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December
11, 2007
Mortgage
Lending
name='1'>Legislation Would Regulate Mortgage Brokers, Require
Reworking of Loans
Senate Banking Chairman Chris
Dodd (D-Conn.) plans to introduce an anti-predatory lending bill today
that would place greater regulation on mortgage brokers and require
investors who own troubled loans to rework those mortgages so homeowners
can be placed into better rates, CongressDaily reported. Dodd's
bill differs in some key aspects from legislation the House passed Nov.
16 as Dodd is targeting the mortgage broker industry, which was
responsible for originating about 70 percent of subprime loans. The bill
would require brokers to have a fiduciary responsibility for their
customers. It also would more severely limit the use of a so-called
yield spread premium than the House bill would. Like the House bill
though, the Dodd measure would require that originators must ensure
that the borrower has an ability to repay their subprime and
nontraditional loans and that refinancing would have a 'net tangible
benefit' to the borrower.
name='2'>Senator Looks at Credit Raters' Role in Mortgage
Crisis
As the subprime mortgage
crisis reverberates through the economy, Sen. Charles Schumer (D-N.Y.)
said that he will maintain his scrutiny of the credit-rating industry,
which endorsed billions of dollars in troubled home loans,
CongressDaily
size='3'>reported yesterday. Schumer said that he is concerned that the
industry has an 'inherent conflict of interest' because it receives fees
from the issuers of mortgage-backed securities, rather than the
investors interested in purchasing such products. Critics
contend that the fee structure has resulted in firms observing
lax underwriting standards so they can court business with major
investment houses, which pay them for judging the quality of
mortgage-backed securities. 'The credit agencies have an inherent
conflict of interest,” Schumer said. “They are paid after
they make the determination of what the rating is, so they obviously
have an incentive to be optimistic.'
name='3'>Federal Reserve and Freddie Mac Try to Limit Subprime
Damage
Freddie Mac announced a policy
yesterday that will reduce the number of overdue loans it purchases from
investors in mortgage securities guaranteed by the company, while the
Federal Reserve is looking to propose mortgage regulations banning
certain lending practices, the Wall Street Journal reported
today. The move by Freddie Mac is designed to preserve capital by
avoiding the large, immediate losses Freddie must recognize when it
makes such purchases. Fannie Mae said that it plans to follow suit.
Meanwhile, the Fed is expected to propose a ban on penalties for
prepaying certain subprime mortgages and a requirement that in some
cases, borrowers include money for taxes and property insurance in their
href='http://online.wsj.com/article/SB119729351756419266.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='4'>Washington
face='Times New Roman' size='3'> Mutual Retrenches after Taking
Hard Hit from Mortgage Crisis
Washington Mutual Inc.,
reeling from continued turmoil in its mortgage business, said that it
plans to reduce its dividend, cut jobs and sell preferred stock to
generate $3.7 billion in capital, the
size='3'>Wall Street Journal reported today.
The company also said it expects a fourth-quarter loss on a $1.6 billion
goodwill write-down on its home-loan business. The moves continued a
year of bad news for a once-highflying financial institution closely
associated with the explosion of retail banking and heavily marketed
mortgage loans across the United States
size='3'>in recent years. Of the top five mortgage lenders, WaMu's
portfolio has the most exposure to risky loans, with 29 percent of its
2006 loans in the high-cost category, mostly subprime, and 15 percent
backed by homes other than the owner's primary residence.
href='http://online.wsj.com/article/SB119732179759119886.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='5'>Mortgage Crisis Forces the Closing of a
Fund
Losses on investments
weakened by the deepening housing crisis have forced Bank of America to
close a multibillion-dollar high-yield fund, the largest of its kind,
after wealthy investors withdrew billions of dollars in assets,
the New York
Times reported today. The fund, run by
Columbia Management, had $40 billion in assets last month, but that
began to shrink after some of its investments were devalued or frozen, a
bank spokesman said. The bank briefly shut off withdrawals after the
fund dropped to about $12 billion last week. Bank of America’s
fund invested in structured investment vehicles (SIVs), which issue
short-term debt tied to home loans, and some of the SIVs were later
downgraded by ratings agencies.
href='http://www.nytimes.com/2007/12/11/business/11money.html?ref=business&pagewanted=print'>Read
more.
