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August 7, 2008
Analysis: Mortgages Issued in 2007
Entering Delinquency at a Rapid Pace
Mortgages issued in the first part of 2007 are going bad at a pace that
far outstrips the 2006 vintage, suggesting that the blow to the
financial system from U.S. housing woes will be deeper than many experts
had earlier estimated, the Wall Street Journal reported today.
An analysis prepared for the Wall Street Journal by the Federal Deposit
Insurance Corp. shows that 0.91 percent of prime mortgages from 2007
were seriously delinquent after 12 months, meaning they were in
foreclosure or at least 90 days past due. The equivalent figure for 2006
prime mortgages was just 0.33 percent after 12 months. The first major
casualty of the subprime credit crisis, New Century Financial Corp.,
imploded in early 2007. However, the data from the FDIC and others
suggest that lenders didn't substantially tighten standards until at
least July or August 2007.
href='http://online.wsj.com/article/SB121805947661818327.html?mod=hpp_us_whats_news'>Read
more. (Subscription required.)
Connecticut Files Suit Against
Countrywide over Lending Practices
Connecticut Attorney General Richard Blumenthal has sued Bank of America
Corp.'s Countrywide Financial Corp. for allegedly deceptive lending
practices, the Wall Street Journal reported today. Echoing
the other legal complaints against the mortgage lender, the
Connecticut lawsuit alleges Countrywide engaged in several types of
inappropriate lending behavior and made loans to consumers that were
unaffordable or unsuitable for the borrower. The complaint, filed in
state court in Hartford, alleges violations of Connecticut's unfair
trade practices and banking laws. The lawsuit seeks civil penalties of
as much as $100,000 per violation of state banking laws and as much as
$5,000 per violation of state consumer-protection laws, as well as
disgorgement of any ill-gotten gains and an order compelling the company
to cease the disputed practices.
href='http://online.wsj.com/article/SB121806885061218873.html?mod=us_business_whats_news'>Read
more. (Subscription required.)
Arizona Bankruptcies Doubled in
July
Filings in Arizona doubled to 1,782 in July, with chapter 7 bankruptcies
accounting for most of the filings, the Arizona Republic
reported today. Consumer bankruptcies in the Phoenix area more than
doubled to 1,251 last month compared with July 2007, the Arizona
Republic reported today. Chapter 7 filings jumped 118 percent,
compared with a 90 percent rise for chapter 13 filings in the Phoenix
area. Bankruptcies are increasing at a faster pace in Arizona than
nationally, where consumer filings in July rose 48 percent from a year
earlier, reported the American Bankruptcy Institute and National
Bankruptcy Research Center.
href='http://www.azcentral.com/business/articles/2008/08/06/20080806biz-bankruptcy0807.html'>Read
more.
Citigroup to Buy Back Auction-Rate
Securities
Citigroup was nearing an agreement late yesterday to buy back more than
$7 billion of auction-rate securities from investors to settle claims
that it misled clients about the dangers of the investments, the New
York Times reported today. The pact, with state and federal
regulators, is expected to include a fine of as much as $100 million.
Regulators are investigating at least a dozen Wall Street firms for
their role in the sales and marketing of so-called auction-rate
investments, and analysts expect a wave of settlements in the next few
months. Citigroup, one of Wall Street's biggest auction-rate securities
dealers, is expected to pay a $100 million fine to settle with the New
York attorney general's office and a task force of 12 state regulators,
led by the Texas State Securities Board. Each group would exact a $50
million penalty.
href='http://www.nytimes.com/2008/08/07/business/07citi.html?ref=business'>Read
more.
Lake at Las Vegas Gets $147
Million DIP Financing
Lake at Las Vegas Joint Venture LLC, the developer of a residential and
vacation complex that filed for chapter 11 protection in July, secured
approval on Monday to enter into a $147 million debtor-in-possession
(DIP) financing agreement with Credit Suisse Securities, Bankruptcy
Law360 reported yesterday. The company continues to operate its
business, and the DIP financing will be used to fund ongoing operations,
including payment to its 260 employees and repairs to the man-made lake
located at the center of the complex. The court's Aug. 4 order approves
$1 million as an initial advance to the debtors.
href='http://bankruptcy.law360.com/articles/65187'>Read
more. (Subscription required.)
