href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
src='/AM/Images/headlines/headline.gif' />
October
25, 2007
Mortgage
Lending
name='1'>House Chairman Looks for Increased Regulation of Wall
Street Stemming from Subprime Crisis
House Financial Services
Chairman Barney Frank (D-Mass.) yesterday defended a provision in his
anti-predatory lending bill that would impose liability on investment
firms that purchase, repackage and sell mortgages - language met by
strong opposition from the securities industry,
face='Times New Roman' size='3'>CongressDaily
size='3'>reported yesterday. During a hearing on his bill, H.R. 3915,
Frank singled out the securities liability section as an integral
component of his measure. The bill would impose liability on firms - but
not investors - for the mortgages they securitize and sell into the
secondary market. Frank argued that the secondary market was important
for the mortgage business because it provided much liquidity to fuel
growth. However, he said that unlike traditional banks, firms had no
federal regulator to ensure they did not engage in abusive actions by
snatching up predatory loans. Rep. Ed Royce (R-Calif.) disagreed, saying
that the provision would open up firms to too much legal jeopardy. 'The
likely result of that will prevent many creditworthy borrowers from
receiving financing and the credit crunch will spread even further,'
Royce said. FDIC Vice Chairman Martin Gruenberg testified that Frank's
bill is a 'workable and helpful vehicle' to establish a national
standard for mortgage lending. Gruenberg said that the FDIC supported
placing assignee liability on lenders and brokers for the mortgages they
make as 'a meaningful check on abuse by originators.'
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht0718073.shtml'>Click
here to read the prepared witness testimony.
In related news, House
Financial Services Committee Chairman Barney Frank (D-Mass.), announced
yesterday that he will host a workshop at the Federal Reserve Bank in
Boston tomorrow at 9:30 a.m., according to a release. The workshop
will feature banking regulators, mortgage lenders, banks, credit
unions, housing advocates, community groups and state and local elected
officials to facilitate discussions on how to best to help homeowners
with troubled mortgages.
name='2'>Reports Suggest Broader Losses from
Mortgages
Economists are now saying
that troubles in the mortgage market could cost a total of up to $400
billion to financial firms and investors, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. That is far more than the roughly $240 billion
cost, adjusted for inflation, of the savings and loan crisis of the
early 1990s, according to estimates of the combined financial toll of
that crisis on both the federal government and private sector. The loss
in total real estate wealth is expected to range from $2 trillion to $4
trillion, depending on how far home prices fall, according to several
economists. That would be significantly less than the losses suffered by
investors in the stock market collapse earlier this decade, which erased
more than $7 trillion, or about 40 percent, of market value. The Joint
Economic Committee of Congress estimates that the lost of real estate
wealth just from foreclosures on subprime loans will be about $71
billion. An additional $32 billion would be lost because foreclosed
homes tend to drive down the prices of other houses in the
neighborhood.
href='http://www.nytimes.com/2007/10/25/business/25mortgage.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
In related news, Merrill
Lynch & Co. said yesterday that it took a $8.4 billion hit in the
third quarter from revaluing bonds backed by mortgages and taking other
write-downs, the Wall
Street Journal reported today. That was far
higher than the $5 billion hit Merrill estimated just two and a half
weeks ago - a surprise that led the firm's stock price to fall 5.8
percent as its credit rating was downgraded. Overall, Merrill recorded a
$2.24 billion loss for the quarter, making it the only one of Wall
Street's five biggest investment banks to end the period in the
red.
href='http://online.wsj.com/article/SB119321271755269627.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='3'>Labor Dept. Calls on
face='Times New Roman' size='3'>Delphi
size='3'>to Cover Retirement Fund Losses
The U.S. Labor Department
said that auto parts supplier Delphi Corp. should pay more than $3
million to compensate 11,000 workers who lost millions because their
retirement funds were incorrectly invested in a General Motors Corp.
stock fund, the
size='3'>Toledo
size='3'>(
face='Times New Roman' size='3'>Ohio
size='3'>) Blade reported today. The
department’s $3.1 million claim against
w:st='on'>
size='3'>Delphi
the company didn’t do enough to correct mistaken retirement
investments, said Jonathan L. Snare, Labor’s acting solicitor. The
company is asking the bankruptcy court to throw out the Labor
Department’s claim, saying it took “immediate steps”
to correct the mistake. The U.S. Bankruptcy Court in
w:st='on'>
size='3'>Manhattan
consider the company’s request Nov. 8.
name='4'>Musicland Disputes Wachovia's $25 Million
Claim
Musicland Holdings Corp.
asked a bankruptcy judge yesterday to expunge Wachovia Bank’s $25
million claim, arguing that it wasn't filed in a timely fashion,
Bankruptcy Law360
reported yesterday. The contested claim centers on a
dispute between Wachovia and another bank, Harris NA, and a group of
entertainment companies, which sued the banks over a last-minute $25
million loan paid to Musicland just four months before the retailer
filed for bankruptcy. The eight secured trade creditors, which include
Buena Vista Home Entertainment Inc. and Paramount Pictures Corp., claim
that the banks participated in a “subterfuge” to disguise
the loan as part of a revolving credit facility secured by a senior
claim on all of Musicland’s assets at the creditors' expense.
