April 4, 2008
Housing Crisis
face='Times New Roman' size='3'>With Durbin Amendment Dead, Senate
Housing Stimulus Package Expected to Pass
The Senate
is expected to clear its housing-stimulus package as early as next week
after it voted yesterday to table an amendment sponsored by Sen. Richard
Durbin (D-Ill.) that would have provided bankruptcy judges additional
power to restructure a home mortgage, CongressDaily
reported today. The overall package would provide $4 billion so cities
could purchase and rehabilitate foreclosed properties to place families
back in them, and about $11 billion in tax breaks to spur additional
home buying. Judiciary ranking member Arlen Specter (R-Pa.) is slated to
offer a competing amendment that would allow a judge to adjust interest
rates and waive prepayment penalties, but not restructure the principal
of a loan. That measure might have a good chance of adoption because
banks have less opposition to that compared to the Durbin measure.
Senate leaders were still trying to hammer out an agreement Thursday
night on the amendments that would be voted on during the debate,
especially as many tax-related measures were being readied.
face='Times New Roman' size='3'>States Move Fast on Mortgage
Aid
size='3'>State governments are acting more aggressively to help
homeowners avoid foreclosure, frustrated by what they view as the
federal government's inadequate response to the mortgage crisis, the
id='EM44'>Wall Street Journal reported today. Ohio officials
announced Tuesday that they had enlisted more than 1,000 local attorneys
to work with certain borrowers free of charge to try to block
foreclosures. An Illinois lawmaker introduced a bill on Wednesday,
backed by the state's governor, that would impose a moratorium of as
long as 60 days on foreclosures. The measure would apply only to
borrowers who enter housing counseling and is meant to give them more
time to work out a deal with lenders. Maryland Gov. Martin O'Malley
signed emergency legislation Thursday to give borrowers at least 150
days to cure defaults, effectively creating a short-term moratorium on
foreclosures. The state also is requiring mortgage-servicing companies
to provide the names of borrowers whose adjustable-rate mortgages are
about to reset to higher rates, and it is asking companies to stop
levying late fees and other charges on borrowers whose request for a
loan workout is being evaluated.
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face='Times New Roman' size='3'>FHA Loans Grow Costly as Banks Add
Fees
size='3'>Banks that make home loans insured by the Federal Housing
Administration are adding fees and restrictions that make those loans
more costly and less widely available, the Wall Street
Journal reported today. Demand for FHA loans has jumped as other
types of mortgages have become more expensive and harder to obtain.
JPMorgan Chase & Co.'s home-mortgage unit this week informed lenders
that sell loans to the big bank that it will require 'price adjustments'
on the new, larger variety of FHA loans. The higher rates largely
reflect muted demand from investors for securities backed by jumbo FHA
loans, traders say. Those securities are expected to be less actively
traded than ones backed by smaller FHA loans, and the larger loans may
be apt to refinance faster, reducing the value to investors. Meanwhile,
many banks also are requiring minimum credit scores for borrowers
seeking FHA loans.
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Study: More Consumers Are Behind on Their
Loans
size='3'>The American Bankers Association reported yesterday that more
Americans have fallen behind on consumer loans than at any time in
nearly 16 years, as credit problems once concentrated in mortgages have
spread into other forms of debt, Reuters reported. In a quarterly study,
the association said the percentage of loans at least 30 days past due
rose to 2.65 percent in the fourth quarter, from 2.44 percent in the
third quarter and 2.23 percent a year earlier. The rate of delinquencies
was the highest since a 2.75 percent rate in the first quarter of 1992.
Credit and debit card delinquencies rose to 4.38 percent, from 4.18
percent in the third quarter, after four consecutive quarterly declines.
Delinquencies on home equity loans increased to a two-year high of 2.39
percent, and on home equity lines of credit, delinquencies rose to 0.96
percent.
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Delphi Approaches Deadline to Get Exit
Loans
size='3'>Delphi needs to secure $6.1 billion in exit financing by today
to meet the requirements of a plan by investors to put as much as $2.55
billion into the reorganized company, the Associated Press reported.
