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November
27, 2007
Mortgage
Lending
name='1'>Congress Awaits Federal Reserve Action on
Mortgages
Congressional wrangling
over home mortgage standards for brokers, lenders and Wall Street firms
will take a back seat in the next month as the Federal Reserve prepares
to issue rules that would place curbs on the businesses, where loose
underwriting standards have contributed to a record number of
foreclosures and rattled credit markets,
size='3'>CongressDaily reported yesterday. The
Federal Reserve is expected to issue preliminary rules to tighten
lending standards under its authority under the 1994 Home Ownership and
Equity Protection Act, which prohibits unfair, abusive or deceptive
practices. What the Fed proposes should have a major effect on Congress.
Senate Banking Chairman
face='Times New Roman' size='3'>Chris
size='3'>topher Dodd (D-Conn.) said that he would not move any bill
until the Fed releases its preliminary rules. 'They may be doing all
what we are going to do anyway,” Dodd said, “so if I get the
regulations that I am looking for, then I will go looking for a narrower
bill.' The House passed legislation this month that would require
brokers and lenders to ensure borrowers have an ability to repay
adjustable rate mortgages, mandate that there would have to be a 'net
tangible benefit' for home refinancing and expand the authority of
federal banking regulators. The bill was strongly opposed by the lending
industry and only mildly supported by consumer groups; it passed 291-127
in part because lawmakers were concerned about the housing
market.
name='2'>Senator Calls for Review of Countrywide’s Borrowing
Practices
Sen. Charles Schumer
(D-N.Y.) urged regulators to examine potential risks posed by a rapid
increase in lending by the Federal Home Loan Bank of
w:st='on'>
size='3'>Atlanta
Countrywide Financial Corp., the
size='3'>Wall Street Journal reported today.
In a letter sent yesterday to Ronald Rosenfeld, chairman of the Federal
Housing Finance Board, which regulates the 12 regional home-loan banks,
Schumer said that he is concerned that mortgages pledged by Countrywide
to secure its borrowings 'may pose a risk to the safety and soundness of
the FHLB system as a whole.' He called for a review of the Atlanta
bank's policies for evaluating collateral and of the loans pledged by
Countrywide to secure its advances.
size='3'>Schumer said that he was concerned about the quality of the
collateral partly because many of the loans held as investments by
Countrywide are so-called pay-option adjustable-rate mortgages, or
option ARMs.
href='http://online.wsj.com/article/SB119610325216704176.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='3'>Commentary: Mortgage Reform Bill Could Unleash Wave of
Civil Litigation
One of the difficulties in
H.R. 3915 barring banks and securitizers from 'steering any consumer to
a loan that the consumer lacks a reasonable ability to repay, does not
provide a net tangible benefit, or has predatory characteristics' is
that it is not defined as to what a 'predatory' loan is, according to an
editorial in today’s Wall Street Journal. A legal
analysis done for the Consumer Mortgage Coalition concludes that the
House bill 'will likely generate significant litigation' and that
lenders will 'rarely, if ever, be able to dispose of even frivolous
lawsuits.' Now the credit industry is so tight that low-income
homebuyers without excellent credit ratings are finding it nearly
impossible to get any home loan -- which will further drag down home
values. The broader danger is that this lending aversion will limit
credit even for higher-income home buyers who have less-than-pristine
credit histories.
href='http://online.wsj.com/article/SB119612958721004797.html?mod=opinion_main_review_and_outlooks'>Read
more. (Registration required.)
name='4'>Fieldstone Mortgage Files for Chapter 11
Citing rising mortgage
delinquencies and tightening credit markets, Fieldstone Mortgage Co.
filed for chapter 11 protection yesterday, the
face='Times New Roman' size='3'>Baltimore Business Journal
reported yesterday. The Columbia, Md.-based company said
that it has liabilities of more than $100 million. Among its largest
creditors are Morgan Stanley, seeking $38.5 million, and Bear, Stearns
& Co., seeking $15.3 million, documents show. Fieldstone originates,
sells and services residential mortgage loans. Fieldstone's focus is
'non-conforming' loans, which do not meet the guidelines of mortgage
giants Fannie Mae and Freddie Mac. Fieldstone originated $5.5 billion in
mortgage loans last year. Its parent company, Fieldstone Investment
Corp., agreed in February to be acquired by Credit-Based Asset Servicing
and Securitization LLC, or C-Bass.
