July 112008

 

Housing-Rescue Bill Advances in
Senate
The Senate moved ahead with a housing-rescue bill yesterday with
Senators voting 84-12 to limit

debate on the measure and set up a vote on the legislative package, the
New York Times

reported today. A timetable for the Senate vote on the full package is
not entirely clear,

since the White House has threatened a veto, and differences between the

Senate and House must

still be worked out. There were rumblings after the vote that the
Democratic leadership might

keep the Senate in session on Friday, which is often a travel day, to
hasten a final vote on

the package. If the Senate does not convene on Friday, a final vote
early next week is likely.

The bill would let the Federal Housing Administration back up to $300
billion in news loans,

enabling lenders and borrowers now saddled with unaffordable mortgages
to refinance them and

assume more manageable 30-year fixed-rate loans. To take part in the
program, lenders would

have to lower each debt obligation to 85 percent of a home's current
value. 

href='http://www.nytimes.com/2008/07/11/washington/11housing.html?ref=business&pagewanted=p

rint'>Read more.

In related news, a commentary in today's Wall Street Journal

said that contractual

and incentive problems in securitized mortgages will likely defeat the
Senate's

housing-assistance bill's attempt to provide a significant amount of
relief. The bill requires

lenders to write down the principal on loans by as much as 15 percent,
and waive prepayment

fees before their loans are eligible for FHA-guaranteed refinancing. For

securitized loans,

there is no 'lender' who can write down the principal, according to the
commentary. Instead,

management of the loan is contracted out to a servicer. Frequently,
servicers are contractually

forbidden from modifying loans or else significantly restricted in their

ability to do so. This

alone will prevent many mortgages from being eligible for FHA
refinancing. 

href='http://online.wsj.com/article_print/SB121573823850144625.html'>Read

more. (Registration required.)

Loan-Agency Woes Swell from a Trickle
to a

Torrent
The fear that Fannie Mae and Freddie Mac, the giant companies at the
heart of the nation's

housing market, might be in trouble continued yesterday even as
government officials tried to

reassure markets that the companies were not going to falter, the
New York Times

reported today. Virtually every Wall Street bank does business with
Fannie Mae and Freddie Mac,

and investors around the world own $5.2 trillion of the debt securities
backed by the

companies. Even as senior Washington officials struggled on Thursday to
reassure worried

investors and discussed a government intervention that could cost
taxpayers billions of

dollars, the companies' stock prices plummeted again in a rush of
selling, this time to their

lowest level in 17 years. Freddie Mac closed down 22 percent, at $8, and

Fannie Mae fell 13.8

percent, to $13.20. 

href='http://www.nytimes.com/2008/07/11/business/11ripple.html?_r=1&hp=&oref=slogin&amp

;pagewanted=print'>Read more.

GM CEO Dismisses Bankruptcy
Rumors
General Motors CEO Rick Wagoner denied rumors yesterday that the
automaker might seek

bankruptcy protection soon, calling the speculation inaccurate and
harmful to GM's turnaround

prospects, the New York Times reported today. GM's shares
dropped 6 percent on

Thursday, to $9.69, as industry analysts questioned whether the company
had enough cash to

weather the downturn in vehicle sales. The company, the largest
automaker in the United States,

had $23.9 billion in cash at the end of March, but analysts contend that

it needs to raise at

least $10 billion more to operate through 2009. Wagoner declined to
specify what actions GM

might take to bolster its cash reserves, but said that the automaker was

“moving

expeditiously” to shore up its finances. 

href='http://www.nytimes.com/2008/07/11/business/11auto.html?ref=business&pagewanted=print'

>Read more.

Government Rule-Makers Looking at
Pensions
As cities and states struggle with ballooning retirement costs,
accounting rule-makers started

an ambitious project yesterday to force state and local governments to
issue better numbers and

reveal the true cost of their pension promises, the New York
Times reported today. The

Governmental Accounting Standards Board began the project yesterday by
tackling the issue of

whether the accounting rules must be changed to stop systematically
undercounting pension

costs. Proponents of sweeping change say the rules now give rise to bad
numbers everywhere -

not just when governments are cutting corners or making mistakes, but
even when the plans are

run responsibly. Governments pensions typically cannot be rescinded
because they are protected

by law and state constitutions, even if they prove unaffordable - as was

the case in Vallejo,

Calif.'s bankruptcy. In some places with rising pension costs, like
Illinois, New Jersey and

Pennsylvania, officials are weighing sales of turnpikes, airports and
parking garages to help

generate cash. 

href='http://www.nytimes.com/2008/07/11/business/11gasb.html?ref=business&pagewanted=print'

>Read more.

