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April 24, 2008
Panels Approve Different Parts of Housing Stimulus
Package
House committees approved
three pieces of legislation yesterday that will be part of a
housing stimulus package to be debated on the House floor during the
first week of May,
size='3'>CongressDaily reported today. The
House Financial Services Committee approved two measures: one that would
provide $15 billion to states and cities to buy and rehabilitate
foreclosed homes so they can place families back in them, and another
that would remove legal liability from the loan servicer who readjusts
an at-risk mortgage to make it more affordable for the borrower. By a
38-26 vote, the panel approved H.R. 5818, sponsored by Housing
Subcommittee Chairwoman Maxine Waters (D-Calif.), that would provide
$7.5 billion each for grants and loans based on a state’s
percentage of foreclosures over the past year, adjusted to its median
home price. The zero-interest loans would be repaid to the federal
government from proceeds of a resale or, in the case of a rental, a
refinance. The Financial Services Committee also approved by voice vote
H.R. 5579, sponsored by Rep. Michael Castle (R-Del.), which would
grant a legal safe harbor to servicers who restructure a mortgage. The
bill would limit the protection to workout plans initiated before 2011
and specifically to owner-occupied properties. It would have to remain
in place for five years, and the new loan could not result in additional
points and fees. The committee adopted a manager’s amendment to
H.R. 5579 that would reaffirm that consumers could still sue lenders for
fraud or abusive lending practices. Meanwhile, the House Veterans
Affairs Economic Opportunity Subcommittee also approved legislation
yesterday that would ban foreclosure proceedings against service members
for at least one year after military service. The current limit is 90
days.
The House Financial Services
Committee today will mark up H.R. 5830, the “FHA Housing
Stabilization and Homeownership Retention Act of 2008.”
name='2'>Consumer Groups Continue to Push for Mortgage Modification
Legislation
While it is not included
in the current housing stimulus package being considered in the House of
Representatives, consumer and civil rights advocates are continuing the
fight for legislation to let bankruptcy judges modify primary mortgages
to help struggling homeowners avoid foreclosure, the
face='Times New Roman' size='3'>Politico
size='3'>reported yesterday. More than 30 national groups sent letters
on Tuesday to House members seeking their support of the controversial
measure, despite House Financial Services Committee Chair Barney
Frank’s (D-Mass.) statement Friday that the provision won’t
be in the House package because it can’t pass the Senate. House
Speaker Nancy Pelosi (D-Calif.) has publicly praised the bankruptcy
provision as a way to help homeowners, and lobbyists say she’s
been pushing behind the scenes to take H.R. 3609 to the House
floor.
href='http://www.politico.com/news/stories/0408/9798.html'>Read
more.
Fed
to Auction $75 Billion in Treasury Securities to Ease Credit
Woes
The Federal Reserve announced
yesterday that it will auction an additional $75 billion in Treasury
securities today to big investment firms as part of an ongoing
effort to help strained credit markets, the Associated Press reported.
In exchange for the 28-day loan of Treasury securities, bidding firms
can put up more risky investments, including certain mortgage-backed
securities, as collateral. In the four auctions held so far, the Fed has
provided close to $158.95 billion worth of the Treasury securities to
investment firms.
href='http://www.nytimes.com/aponline/us/AP-Fed-Credit-Crisis.html?sq=bankruptcy&st=nyt&scp=10&pagewanted=print'>Read
more.
name='4'>Commentary: The Student Lending Bailout
The combination of
legislative fiat and fewer investors willing to buy asset-backed
securities amid the credit crunch has put the squeeze on student
lenders, according to an editorial in today’s
face='Times New Roman' size='3'>Wall Street Journal
size='3'>. Market leader Sallie Mae says it now loses money on every new
federal education loan. A third of the nation's top 100 lenders to
students in 2007 have temporarily suspended new loan originations or
exited the business altogether. Last week the House passed legislation
sponsored by Education and Labor Chairman George Miller (D-Calif.) to
give the Department of Education new authority to purchase loans
directly from lenders. So having raised solemn alarms when the Fed began
to accept dodgy mortgage-backed securities as collateral, members of the
Senate are now demanding that the Fed accept dodgy student-loan paper
too. The recent congressional actions show some of the weaknesses of the
'College Cost Reduction and Access Act' that Congress passed in
September, which reduced the interest rates borrowers pay on federally
insured student loans. Convinced that the private lenders who make these
loans were reaping too much profit, Congress also cut the yield on each
loan. The return on the popular
face='Times New









Roman'
size='3'>Stafford loan for undergrads
was reduced by 70 basis points. For loan consolidations, Congress cut
returns by 65 basis points. In a vibrant market, banks might have
absorbed these hits and continued to lend.
href='http://online.wsj.com/article/SB120899430294839827.html?mod=opinion_main_review_and_outlooks'>Read
more. (Registration required.)
