September 92009

 

 

Report: Another Foreclosure
Wave Looms with Option ARM Resets

A report by Fitch Ratings released yesterday said that

the housing market faces the prospect of a new round of foreclosures as
hundreds of thousands option adjustable-rate mortgages (ARMs) reset to
significantly higher payments that could force borrowers to fall behind,

the
size='3'>Washington Post reported today. About

70 percent of the $189 billion in outstanding option ARMs will reset by
2011, the report said, which would be another setback to a teetering
housing market still struggling to recover from the mortgage meltdown
that precipitated the financial crisis. Fitch estimates that $134
billion in option ARMs will reset in the next two years. It expects
monthly payments to jump 63 percent on average, or $1,053 a month, for
loans adjusting this year and next, prompting a rise in defaults and
foreclosures. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/08/AR2009090803507_pf.html'>Read

more.

Congressional Hearings to
Focus on Role of Lending Industry in the Foreclosure Crisis,
“Making Home Affordable” Program

The House Judiciary Subcommittee on the Commercial and

Administrative Law will hold a hearing today at 2 p.m. ET titled
“The Role of the Lending Industry in the Home Foreclosure
Crisis.” Witnesses include Bankruptcy Judge
Elizabeth W. Magner (E.D. La; New Orleans), attorney Lewis D. Wrobel,
Dr. Joseph R. Mason of Louisiana State University and Suzanne Sangree,
the Chief Solicitor of the City of Baltimore Law Department. 
href='http://judiciary.house.gov/hearings/hear_090909_1.html'>Click
here to view the hearing details and prepared witness
testimony.

Additionally, the House
Financial Services Subcommittee on Housing and Community Opportunity
will hold a hearing today entitled, “Progress of the Making Home
Affordable Program: What Are the Outcomes for Homeowners and What Are
the Obstacles to Success?” The hearing will focus on the successes

and challenges of the Making Home Affordable Program six months after
its implementation on March 4, 2009.  The
program was intended to help three to four million homeowners, but six
months into the program only 15 percent of the eligible 2.7 million
homeowners have received help. The hearing will take place at 10 a.m. ET

in Room 2128 of the Rayburn House Office Building. 

href='http://www.house.gov/apps/list/press/financialsvcs_dem/press_090809.shtml'>Click

here to view a live Webcast of the hearing.

Legislation Seeks to
Establish New Judgeships

Senate Judiciary Committee Chairman Patrick Leahy
(D-Vt.) yesterday introduced the “Federal Judgeship Act of
2009” that would establish a total of 63 new permanent and
temporary judgeships across the U.S., including 12 circuit
judgeships,

size='3'>Bankruptcy Law360 reported yesterday.

Congress has not passed comprehensive legislation to address mounting
caseloads in federal district and circuit courts across the U.S. since
1990, according to Leahy. The measure — which includes
recommendations made in May by the Judicial Conference of the United
States, the policymaking body of the federal courts — includes 13
temporary district court judgeships and three temporary circuit court
judgeships. It also extends one existing temporary district court
judgeship, which Leahy said would allow lawmakers greater flexibility as

judgeship needs change in the future. 
href='http://leahy.senate.gov/press/200909/090809c.html'>Click
here to read Leahy’s press release on the
legislation.

Overspending on Debit Cards
Is a Boon for Banks

Banks and credit unions have long pitched debit cards
as a convenient and prudent way to make purchases, but overdraft fees
are growing to sting consumers who use these cards, the
face='Times New Roman'>New York

Times reported today. Banks market overdraft
protection, and the fees it generates have become an important source of

income for the banking industry at a time of big losses in other
operations. This year alone, banks are expected to bring in $27 billion
by covering overdrafts on checking accounts, typically on debit card
purchases or checks that exceed a customer’s balance. Banks now
make more covering overdrafts than they do on penalty fees from credit
cards. Although regulators have warned of abuses since at least 2001,
they have done little to curb the explosive growth of overdraft fees.
But as a consumer outcry grows, the practice is under attack, and
regulators plan to introduce new protections before year’s end.
The proposals do not seek to ban overdraft fees altogether. Rather,
regulators and lawmakers say they hope to curb abuses and make the fees
more equitable. 

href='http://www.nytimes.com/2009/09/09/your-money/credit-and-debit-cards/09debit.html?_r=1&ref=business&pagewanted=print'>Read

more.