Wachovia wants to make sure that Musicland has enough money in its
coffers to cover a defeat in the trade vendor suit since the financial
giant claims to be indemnified against the potential loss.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38336'>Read
more. (Registration required.)
Criticizes Pacific Lumber Plan
Bankruptcy Judge
Richard Schmidt
criticized Pacific Lumber Co.’s reorganization
plan, saying that it would likely incite opposition from
creditors, Bankruptcy
Law360 reported yesterday. Judge Schmidt said
that although Pacific Lumber plans to finance its reemergence by using
its land for luxury housing developments, the company has not managed to
attract the support of
w:st='on'>
size='3'>Humboldt
face='Times New Roman'
size='3'>County
the land is located. Pacific Lumber's creditors echoed Judge Schmidt's
skepticism about the plan, with Bank of New York arguing that the
company's $1 billion development plan would negatively impact the
quality of life in
w:st='on'>
size='3'>Humboldt
face='Times New Roman'
size='3'>County
size='3'>.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38286'>Read
more. (Registration required.)
The New York Racing
Association Inc. filed a reorganization plan and accompanying disclosure
statement Tuesday that, if approved, will allow it to run the
Aqueduct,
size='3'>Belmont
w:st='on'>
size='3'>Saratoga
size='3'>racetracks for at least the next 30 years,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. According to the disclosure statement, NYRA
will receive a 30-year thoroughbred racing franchise from
size='3'>New York
which also agreed to provide NYRA with up to $75 million in funds
received from a gaming entity that will operate video lottery terminals
at the Aqueduct track. In return, NYRA agreed to provide all net
revenues from racing operations to the state. The association also
agreed to relinquish its ownership claims to the racetracks, an issue
that was first resolved last month in a memorandum of
understanding.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=38367'>Read
more. (Registration required.)
Appoints Trustee for 1031 Tax Group Bankruptcy
Bankruptcy Judge
Martin Glenn appointed a trustee to sort out the
finances of the 1031 Tax Group after a $300 million loan failed to come
through for the bankrupt company, the
size='3'>San Jose Mercury News reported
yesterday. The Richmond, Va.-based company filed for chapter 11 in May
after authorities said that founder Edward Okun allegedly stole about
$151 million from 300 clients' property sales nationwide. That company
was one of five qualified intermediaries that Okun bought during the
past two years and placed under the umbrella firm 1031 Tax Group.
Qualified intermediaries hold proceeds from property sales for a fee
under §1031 of the
w:st='on'>
size='3'>U.S.
code. Jim
Lukenda, a restructuring officer from Huron
Consulting Group hired to reorganize 1031 Tax Group, said he'd been
counting on the loan to repay investors in August and finance 1031's
operations, but the money from JPS Capital Partners never
materialized.
href='http://www.mercurynews.com/ci_7275529?source=rss'>Read
more.
name='8'>Senate Panel Backs Enhanced Disclosure of 401(k)
Fees
Noting few Americans know what they pay for their 401(k) retirement
programs, Senate Aging Chairman Herb Kohl (D-Wis.) said at a hearing
yesterday that he plans to introduce legislation this week requiring
pension plans to disclose fees to employers and participants,
CongressDaily reported today. Kohl said that the bill he and Sen.
Tom Harkin (D-Iowa) wrote will help employers negotiate to obtain the
lowest possible fees for their workers and assist participants in making
decisions on investment plans. The bill would amplify the disclosures
required by the Pension Protection Act of 2006. Bradford Campbell, head
of the Employee Benefits Security Administration, testified that his
agency is pursuing three initiatives in a regulatory framework. Within
the next few weeks the department is issuing a final regulation
requiring pension plans to include disclosure of their fees in the
annual report they file with the Secretary of Labor, IRS and the Pension
Benefit Guaranty Corporation,
w:st='on'>Campbell
department will propose a regulation requiring disclosure of fees to
employers who choose among plans.