href='http://www.bizjournals.com/baltimore/stories/2007/11/26/daily9.html?t=printable'>Read
more.
w:st='on'>
name='5'>U.S.
face='Times


























New























Roman'
size='3'> Trustee Opposes Court Approval of AHM Loan
w:st='on'>
w:st='on'>Sale
U.S. Trustee
Kelly Beaudin
Stapleton objected to American Home Mortgage
Holdings Inc.’s motion requesting approval of procedures used to
sell loans owned by two non-debtor subsidiaries,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. AHM filed its request on Nov. 8, seeking
court approval of procedures that would be used to sell almost 6,000
mortgage loans owned by its nondebtor subsidiaries, Broadhollow Funding
LLC and Melville Funding LLC. Stapleton rejected that argument, stating
that AHM’s request should be denied because the bankruptcy court
cannot enforce sale procedures of non-debtor owned property. A hearing
on the matter has been scheduled for Nov. 28.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=40783'>Read
more. (Registration required.)
name='6'>Head of German Bank Predicts Further Fallout from
size='3'>U.S.
size='3'>Subprime Mortgage Crisis
Klaus-Peter Müller,
the head of Germany’s Commerzbank, has been unsparing in his
criticism of American mortgage-market excess, which has mutated into a
trans-Atlantic financial crisis, nearly ruined two German banks and, he
predicts, will wreak more havoc in the investment portfolios of other
European banks, the New
York Times reported today. Nearly five months
after the mortgage mess spilled into
face='Times New Roman' size='3'>Europe
size='3'>, Müller said that the full extent of the damage was still
unclear and that he expects more bad news from banks that have not yet
acknowledged owning a slice of American-style risk. Müller is
similarly unsparing about German banks, including his own, which
invested in securities backed by subprime mortgages. Bankers,
Müller said, did not adequately understand these investments and
relied too heavily on high-grade credit ratings from agencies that
helped put together the products, then rated them.
href='http://www.nytimes.com/2007/11/27/business/worldbusiness/27subprime.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
Fed
to Inject $8 Billion into Economy
Seeking to reassure banks
amid the continuing credit crisis, the Federal Reserve said yesterday
that it would provide $8 billion in funds to ease concerns about lending
during the holiday season, the
size='3'>New York Times reported today. The $8
billion — essentially a low-interest loan to the nation’s
banks — will be issued Wednesday and repaid Jan. 10. The 43-day
loan period is the longest in three years for this type of year-end
injection. While it is not an unusual step for the Fed, the injection
usually takes place later in the fourth quarter and involves a smaller
amount. In 2005, the last time the Fed issued year-end funds, it issued
28-day repurchase agreements for $5 billion, starting Dec. 8.
href='http://www.nytimes.com/2007/11/27/business/27fed.html?ref=business&pagewanted=print'>Read
more.
name='8'>NetBank to Liquidate Assets in Bankruptcy
NetBank Inc., which
became the largest U.S. bank to fail in 14 years when it filed for
bankruptcy protection two months ago, said yesterday that it expects to
liquidate its assets, Reuters reported yesterday. NetBank, based
in
size='3'>Alpharetta
size='3'>, filed for protection from creditors on Sept. 28 with
the
size='3'>U.S.
Court in
face='Times New Roman' size='3'>Jacksonville
size='3'>,
size='3'>Fla.
losses had mounted from mortgage defaults and what the U.S. Office of
Thrift Supervision called 'failed business strategies.' The Federal
Deposit Insurance Corp. closed NetBank's operations, and ING
size='3'>Groep
size='3'>NV's ING Bank
unit took over much of the company's deposits. NetBank had had $2.5
billion of assets and $2.3 billion of deposits as of June 30, the FDIC
said.
href='http://news.yahoo.com/s/nm/20071126/bs_nm/netbank_dc_1'>Read
more.
name='9'>Monitor Oil Files for Chapter 11 after Losing Contract
Bid
Oil and gas production
support services company Monitor Oil Plc filed for chapter 11 protection
on Wednesday, just three weeks after revealing that it lost a bid for a
contract to remove drilling platforms from ConocoPhillips Co.’s
Ekofisk complex off the coast of Norway,
size='3'>Bankruptcy Law360 reported yesterday.