Asarco Reaches $16.8 Million
Settlement over Idaho

Site
Bankrupt copper mining company Asarco LLC has reached a $16.8 million
settlement with the U.S.

and Idaho governments over its liability for the cleanup of a polluted
site in Idaho,

Bankruptcy Law360 reported yesterday. The agreement settles all

of Asarco's

liabilities related to a contaminated area in Idaho known as the Coeur
d'Alene box site.

Government experts have estimated the total cost of cleaning up the site

at over $39

million. 
href='http://bankruptcy.law360.com/secure/printview.aspx?id=61782'>Read

more. (Registration required.)

Subprime Lender's Reorganization Plan
Approved
Bankruptcy Judge James F. Schneider said yesterday that

he would confirm a

reorganization plan for Columbia's Fieldstone Mortgage Co. as early as
today, making it one of

few subprime lenders to survive bankruptcy since the credit crisis
began, the Baltimore Sun

reported today. Fieldstone filed for chapter 11 protection in November,
having already

shuttered operations and whittled its work force to 25 from 1,000. Most
of the remaining

employees will join the reorganized business, now funded and run by
Planet Financial Group

LLC. 

href='http://www.baltimoresun.com/business/realestate/bal-bz.fieldstone11jul11,0,2311476,print.

story'>Read more.

Judge Grants Aegis More Time to Submit

Chapter 11

Plan
Bankrupt Aegis Mortgage Corp. has won its bid for an extention to
negotiate with creditors and

file an exclusive chapter 11 exit plan, Bankruptcy Law360
reported yesterday.

Bankruptcy Judge Brendan Shannon issued his order Tuesday
giving the lender until Aug.

7 to submit the plan. Aegis, which filed for chapter 11 last August amid

the mortgage meltdown,

originally sought a 90-day extension, but agreed to accept a 60-day
compromise after

negotiations with its creditors' committee. 

href='http://bankruptcy.law360.com/Secure/printview.aspx?id=61785'>Read

more. (Registration required.)

Bankrupt Utility Company Pays $23
Million Bankruptcy

Settlement
NorthWestern Corp., an electricity and natural gas provider, said today
that a bankruptcy court

has approved a settlement between NorthWestern, Magten Asset Management,

Law Debenture Trust

Company of New York and holders of quarterly income preferred
securities, the Associated Press

reported. Under the agreement, NorthWestern will make a cash payment of
$23 million to be

allocated between Magten, Law Debenture and holders of the preferred
securities. NorthWestern

will be reimbursed for $4 million in legal fees and expenses under a
separate agreement. The

$23 million settlement was the last major claim related to
NorthWestern's 2003 chapter 11

bankruptcy case, according Michael Hanson, the company's president and
CEO.

New Bankruptcy Judge Appointed in
Florida
The Honorable Caryl E. Delano was appointed as a
bankruptcy judge of the U.S.

Bankruptcy Court for the Middle District of Florida, Tampa Division, on
June 25, according to a

court press release. Judge Delano practiced before the state and federal

courts of California

for fourteen years.  She most recently practiced law with the firm
of Addison &

Delano, P.A. Judge Delano has represented debtors and creditors in
numerous chapter 11 cases

and related adversary proceedings. She graduated from the University of
South Florida, B.A.,

cum laude, in English in 1976.  She attended
Indiana University School

of Law - Indianapolis and Emory University School of Law, receiving her
J.D. from Indiana

University in 1979.

International

Polish Shipyard Workers Rally Amid
Bankruptcy

Fears
Nearly 2,000 workers staged protests today at Poland's
shipyards amid fears that the

European Union may force them into bankruptcy in a dispute over state
aid, Reuters reported

today. The European Commission, the EU's executive body, is due next
Wednesday to rule on

whether Poland broke state aid rules by extending billions of euros in
aid to the yards, which

played a key role in the struggle for democracy during the 1980s. Having

to repay the aid,

worth some 1 billion euros ($1.57 billion), would bankrupt the Gdynia,
Gdansk and Szczecin

shipyards and officials in Warsaw say up to 60,000 jobs are at risk. The

Commission confirmed

today that it had received further information from the Polish
government on its restructuring

plans for the shipyards, and promised to assess them quickly to see
whether they would

influence its final decision. 

href='http://www.guardian.co.uk/business/feedarticle/7645221'>Read
more.

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