Rejects Bond Trader's Request for Payment from Dura
Automotive
Bankruptcy Judge
Kevin Carey
size='3'>rejected bond trader James W. Korth's request to be compensated
for challenging Dura's reorganization plan, which pays nothing to many
of Korth's creditor clients, Bloomberg News reported.
size='3'> Under the plan, Rochester Hills,
Mich.-based Dura would cut debt by $940 million, in part by giving some
noteholders equity instead of cash. Creditors who hold $560.7 million in
debt that isn't backed by collateral would get nothing. Many creditors
bought those notes through Korth's company, J.W. Korth & Co. Judge
Carey said that the Bankruptcy Code requires a company like Dura to pay
for the legal and other professional fees of any officially recognized
committee, and not, in most cases, for individual creditors.
Judge Carey is scheduled to hold a hearing starting May
13 to decide whether to approve Dura's reorganization plan.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ato9IV5qLhLA'>Read
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ato9IV5qLhLA'>
name='6'>Homebuilder Receives Exclusivity Extension
Bankrupt homebuilder
Levitt & Sons LLC has been granted a 30-day extension of its
exclusivity period, giving the company more time to negotiate its
liquidation plan with its creditors,
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge Raymond
B. Ray approved the extension on Tuesday,
giving the developer until May 2 to file its plan with the bankruptcy
court and until July 10 to solicit support for it. Levitt & Sons
filed its bankruptcy petition on behalf of itself and 37 subsidiaries in
November 2007 in the wake of the mortgage collapse. The debtors
requested the extension on April 10, the day its previous exclusivity
period expired. The company had requested one prior extension, granted
by Judge Ray on March 7.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54011'>Read
more. (Registration required.)
name='7'>Diamond Wholesaler Proposes Asset
size='3'>
w:st='on'>Sale
After more than a year
spent in chapter 11, diamond wholesaler L.I.D. Ltd. has signaled its
intention to sell off its assets, notifying creditors of the bidding
procedures that have already been approved by the bankruptcy
court, Bankruptcy
Law360 reported yesterday.
face='Times New Roman' size='3'>L.I.D. on Tuesday detailed the proposed
asset sale for the parties in interest, indicating that qualified
bids were due no later than May 12 and that the procedure already had
the blessing of the U.S. Bankruptcy Court for the Southern District of
New York. Though L.I.D. filed its reorganization plan and disclosure
statement in December, the company opted to sell its inventory amid
ongoing disputes with creditors.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=53978'>Read
more. (Registration required.)
name='8'>Restaurant Chain Looks to Block Wage-and-Hour
Suit
Bankrupt restaurant chain
Buffets Holdings Inc. has filed an adversary case in an effort to put a
halt to a wage-and-hour suit brought against the company’s
executives after Buffets filed for chapter 11,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The wage-and-hour suit was filed by James
Harris on behalf of a class of approximately 780 workers who were
employed by Buffets subsidiary HomeTown Buffet Inc. in salaried
restaurant management positions, the debtors say. Harris filed the suit
under the Private Attorneys General Act, or PAGA, on March 21 in the
Superior Court of California,
face='Times New Roman' size='3'>County
size='3'>of
size='3'>San Diego, claiming
HomeTown Buffet had failed to pay the employees overtime pay and provide
meal or rest periods required by
w:st='on'>
size='3'>California
If the company is forced to indemnify its employees for any costs
relating to the
face='Times New Roman'
size='3'>California
size='3'>action, the debtors’ estate will be harmed, Buffets
claims.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=53996'>Read
more. (Registration required.)
name='9'>Debt Collection Done from
w:st='on'>
size='3'>India
to
face='Times New Roman'
size='3'>U.S.
size='3'>Agencies
While Americans have
received calls from India for insurance claims and credit card sales,
debt collection represents a growing business for outsourcing companies,
especially as the American economy slows and its consumers struggle to
pay for their purchases, the
size='3'>New York Times reported today. Armed
with a sophisticated automated system that dials tens of thousands of
Americans every hour, and puts confidential information like Social
Security numbers, addresses and credit history at operators’
fingertips, overseas collectors are chasing down late car payments,
overdue credit card debt and lapsed installment loans. Debt collectors
in
face='Times New Roman'
size='3'>India
size='3'>often cost about one-quarter the price of their American
counterparts, and are often better at the job, debt collection company
executives say. So far, industry executives
estimate that just a small fraction, about 5 percent, of American debt
collection is done outside the country, but they expect that number to
increase in the coming years.
href='http://www.nytimes.com/2008/04/24/business/worldbusiness/24debt.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.