Monitor filed a voluntary petition in the U.S. Bankruptcy Court for the
Southern District of New York along with two subsidiaries, Monitor US
Finco Inc. and Monitor Single Lift 1 Ltd. The company listed assets and
debts of over $100 million each. The case is
size='3'>Monitor Oil Plc, case number 07-13709
in the U.S. Bankruptcy Court for the Southern District of New
York.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=40895'>Read
more. (Registration required.)
Autos
name='10'>Creditors Balk at
face='Times New Roman' size='3'>Delphi
size='3'>'s Disclosure Statement
size='3'>Delphi’s unsecured
creditors’ committee objected to the company’s disclosure
statement, saying that the recovery for the unsecured creditors has
deteriorated while it favors plan investors,
size='3'>Bankruptcy Law360 reported
yesterday.
size='3'>Delphi
disclosure statement would allow the creditors to “purchase their
recovery” with creditors receiving 92.4 percent of the recovery in
equity and the rest in a rights offering, the motion said. The proposal
would allow them to receive 75.5 percent of their recovery in new equity
and the rest in the form of rights to purchase new equity.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=40821'>Read
more. (Registration required.)
name='11'>Asbestos Claimants Appeal Dana
Settlement
The asbestos personal
injury claimants’ committee in Dana Corp.'s chapter 11
reorganization are appealing a
w:st='on'>
size='3'>Manhattan
size='3'>bankruptcy court's Nov. 15 approval of a settlement deal
between the auto parts supplier and 7,500 asbestos claimants,
Bankruptcy Law360
reported yesterday. The committee filed its notice of
appeal with the U.S. Bankruptcy Court for the Southern District of New
York challenging U.S. Bankruptcy Judge
size='3'>Burton Lifland's order approving the
settlement, which the company said would be worth about $2 million. The
committee complained that a stipulation in the settlement agreements
could potentially inhibit the lawyers representing the settling
claimants from pursuing other claims and would violate the general
ethical restriction against settlements that prevent a lawyer from
practicing freely.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=40781'>Read
more. (Registration required.)
name='12'>Levitz Receives Approval to Auction
Inventory
Levitz Furniture Inc. won
approval to sell its retail furniture business at a bankruptcy court
auction, nearly three weeks after the company filed for chapter 11 for
the third time in less than a decade, the Associated Press reported
yesterday. Judge Robert
E. Gerber approved the auction rules
Wednesday, despite concerns over the short timeframe for the sale.
Gerber also ruled that subordinated lender YA Global Investments LP can
submit a credit bid for Levitz debt under its control at the auction.
Levitz owes the private-equity firm about $22.7 million on bonds that
mature in August 2010, according to court papers. It also owes about $33
million to its senior lenders, led by General Electric Capital Corp. An
auction is scheduled for next Wednesday, Nov. 28, at the offices of
Jones Day, the law firm handling Levitz's bankruptcy case, and a sale
hearing is set for Thursday.
href='http://www.chron.com/disp/story.mpl/ap/fn/5324449.html'>Read
more.
name='13'>HSBC Becomes First Bank to Bail Out Troubled
SIVs
U.K. banking giant
HSBC Holdings PLC yesterday became the first bank to bail out
specialized funds known as structured investment vehicles (SIVs),
the Wall Street
Journal reported today. HSBC plans to
gradually shut down two bank-sponsored SIVs and take $45 billion in
mortgage-backed securities and other assets owned by the funds onto its
own balance sheet. HSBC, with $2.15 trillion in assets, said that the
move would have little impact on its ability to lend or on its
capital-adequacy ratio, a gauge of a bank's ability to absorb losses.
The company's decision highlights a growing concern among investors that
banks will increasingly be forced to take responsibility for losses at
funds that had once been viewed as safe. In recent weeks, managers of
money-market funds, including
w:st='on'>
size='3'>Atlanta
Banks Inc., have moved to insure investors against losses on the funds'
investments in SIVs, which hold a total of $300 billion in
securities.
href='http://online.wsj.com/article/SB119607380689703811.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB119607380689703811.html?mod=hpp_us_whats_news'>