Report: U.S. Unlikely to
Recoup Automaker Investments

The Congressional Oversight Panel will release a
report today saying that the federal government is unlikely to recoup
the billions of dollars that it has invested in General Motors and
Chrysler, the Washington Post reported
today. The report said that a $5.4 billion portion of the $10.5 billion
owed by Chrysler is 'highly unlikely' to be repaid, while full recovery
of the $50 billion sunk into GM would require the company's stock to
reach unprecedented heights. The report also recommended that the
Treasury Department act with more transparency and provide a legal
analysis justifying the use of financial rescue funds for the
automakers. In all, the government has invested $74 billion in the
nation's auto industry, including $12.5 billion into auto financing
giant GMAC and $3.5 billion into auto suppliers, according to the
report. The panel also admitted that the government may have averted
economic catastrophe by taking on the rescue. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/08/AR2009090804072_pf.html'>Read

more.

Insurer Seeks to Revoke AHM
Loan Coverage

Triad Guaranty Insurance Corp. filed an adversary
proceeding against American Home Mortgage Holdings Inc., claiming the
bankrupt mortgage lender failed to properly underwrite thousands of
loans covered by the insurer, causing defaults and rescissions to
skyrocket,

size='3'>Bankruptcy Law360 reported yesterday.

Triad filed a complaint Friday in the U.S. Bankruptcy Court for the
District of Delaware seeking to wriggle out of several master insurance
policies it issued to AHM to cover potential defaults on 29,000 home
loans. AHM failed to adhere to prudent underwriting guidelines,
effectively causing Triad to insure a large percentage of unqualified
loans and causing the company “enormous losses,” the suit
alleges. Under AHM's administration, defaults increased from 2 percent
to 16 percent, and Triad has had to rescind 70 percent of the loans, up
from 5 percent — “a dramatic and unexpected increase in
underwriting violations,” the complaint says. 
href='http://bankruptcy.law360.com/articles/120866'>Read
more. (Subscription required.)

New York Nears Charges on
Merrill Deal

New York Attorney General Andrew Cuomo moved closer
yesterday to filing securities-fraud charges against Bank of America
Corp. executives, citing at least four 'failures' to tell shareholders
material information related to the bank's takeover of Merrill Lynch
& Co., the Wall Street Journal reported
today. Cuomo's office is pursuing its investigation of the Merrill deal,

reached last September as Lehman Brothers was tumbling into bankruptcy,
under the Martin Act, a New York state law that broadly defined
securities fraud and can be used to pursue civil and criminal penalties.

In contrast, the Securities and Exchange Commission didn't move to hold
any specific BofA executives responsible for securities filings that the

agency concluded last month had misled investors about $3.6 billion in
bonuses at Merrill. BofA agreed to a $33 million settlement of those
civil allegations, without admitting or denying wrongdoing. A federal
judge has declined to approve the settlement without more information on

how it was reached. Court filings from both sides are due today. 

href='http://online.wsj.com/article/SB125243473310093181.html'>Read
more. (Subscription required.)

Lyondell Says Superfund
Costs Should Be Considered Unsecured Claims

Lyondell Chemical Co. has objected to efforts by
California and U.S. environmental authorities to seek injunctive relief
against the bankrupt company and its affiliated debtors, contending that

any cleanup recoveries for the sites — totaling $5 billion —

should be treated as unsecured claims,

face='Times










New

Roman' size='3'>Bankruptcy Law360 reported
yesterday. The claims, some of which were brought under the federal
Comprehensive Environmental Response, Compensation and Liability Act,
involve hundreds of sites in various states across the U.S. — many

of which no longer have any direct connection to Lyondell or its
subsidiaries and other affiliates, the chemical company claims. The most

substantial include include claims totaling about $2.7 billion asserted
against debtor Millennium Holdings for cleanup costs associated with a
former Allied Paper Inc. mill near Kalamazoo, Mich., according to the
filing. The case is
face='Times New Roman' size='3'>In re Lyondell Chemical Co. et
al., case number 09-10023, in the U.S.
Bankruptcy Court for the Southern District of New York. 
href='http://bankruptcy.law360.com/articles/120933'>Read
more. (Subscription required.)