Judge Appoints Trustee in TV
Bankruptcy Case
Bankruptcy Judge Peter J. Walsh appointed a chapter 11
trustee in the bankruptcy case of Pappas Telecasting Inc. (PTI) at the
request of lenders who accused the company's chairman and CEO of using
the proceedings to further his personal agenda, Bankruptcy
Law360 reported yesterday. Judge Walsh signed an order Tuesday
granting the request from PTI's creditors, led by Fortress Credit Corp.,
the administrative agent of a $284 million bridge loan acquired by PTI
in March 2006. Under the terms of the bridge loan, company chairman and
chief executive Harry J. Pappas and his wife “personally agreed to
be jointly and severally liable for all obligations under the loan
documents subject to a limitation of $30 million,” the lenders
have said in court documents.
href='http://bankruptcy.law360.com/articles/65266'>Read
more. (Subscription required.)
CEO of Health Care Financing Company
Sentenced to 15 Years in Prison
National Century Financial Enterprises Inc. co-founder Donald Ayers was
sentenced to 15 years in prison yesterday for his role in bilking
investors out of $2.9 billion before the health care financing company's
bankruptcy in 2002, Bloomberg News reported. Ayers was sentenced to 15
years on money-laundering charges and five years for securities fraud,
with the sentences to run concurrently. Marbley ordered Ayers and the
other executives, Roger S. Faulkenberry, Randolph Speer, James Dierker
and Rebecca Parrett, to pay restitution in the amount of $2.3 billion.
National Century, based in Dublin, Ohio, loaned money to struggling
health care providers and claimed to secure the loans with incoming
payments that backed bonds sold to investors. Ayers and the other
executives lied to auditors and in monthly reports to bondholders,
prosecutors said. The company's collapse led to bankruptcies by 275
providers.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=acf2y3AYHeXQ'>Read
more.
Florida Bank Looks to Avert Tailspin
from Subprime Losses
While Bank United, Florida's biggest regional bank, tripled its profits
in 2006 by aggressively selling a popular type of high-interest loan to
risky borrowers, it has lost nearly $100 million in late 2007 and early
2008 as the real estate market has cratered, the New York Times
reported today. Bank United CEO Alfred R. Camner is now scrambling to
raise $400 million in capital, an amount nearly eight times the bank's
shriveled value on the stock market. Analysts and a corporate governance
group are monitoring the bank's asset quality and asking why Camner was
allowed, with board approval, to amass a pool of volatile loans that at
one point represented 75 percent of the bank's mortgage
portfolio.
href='http://www.nytimes.com/2008/08/07/business/07florida.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Chrysler, Nissan in Talks to Team Up
on Key Cars
Chrysler LLC is in talks with Nissan Motor Co. about jointly producing
midsize cars, a partnership that would move the U.S. auto maker toward a
radical new business model, the Wall Street Journal reported
today. The two companies agreed earlier this year to team up on pickup
trucks and subcompact cars, and they have since been discussing an
agreement under which Nissan would produce midsize sedans that Chrysler
would sell in the United States under its own name. A partnership with
Nissan on midsize sedans would put Chrysler on a path to becoming a
marketer and seller of cars made by others. Under its earlier agreement
with Nissan, which is based in Japan, Chrysler will start selling a
subcompact car made by Nissan by about 2011. Chrysler also has a deal
under which China's Chery Automobile Co. will make small cars for
it.
href='http://online.wsj.com/article/SB121807669397319543.html?mod=hpp_us_whats_news'>Read
more. (Subscription required.)
EU Clears Purchase of Northwest
Airlines by Delta
Delta Air Lines Inc. won permission from the European Commission
yesterday to buy rival U.S. carrier Northwest Airlines Corp. for more
than $3 billion, Reuters reported yesterday. The new airline, led by
Delta CEO Richard Anderson, will be headquartered in Atlanta and will
operate under Delta's flag with over $35 billion in annual revenue and
about 75,000 employees. The deal must still receive approval from
shareholders and the U.S. Department of Justice.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/08/06/AR2008080601498.html'>Read
more.