Appaloosa Management LP is leading a group of investors who will take
equity in Delphi in exchange for the $2.55 billion. The group includes
Harbinger Capital Partners Master Fund I Ltd.; Merrill Lynch; Pierce,
Fenner & Smith Inc.; UBS Securities LLC; Pardus Capital Management
LP; and Goldman Sachs Group Inc. If Delphi gets the loans it needs by
Friday, it could finally learn whether the investment group will move
forward on taking a controlling stake in the company. Also, General
Motors may increase how much it will contribute to defray Delphi's
pension obligations. The automaker has agreed to take on $1.5 billion in
pension obligations, according to a court filing last month. Delphi was
$3.8 billion short of being able to fully fund pensions for its hourly
workers as of the end of 2007.
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Airlines
face='Times New Roman' size='3'>JetBlue, United CEOs Cite Struggles with
Fuel Costs
Chief
executives of two U.S. airlines outlined plans yesterday to hold down
costs amid record-high fuel costs, and both anticipated consolidation in
the struggling industry, the Associated Press reported. 'We're pretty
much at the mercy of the cost of energy into an aircraft,' JetBlue
Airways Corp. CEO David Barger said. Facing rising fuel prices, UAL
Corp. CEO Glenn Tilton said that the company's United Air Lines unit is
taking steps to hold down costs, such as by charging fliers a second bag
of luggage beginning in May.
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id='FONT82' face='Times New Roman' size='3'>Northwest Air Raising Fuel
Surcharges
size='3'>In response to rising fuel costs, Northwest Airlines has raised
prices on international flights, plans to freeze new hiring of pilots
and flight attendants, and will cut its domestic schedule by 5 percent
beginning in September, the Associated Press reported today. The
nation's fifth-largest airline said that on March 18 it raised fuel
surcharges generally by $10 or $20 each way for flights from North
America to Europe, India, Japan and most other destinations in Asia. The
airline said that it would try to save $100 million a year through cost
reductions, productivity improvements and revenue enhancements.
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Creditors Object to Vitamin Company’s
Sale
Creditors
say Leiner Health Products Inc.'s plans to sell the company as quickly
as possible will benefit top executives and banks while excluding the
vitamin maker's suppliers, the Associated Press reported yesterday. The
unsecured creditors' committee on Tuesday asked a bankruptcy judge to
put the brakes on plans to sell the Carson, Calif. company, which filed
for chapter 11 protection March 10. Proposed rules for an auction that
will see Leiner sold within months set 'unreasonable hurdles' for
potential bidders, creditors said in court papers filed Wednesday. The
rush sale means only those at the top of the pile of creditors and
insiders who have been running Leiner can count on getting paid,
creditors say.
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Investors Stalk the Wounded of Wall
Street
size='3'>These market opportunists are buying up mortgages of
hard-pressed homeowners, the bank loans of cash-short businesses, and
companies that seem headed toward bankruptcy, the New York Times
reported yesterday. W. L. Ross & Co. recently spent $2.6 billion for
two mortgage servicers and a bond insurance company. Wilbur Ross said
that he planned to buy more as hedge funds and other investors sell at
bargain prices. As the mortgage crisis erupted and then ripped through
the credit markets last year, nearly $21 billion flowed into hedge funds
that specialize in distressed investments — just over $1 out of
every $10 flowed into those loosely regulated investment vehicles,
according to Hedge Fund Research. The average corporate loan, for
example, fetches less than 90 cents on the dollar in the secondary, or
resale, market. Some mortgage bonds sell for pennies on the
dollar.
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International
face='Times New Roman' size='3'>Future of Italian Airline
Uncertain
After
Air France-KLM SA abandoned talks to take over Alitalia SpA, it is
unlikely that the Italian state, which owns 49.9 percent of the airline,
will be able to cobble together a solution for Alitalia until a after
the Italy’s elections in a couple weeks, the Wall Street Journal
reported today. Alitalia's board met more than eight hours yesterday,
but its only decision was to name a new chairman, Aristide Police, to
succeed Maurizio Prato, who quit a day earlier. Prato had insisted that
a takeover by Air France-KLM was Alitalia's last chance for a
turnaround, and he handed in his resignation shortly after the
Franco-Dutch carrier quit the negotiations. Alitalia also said it would
tell the government by Tuesday if the company has enough funds to
survive. The company had €180 million ($282 million) of cash on
hand as of the end of February.
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