September 102009

 

Lawmakers Warn Lenders on
Pace of Mortgage Modifications

Frustrated lawmakers warned yesterday that the lending

industry could face a renewed push for cramdown legislation if it does
not do more to help homeowners, the

face='Times New Roman' size='3'>Washington Post
size='3'>reported today. Unless there is significant progress under the
government's Making Home Affordable program during the next few months,
legislation to allow bankruptcy judges to modify mortgages should be
revived, Rep. Barney Frank (D-Mass.) said during a House subcommittee
hearing yesterday. Legislation allowing cramdowns narrowly passed the
House earlier this year, but was rejected by the Senate. Since the
Making Home Affordable program was launched in March, 360,165 borrowers'

payments have been lowered under the program, according to figures
released Wednesday by the Treasury Department. That is up from 235,247
last month and brings the industry closer to meeting the Obama
administration's goal of modifying the loans of at least 500,000
borrowers by Nov. 1. However, with millions more borrowers facing
foreclosure over the next few years, the data also illustrate how some
large lenders are struggling to address a backlog of people who need
help. The industry's implementation of the program has been spotty,
consumer advocates say, with some lenders failing to understand the
program's rules or who qualifies for a loan modification. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/09/AR2009090901697.html'>Click

here to read the full story.

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr_090209.shtml'>Click

here to read the prepared witness testimony.

Fannie Mae CEO Cautious
About Housing Recovery

Fannie Mae CEO Michael Williams said yesterday that
the U.S. housing market still has a “long road ahead” to
recovery, and investors and borrowers should remain cautious as the
economy regains its footing, Bloomberg News reported yesterday. The
mortgage market is still dependent on government- affiliated programs,
with private banks providing just 10 percent of loan liquidity, down
from about 60 percent in 2006, Williams said. Fannie Mae and Freddie Mac

are responsible for about 70 percent of all new mortgages, while the
Federal Housing Administration accounts for about 20 percent, Williams
said. Foreclosures will continue to climb this year, Williams said,
putting pressure on home prices as mortgage companies work through a
backlog of property seizures that had been suspended earlier this year
as part of efforts to provide struggling homeowners with relief. One in
every 10 mortgage borrowers is behind on their payments and one in every

25 homes is in foreclosure, he said. Homeowners have lost 40 percent of
their equity, making it difficult for many to refinance, he
said. 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a5VleA6P8q9I'>Read

more.

Wealthy Families Face
Bankruptcy on Real Estate Crash

Wealthy individuals’ chapter 11 bankruptcy
filings jumped 73 percent in the second quarter from a year earlier,
according to the National Bankruptcy Research Center, Bloomberg News
reported yesterday. Falling U.S. home prices leave them unable to
refinance or sell properties when they drop below the value of the
mortgage, said

size='3'>Joseph Baldi, a Chicago bankruptcy
attorney. Listings of homes for sale worth $1 million or more increased
27.3 percent in July from October, according to Zillow.com, a Web site
that tracks real estate transactions. The number of homes sold with a
value between $1 million to $2 million fell 23 percent in July from a
year earlier, according to the Chicago-based National Association of
Realtors. There is currently a 21-month supply of homes, up
from 16 months last year. “There are a lot of people with real
estate, and they can’t afford it,” said Baldi. “They
can’t make the payments, and they can’t sell the
house.” 

href='http://www.bloomberg.com/apps/news?pid=20601203&sid=a6l3xr8MUE08'>Read

more.

Insurance Regulators
Schedule Hearing on Rating Firms

State regulators scheduled a hearing on Sept. 24 to
review their reliance on ratings firms in grading insurers’
financial strength and whether changes are needed after the plunge of
top-ranked bonds exposed flaws in credit scores, Bloomberg News reported

yesterday. Regulators will consider approaching companies beyond
S&P, Moody’s, Fitch and Dominion Bond Rating Service Ltd. to
analyze securities, said Hampton Finer, deputy superintendent and chief
economist at the New York Insurance Department. All four ratings firms
are invited to attend, he said. Regulators, consumer representatives,
academics and industry experts will also be invited to attend the
hearing to be held at National Harbor, Md.

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aebfBaxxY1aE'>Read

more.

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aebfBaxxY1aE'>

Environmental Group Sues
Feds over Bankrupt Mine Company Waste

An environmental group has accused the Bureau of Land
Management of violating the Clean Water Act by not policing the
activities of a now-bankrupt mining company that leased land from the
bureau and went on to allegedly dump arsenic and other hazardous
chemicals into nearby surface waters,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. Northern California River Watch on Tuesday
sued the U.S. Department of the Interior's Bureau of Land Management and

five former supervisors and employees of mining company Bullion River
Gold Corp., now under chapter 11 protection, in the U.S. District Court
for the Eastern District of California. The federal government and the
former Bullion River Gold employees violated the conditions of a state
permit as well as a National Pollutant Discharge Elimination System
permit by allowing contaminated stormwater and pollutants from the
Washington Mine to flow into adjacent waters, River Watch
claimed. 
href='http://bankruptcy.law360.com/print_article/121133'>Read
more. (Subscription required.)

Chicago
Sun-Times Seeks Approval for $5 Million

Sale to Investor Group

The bankrupt Sun-Times Media Group has asked a judge
to approve the sale of substantially all its assets to a stalking-horse
investor group, led by Mesirow Financial Holdings Inc. CEO James C.
Tyree, for $5 million in cash, Bankruptcy Law360 reported
yesterday.Sun-Times Media filed the motion seeking approval of the asset

sale to STMG Holdings LLC free and clear of liens, claims, encumbrances
and other interests, as well as bidding procedures related to the sale,
in the U.S. Bankruptcy Court for the District of Delaware on Tuesday.The

buyers will assume liabilities estimated to total approximately $20
million under the terms of the sale, Sun-Times Media said Tuesday.The
case is

size='3'>In re Sun-Times Media Group Inc.,
case number 09-11092, in the U.S. Bankruptcy Court for the District of
Delaware. 
href='http://bankruptcy.law360.com/print_article/121240'>Read
more. (Subscription required.)

