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December
17, 2007
Mortgage
Lending
size='3'>Senate Passes FHA Bill to Help Subprime
Borrowers
The Senate passed legislation
on Friday that would make Federal Housing Administration loans available
to subprime borrowers facing foreclosure, Bloomberg News reported on
Saturday. The Senate plan would lower the down payment required of low-
and middle-income home buyers who obtain federally insured loans, and
also allow larger loans. It also would make it easier for homeowners
with adjustable-rate loans due to reset to get FHA-backed loans. The
Senate FHA measure must be reconciled with the House bill, which had
higher loan limits and more flexible down-payment requirements. The
House legislation also would give the FHA discretion to charge different
rates to buyers based on their credit records, and extend the maximum
mortgage term to 40 years from 35 years. The White House has indicated
that President Bush will sign the final bill.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/12/14/AR2007121401737_pf.html'>Read
more.
name='2'>Fed Plans to Curb Mortgage Excesses
The Federal Reserve is set to
change home-loan lending practices that are blamed for pushing the
nation into a housing downturn, but the effort is expected to fall short
of far more stringent efforts by Congress, the Washington
Post reported on Saturday. The new Fed rules, which may be
announced as soon as tomorrow, aim to curb predatory lending and the
overuse of exotic home loans without hurting the financial system that
backs mortgage lending, according to lawmakers and sources close to the
Fed. Like the measures in Congress, the Fed rules would require lenders
to clearly disclose mortgage information to consumers and to raise
standards for approving mortgage applications. Fed officials, however,
have indicated they may take a softer stance on some practices that have
become widely disparaged in the mortgage crisis. For example, subprime
mortgage holders are often forced to pay large penalties if they pay off
their mortgages ahead of schedule. Many lawmakers want to eliminate
those penalties, but some at the Fed have suggested in public remarks
that the penalties can protect lenders that offer low rates to people
with questionable credit.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/12/14/AR2007121401875_pf.html'>Read
more.
name='3'>Administration’s Mortgage Relief Plan Divides
Neighborhoods
The Bush
Administration’s mortgage relief plan looking help debt-laden
homeowners across
w:st='on'>
size='3'>America
size='3'>is creating fresh tensions in cities that mushroomed during the
subprime lending boom, the Wall Street Journal reported today.
Supporters say that the proposal to freeze interest rates for certain
buyers and accelerate loan refinancing for others aims to target
deserving debtors and avoid aiding those who really can't afford their
homes. Congress joined the rescue effort last week, passing legislation
to help borrowers with mortgages up to $417,000 to secure
refinancing.
size='3'>Southern California
size='3'>, however, poses a particularly tough challenge because of
the mix of adjustable-rate loans and high home prices that put many
mortgages above the ceiling for government guarantees. The prospect of
aid for some borrowers, but not others, brings another layer of discord
to neighborhoods already racked by plummeting home values, rising bank
repossessions and vacant houses whose owners simply up and left.
href='http://online.wsj.com/article/SB119785633408932917.html?mod=hpp_us_pageone'>Read
more. (Registration required.)
name='4'>Greenspan Urges
w:st='on'>
size='3'>U.S.
Help Those Facing Foreclosure
Former Federal Reserve
chairman Alan Greenspan said yesterday that the government should
provide direct financial assistance to homeowners who are threatened by
foreclosure in the worsening credit crisis, the New York
Times reported today. Greenspan said that
helping homeowners directly would create “a short-term fiscal
problem” for the government, but that doing so would be more
effective than solutions like freezing mortgage rates. Two ways to help
homeowners directly would be to reduce taxes or to give cash grants
similar to those given to disaster victims. Either approach would strain
the federal budget, but Greenspan said that it would be “far less
damaging to the economy to create a short-term fiscal problem, which we
would, than to try to fix the prices of homes or interest
rates.”