Dura
Delays Hearing on Bankruptcy Plan
Auto-parts supplier Dura
Automotive Systems Inc. is pushing back a court hearing on its
reorganization plan so it can finish syndicating the $425 million in
financing it needs to exit bankruptcy protection, the Associated Press
reported yesterday. The company said yesterday that it has syndicated a
majority of the financing but chose to extend the loan-marketing period
to give the banks that arranged the financing, Goldman Sachs Credit
Partners and Barclays Capital, more time to sell the loans. Dura, which
is trying to exit bankruptcy protection by the end of the year, said it
asked the U.S. Bankruptcy Court in
w:st='on'>
size='3'>Wilmington,
w:st='on'>
size='3'>Del.
chapter 11 plan confirmation hearing to later in December so the banks
can complete the loan syndication.
href='http://biz.yahoo.com/ap/071210/dura_automotive_bankruptcy.html?.v=1'>Read
more.
face='Times New Roman' size='3'>
name='7'>Delphi
size='3'> Agrees to Sell Steering Business
Bankrupt auto supplier
Delphi Corp. said today that it agreed to sell its global steering and
halfshaft business to a private equity group, the Associated Press
reported today.
size='3'>Delphi did not disclose
financial terms of the deal with Steering Solutions Corp., a unit of
Platinum Equity LLC. The company also said that it sealed a 'transaction
facilitation agreement' with General Motors Corp. that foresees GM
making certain commitments to
face='Times New Roman' size='3'>Delphi
size='3'>in connection with the sale. Specifics of that agreement were
not disclosed.
size='3'>Delphi
approval for the Platinum bid in February.
href='http://biz.yahoo.com/ap/071211/delphi_sale.html?.v=1'>Read
more.
Pope
& Talbot Bankruptcy Loan Approved
Pulp and lumber producer
Pope & Talbot Inc. has won court approval to borrow up to $89
million in bankruptcy financing as it works to sell off its assets by
early next year, the Associated Press reported yesterday. Bankruptcy
Judge
size='3'>Chris
size='3'>topher S. Sontchi signed off on the financing
from Wells Fargo Financial Corp. and Ableco Finance on Friday. The
financing package, which includes a $71 million revolving loan and an
$18 million term loan, requires Pope & Talbot to sell its assets by
Feb. 15. The company has already signed a deal to sell most of its
lumber business to International Forest Products Ltd. for $69 million,
subject to higher offers. The company has until Jan. 8 to select a lead
bidder for the assets and Judge Sontchi will review the auction results
at a Feb. 12 hearing.
href='http://biz.yahoo.com/ap/071210/pope_talbot_bankruptcy.html?.v=1'>Read
more.
Fight M. Fabrikant's Liquidation Plan
A group of banks has
filed objections to M. Fabrikant & Sons Inc.'s chapter 11
liquidation plan, arguing that it does not adequately address the banks'
rights to recover defense costs stemming from an adversary case filed in
October, Bankruptcy
Law360 reported yesterday. Bank of America NA
and JP Morgan Chase Bank NA filed objections to the plan on Friday as
HSBC Bank
size='3'>USA filed a joinder
to Bank of America's objection and Bank Leumi
w:st='on'>
size='3'>USA
size='3'>filed a joinder to JP Morgan Chase's objection. Bank of America
and JP Morgan Chase filed similar objections, asking the court to deny
confirmation of the plan until the administrative claims related to the
pending adversary litigation can be fully protected.
size='3'>In early October, the unsecured creditors’ committee
filed an adversary suit seeking to force a number of banks to void the
millions in loans they gave the troubled diamond purveyor, claiming the
banks knew full well that its controlling family was funneling the funds
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=41966'>Read
more. (Registration required.)
name='10'>Musicland Hit with Suits over Prepetition
Transfers
Unsecured creditors of
Musicland Holdings Corp. have filed another wave of adversary cases
against companies with claims against the bankrupt entertainment
retailer in a bid to recover more than $3 million in allegedly
fraudulent payments made before the company's chapter 11 filing,
Bankruptcy Law360
reported yesterday. The 10 cases, filed separately on
Friday in the U.S. Bankruptcy Court for the Southern District of New
York, seek to recover transfers that were made to a number of companies,
including Grant Thornton LLP and Accenture LLC, during the 90-day
preferential period before Musicland filed for bankruptcy on Jan. 12,
2006.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=41928'>Read
more. (Registration required.)
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=41928'>