Liquidating Trustee Fights
Claims in Charys Chapter 11

The liquidating trustee for Crochet & Borel
Services Inc.has filed an objection in the chapter 11 proceedings of its

parent — wireless communications company Charys Holdings Co. Inc.
— seeking an order to disallow claims that contradict what is
listed in Crochet & Borel's records,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. More than 200 proofs of claim have been
filed against Charys and its affiliated debtors in the chapter 11
proceedings, and the liquidating trustee's counsel has reviewed and
reconciled all prepetition claims against Charys, the objection states.
However, the trustee has been unable to reconcile 10 claims with the
books and records, according to the objection. Those claims should be
disallowed or reduced because the books and records, which Charys
believes are accurate, do not reflect the existence of several of the
asserted claims, and some of the claims asserted are in excess of the
amounts actually owed, the objection states. 
href='http://bankruptcy.law360.com/articles/121217'>Read more.
(Subscription required.)

SEC Defends Deal in Merrill
Takeover

The Securities and Exchange Commission yesterday
defended its proposed $33 million settlement with Bank of America over
bonuses paid to Merrill Lynch executives just before the bank took over
Merrill last year, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today.The SEC said in a federal court filing that the
settlement was “fair” and “reasonable” and that
it had lacked enough evidence to charge individuals at the bank with
misleading shareholders about the $3.6 billion in bonuses paid to
Merrill employees.In its own legal filing, Bank of America maintained
its previous stance that “there is no evidence that any individual

is culpable” and said it had agreed to the settlement with the SEC

to avoid a protracted public court fight that could potentially damage
its reputation.On Aug. 25, Judge Jed S. Rakoff of the U.S. District

Court in Manhattan refused to approve the proposed settlement until he
received an explanation about why the SEC had failed to pursue charges
against individuals at the bank. 

href='http://www.nytimes.com/2009/09/10/business/10bank.html?ref=business&pagewanted=print'>Read

more.

Real Estate

Buyers of Huge Manhattan
Complex Face Default Risk

Jerry I. and Rob Speyer and their partner, BlackRock
Realty, who paid $5.4 billion for Stuyvesant Town and Peter Cooper
Village in Manhattan, have seen the property lose more than half of its
value, and the income from rent — down 25 percent from its peak
— covers less than half of their debt payments, the
face='Times New Roman'>New York

Times reported today. Real estate analysts say

they expect that by December, the partnership will run out of an
additional $890 million set aside for apartment renovations, landscaping

and interest payments, and that the owners are at “high
risk” of default on $4.4 billion in loans.
size='3'>  The partnership will go before the

Court of Appeals today in Albany to try to overturn a lower court
decision that could force them to pay hundreds of millions of dollars in

rent rebates to thousands of tenants. 

href='http://www.nytimes.com/2009/09/10/nyregion/10stuy.html?ref=business&pagewanted=print'>Read

more.

Florida Condo Complex
Threatens to Topple Financing Company

The Tao Sawgrass condominium complex near Fort
Lauderdale, Fla., built with easy money during the housing boom, is now
threatening to topple condo finance conglomerate, Corus Bancshares of
Chicago, the

size='3'>New York Times reported today. The
26-story Tao — begun in 2006, just as the Florida real estate
market imploded — is one of the many troubled condominium projects

that have mired Corus in red ink and now threaten its survival. Federal
authorities are racing to broker a sale of Corus to avert yet another
costly banking collapse.After failing to find a buyer for the entire
company, regulators are moving to cleave the bank in two and sell its
banking operations and condominium loans separately. The hope is to
clinch a deal by the end of the month. Corus epitomized the easy lending

and lax oversight of the go-go years as it moved into hot markets like
California, Florida and Nevada and then kept lending as those markets
boiled over. Rather than diversify, it concentrated its lending bets by
financing only a handful of big, risky projects. The failure of Corus
could cost an already-strained Federal Deposit Insurance Corporation
billions. Construction and land loans are now the biggest problem for
hundreds of deeply troubled lenders and pose far greater dangers than
commercial loans or home mortgages, according to Foresight Analytics, a
banking industry research firm. 

href='http://www.nytimes.com/2009/09/10/business/10corus.html?ref=business&pagewanted=print'>Read

more.

Banks Face Loss of Debt
Guarantee

The Federal Deposit Insurance Corp. is preparing to
wind down an emergency program it launched last year that guaranteed
debt issued by banks, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The FDIC's program is credited with helping to
stabilize the financial system during last year's turmoil. The agency
said it was considering either letting the debt-guarantee program expire

on Oct. 31, or continuing it for another six months for 'emergency'
purposes. The latter would require case-by-case approval from FDIC
Chairman Sheila Bair and a hefty fee from participants. 'As domestic
credit and liquidity markets appear to be normalizing and the number of
entities utilizing the Debt Guarantee Program has decreased, now is an
important time to make clear our intent to end the program,' said
Bair. 

href='http://online.wsj.com/article/SB125253151037397187.html#mod=WSJ_hps_LEFTWhatsNews'>Read

more. (Subscription required.)

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

International

href='http://global.abiworld.org/?q=news'>Click here to review
today's global insolvency news from the GLOBAL INSOLvency
site.