href='http://www.nytimes.com/2007/12/17/business/17greenspan.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
AHM
Approved to Borrow $38 Million More from ABN for Advances
A judge on Wednesday allowed
bankrupt subprime lender American Home Mortgage Lenders Inc. to ask for
an additional $38 million from ABN Amro Holding NV to make advances to
mortgagors before eventually turning the mortgages over to ABN,
Bankruptcy Law360 reported on Friday. The mortgages are
the subject of a repurchase agreement between AHM and the bank, with AHM
making the initial sale of the mortgages to ABN in February, months
before the company entered bankruptcy. On Aug. 22, shortly after AHM
declared bankruptcy, the two companies entered into a stipulation
allowing AHM to continue to request up to $32 million for advances to
mortgagors. The stipulation approved Wednesday raised that cap to $70
million.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=42344'>Read
more. (Registration required.)
name='6'>Calpine Poised to Emerge from Chapter 11
More than 90 percent of Calpine
Corp.'s creditors have voted to accept its reorganization plan, which
calls for unsecured creditors to recover almost 97 percent of what they
are owed, Bankruptcy Law360 reported on Friday. Based on a
valuation analysis, Calpine plans to argue at its confirmation hearing
today that its enterprise will be worth between $18.3 billion and $20.4
billion, with a midpoint value of $19.35 billion if it emerges from
bankruptcy at the end of this year. Shareholders, however, are not
expected to win recovery of their common stock. For that reason, a
committee representing the company's shareholders is expected to argue
at Monday's hearing that Calpine will actually be worth $24.4 billion
when it emerges from bankruptcy, and that the shareholders are entitled
to more recovery.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=42482'>Read
more. (Registration required.)
name='7'>Interstate Bakeries Receives Interest from
size='3'>Yucaipa
Interstate Bakeries
Corporation (IBC) confirmed that it has received a preliminary
indication of interest from the Yucaipa Companies and the International
Brotherhood of Teamsters describing a possible plan of reorganization
for IBC's emergence from chapter 11 protection, BankruptcyData.com
reported today. The document incorporates some of the terms of the
reorganization plan filed by IBC on Nov. 5 in which
w:st='on'>
size='3'>Yucaipa
would provide creditors with aggregate consideration based on an
enterprise value of $580 million. However, it does not specify how much
will be distributed to unsecured creditors.
name='8'>Recent Case Illustrates Complexity of Handling CDO
Payouts
A recent filing in
size='3'>New York
court provides a window into the legal battles likely to ensue from
battered investments as big players, including Deutsche Bank AG, bond
insurer MBIA Inc., Wachovia Corp. and UBS AG are tangled together over a
mortgage investment vehicle named Sagittarius, the Wall Street
Journal reported today. Sagittarius CDO I Ltd. is a $985 million
collateralized debt obligation (CDO), an investment vehicle that pools
together mortgage-backed securities and sells bonds related to these
pools. During the
w:st='on'>
size='3'>U.S.
size='3'>housing boom, Wall Street scattered the risk in investments
like Sagittarius -- selling pieces to investors around the globe. On
Nov. 6, Sagittarius triggered 'an event of default.' This prompted MBIA
to claim it should get all the remaining payments. That put it into
potential conflict with Deutsche, the CDO's trustee, and UBS, an
investor with fewer rights in the event of default.
href='http://online.wsj.com/article/SB119785147303432641.html'>Read
more. (Registration required.)
name='9'>Senate Finance Approves Millard's Nomination to
PGBC
The Senate Finance Committee unanimously approved the nomination of
Charles Millard, 21-0, to head the Pension Benefit Guaranty Corporation
in an off-the-floor vote Thursday, CongressDaily reported on
Friday. Millard, who has been the interim director since May, is the
first PBGC director required to go through the Senate confirmation
process. The Pension Protection Act passed last year upgraded the
position to a presidential appointment subject to confirmation and is
one of the few positions that requires approval by two committees,
Finance and Health, Education, Labor and Pensions. Millard, if
confirmed by the Senate, will take over a struggling agency that posted
an $18.9 billion deficit last fiscal year, with liabilities of $80
billion and estimated assets of $61 billion, while total underfunding of
existing pension plans reached $500 billion. The veteran of Wall Street
said during his confirmation hearing in September that government-backed
pensions should be more aggressively invested and suggested the agency
review its investment policy. However, the pension law passed last year
stipulates that the agency's investment policy will be reviewed every
two years.