.)
name='10'>Solutia Settles Dispute with EPA
Bankruptcy Judge
Prudence Carter
Beatty on Friday signed off on a recent
agreement reached between the U.S. Environmental Protection Agency and
Solutia Inc., putting to rest a long-standing lawsuit over
responsibility connected to the cleanup of one of the Superfund
sites, Bankruptcy
Law360 reported yesterday. Judge Beatty
granted the EPA a $3.6 million allowed unsecured claim in the company's
chapter 11 case as laid out in the company's agreement. Under Solutia's
court-approved reorganization plan, unsecured creditors will receive 83
cents for every dollar in claims, which would equal a payout to the EPA
of approximately $3 million. The EPA's claim concerns the Great Lakes
Container Corp. site in St. Louis, at
which Solutia's predecessor, Monsanto Co., allegedly released hazardous
substances.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=46666'>Read
more. (Registration required.)
name='11'>Court Finds Auditor Not Liable in Former Bank’s
Downfall
A federal appeals court
has rejected a ruling by federal regulators that Grant Thornton LLP bore
responsibility in the former First National Bank of Keystone’s
financial meltdown,
size='3'>Bankruptcy Law360 reported yesterday.
The U.S. Court of Appeals for the D.C. Circuit found that, as an
external auditor, the auditor was not conducting the bank's business.
The court spared the Chicago-based accounting firm $300,000 in civil
penalties and also threw out the U.S. Comptroller of the
Currency’s motion to inspect Grant Thornton’s audits of the
bank. The appeals court said that the federal law the OCC used to
implicate Grant Thornton calls for the accounting firm to be part of
Keystone in order for it to be held liable, and that the comptroller had
exceeded his statutory authority.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=46635'>Read
more. (Registration required.)
name='12'>Lerach Sentenced to Two Years in Federal
Prison
Yesterday in Los Angeles,
U.S. District Judge John Walter sentenced fallen class-action lawyer
William Lerach to two years in federal prison for conspiring to obstruct
justice in connection with alleged kickback payments made by his former
law firm, Milberg Weiss LLP, the
size='3'>Wall Street Journal reported today.
Lerach is also paying an $8 million penalty, has been suspended from the
practice of law and will be disbarred. The costly class-action lawsuits
Lerach pursued in the name of shareholders made him loathed in
size='3'>America
size='3'>'s boardrooms. The criminal case against Lerach stemmed from
the very lawsuits that made him rich. The suits typically followed a
drop in a company's share price and alleged that executives had misled
investors. The suits were brought on behalf of many shareholders, but
law requires that court papers include a plaintiff identified by name
who was an actual stockholder. Federal prosecutors in
size='3'>Los Angeles
size='3'>charged Milberg Weiss in 2006 with a 20-year conspiracy,
alleging it had secretly paid millions of dollars in kickbacks to
certain people to persuade them to serve as lead plaintiffs in these
lucrative suits.
href='http://online.wsj.com/article_print/SB120274390736058979.html'>Read
more. (Registration required.)
href='http://online.wsj.com/article_print/SB120274390736058979.html'>