CIC Looks to Pile Cash into
U.S. Real Estate

China's $300 billion sovereign-wealth fund is eyeing
big investments in distressed U.S. real estate, the
face='Times New Roman'>Wall
Street Journal reported today. In recent
weeks, officials from China Investment Corp. have held talks with U.S.
private-equity fund managers, including BlackRock Inc., Invesco Ltd. and

Lone Star Funds, about potential investments in beaten-down property
assets, namely mortgage securities backed by office buildings, hotels,
strip malls and other commercial property. CIC also is considering
buying ownership interests in buildings. In addition, CIC is weighing
investing through one of the U.S. government's bailout programs, the
Treasury's Public-Private Investment Program, known as PPIP. The program

is designed to rid banks of toxic mortgage securities by enticing
investors to buy these assets with financing from the U.S.
government. 
href='http://online.wsj.com/article/SB125243309793493085.html'>Read
more. (Subscription required.)

CommerceConnect
Media’s Reorganization Plan Approved

CommerceConnect Media Holdings Inc., a trade-magazine
publisher and Web site operator, won court approval of its plan to swap
debt for equity, just over a month after seeking bankruptcy protection,
Bloomberg News reported yesterday. Bankruptcy Judge
face='Times New Roman'>Brendan
Linehan Shannon approved the pre-packaged
reorganization plan at a hearing yesterday. Under the plan, senior
secured lenders owed about $173 million will share about 87 percent of
the reorganized company’s stock and $60 million in new debt, for
an estimated recovery of up to 70 cents on the dollar, court papers
show. The junior lenders, owed about $33 million, will get warrants to
buy as much as 8 percent of the new stock for a recovery of as much as 4

cents on the dollar. General unsecured creditors, owed up to $2.2
million, will have their claims paid in full or reinstated, according to

court documents. 

href='http://www.bloomberg.com/apps/news?pid=20601127&sid=aNjmQqexVPuw'>Read

more.

Lake at Las Vegas Plan
Gives DIP Lenders Equity

Lake at Las Vegas Joint Venture filed its proposed
chapter 11 plan and disclosure statement on Friday and said that the
company had reached an agreement on a plan term sheet with its unsecured

creditors’ committee,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The disclosure statement noted that the
plan provided for changes in the debtors' ownership, and said that the
DIP lenders would get most of the equity of the reorganized debtors in
satisfaction of the $127 million DIP facility. Any portion of the DIP
loan not used during the bankruptcy will go to the reorganized debtors
to fund operations, the disclosure statement added. The proposed plan
would also resolve an adversary proceeding brought against Credit Suisse

by the creditors’ committee in July for equitable subordination
and fraudulent conveyance, according to the disclosure statement. A
hearing on the adequacy of the disclosure statement is slated for Oct.
15, and a plan confirmation hearing is slated for Dec. 15, court papers
said. 
href='http://bankruptcy.law360.com/print_article/120854'>Read
more. (Subscription required.)

Analysis: NHL Risks Bad
Precedent in Coyotes Bankruptcy

A courtroom tussle over ownership of the National
Hockey League's Phoenix Coyotes team threatens to deprive the NHL of the

right to decide who can own a team, and where it may relocate, according

to a Reuters analysis today. Canadian billionaire James Balsillie,
co-CEO of BlackBerry maker Research in Motion Ltd., raised his bid for
the bankrupt team by $30 million to $242.5 million. That would be almost

$100 million higher than the next-highest offer of $150 million by Ice
Edge Holdings, which includes current Coyotes coach and part owner Wayne

Gretzky. Balsillie wants to move the team to southern Ontario in Canada,

against the NHL's wishes. Balsillie's bid puts pressure on Judge

size='3'>Redfield Baum, who is looking to
maximize the return on the team, analysts said. It also includes an
offer of up to $50 million for the city of Glendale, Ariz., for the loss

of the team's home games under a long-term lease. Judge Baum still must
decide whether to include Balsillie's bid in the two-day auction set to
start on Thursday. Last month, NHL owners rejected Balsillie's ownership

application. 

href='http://in.reuters.com/article/innovationNews/idINTRE5876D520090908'>Read

more.

SemGroup Selects New
Executive Team, Board of Directors

SemGroup, LP announced today the selection of a new
chief executive officer, chief financial officer and board of directors
to lead the company upon its emergence from chapter 11 reorganization,
according to a press release. SemGroup is expected to exit chapter 11 in

November 2009 and become a publicly traded company. Norm Szydlowski has
been selected to become president and CEO of the company, while Philip
J. Reedy was selected CFO. SemGroup, LP and certain subsidiaries filed
for chapter 11 protection on July 22, 2008. 

href='http://www.reuters.com/article/pressRelease/idUS40354+09-Sep-2009+BW20090909'>Read

more.

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