February 42008

 

Head
of NCBJ Calls for Judicial Pay

Raise

Bankruptcy Judge

size='3'>Thomas Bennett, president of the
National Conference of Bankruptcy Judges, is

taking issue with a congressional study finding that stagnant salaries
for federal judges haven’t

discouraged lawyers from joining the bench, Dow Jones
face='Times New Roman' size='3'>Daily

Bankruptcy Review reported today. Judge
Bennett said that fewer private-sector lawyers

with commercial-law backgrounds are becoming judges because it would
force them to take a pay cut. However, a

report published in December by the Congressional Research Service
found no “conclusive

relationship” between salary and a judge’s decision to
resign or retire. The report examined the

number of retirements and median salaries going back to 1985. Its
results come as several bills to raise the

pay for federal judges are pending in Congress. 

href='http://assets.opencrs.com/rpts/RL34281_20080110.pdf'>Click
here to read the CRS report on judicial

pay raises.

Mortgage
Lending

name='2'>Bankruptcy Judge Sanctions

Countrywide

Countrywide Financial
Corp., which has been under criticism for

its conduct in bankruptcy cases of borrowers, has been sanctioned by a
federal judge in

w:st='on'>
size='3'>Idaho

size='3'>who said that the ailing lender disobeyed court rules,
the

size='3'>Wall Street Journal reported today.
Bankruptcy Judge

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Roman' size='3'>Jim Pappas
size='3'>ordered two subsidiaries of

Countrywide and a business partner to pay $2,250 for failing to properly

respond to borrowers' requests for

documents and failing to appear at court-authorized depositions in a
case where Countrywide was alleged to have

tried to foreclose on the borrowers' home in violation of the Bankruptcy

Rules. The
w:st='on'>

size='3'>Idaho borrowers, Jason and
Ginger Scott of

w:st='on'>Twin

Falls

size='3'>, got a home-equity loan from Countrywide in 2004. The couple
filed for chapter 13 bankruptcy in late

2005 and Countrywide was notified, but the company allegedly continued
to attempt to collect payments on the

loan. 
href='http://online.wsj.com/article/SB120192210187637523.html'>Read
more. (Registration

required.)

In related news, Bank of
America's $4.1 billion offer for

Countrywide Financial was thrown into doubt when a large shareholder in
the biggest U.S.

size='3'>mortgage lender said it would vote against the deal, the

size='3'>Financial Times reported on Saturday.

SRM Global Fund, a Monaco-based hedge

fund, said that the offer 'considerably undervalued' Countrywide. The
fund, which has a 5 percent stake in

Countrywide, also said that it would ask the Securities and Exchange
Commission to investigate the movement of

Countrywide's share price ahead of last month's offer. SRM said that it
would approach other large shareholders,

which include Legg Mason, Capital Research and Fidelity, and urge them
to vote against the deal. 

href='http://www.ft.com/cms/s/0/f6e3cfde-d068-11dc-9309-0000779fd2ac.html'>Read

more.

name='3'>Judge Threatens Chase with Fines over

Home-Foreclosure Bid

Bankruptcy Judge

size='3'>Cecilia Morris on Friday accused
Chase Home Financial LLC of

“unconscionable” behavior in its attempt to foreclose on the

home of an upstate

w:st='on'>New

York

couple and threatened the company with stiff fines, Dow
Jones

size='3'>Daily Bankruptcy Review reported
today. Judge Morris said that she was

considering imposing fines similar to those imposed on another mortgage
lender in a

w:st='on'>
size='3'>Massachusetts

size='3'>bankruptcy case where the lender was fined $750,000. Morris
said that Chase, a JPMorgan Chase & Co.

unit, began preparations to foreclose on the home of Christopher and
Bobbi Ann Schuessler after they filed for

bankruptcy protection on April 30, 2007. She said that the bank refused
to accept their mortgage payment at a

local branch office and sought to initiate foreclosure proceedings even
though the payment was only a month late.

(Subscription required).

name='4'>Fitch Places $139 Billion of Subprime

Securities on Negative Watch, Cites ‘Walk
Aways’

Fitch Ratings said late Friday
that it had placed $139 billion of

subprime residential mortgage-backed securities on “Watch
Negative,” the result of increased loss

expectations, according to HouseWire.com on Friday. Fitch said that the
apparent willingness of borrowers to walk

away from mortgage debt has contributed to extraordinarily high levels
of early default, which is particularly

noticeable in the 2007 vintage mortgages. As Fitch has described in
recent research reports, this behavior

appears to be largely attributable to the use of high-risk mortgage
products such as “piggy-back”

second liens and stated-income documentation programs. The ratings
company said that in many instances, these

liens were poorly underwritten and susceptible to borrower/broker
fraud. 

href='http://www.housingwire.com/2008/02/01/fitch-places-139-billion-of-subprime-rmbs-on-negative-watch-cites-wal

k-aways/'>Read more.

EU

Official Wants Global Action on Subprime

Mortgage Crisis

Charlie McCreevy, the
European commissioner for the Internal

Market and Services, warned on Friday that the market turmoil caused by
the subprime mortgage crisis in the

United States was far from over and called for a global response,

size='3'>CongressDaily reported. 'We cannot
ignore each other,' said McCreevy, adding

that no one expected that the subprime mortgage woes in the

face='Times New Roman' size='3'>United
States could cause the near

collapse of banks in

size='3'>Europe. McCreevy said that
the stakes will remain high because 'it is

now clear that significant problems lie ahead.' He also warned that
restoring market confidence will be a

long-term project. McCreevy met with SEC Chairman Christopher Cox on
Friday to discuss the mutual recognition

of
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Roman'
size='3'>U.S. and

EU

regulations affecting the securities and insurance
industries.

name='6'>Freddie Looks to Grow in Apartment

Financing

Freddie Mac, looking to
expand its role in financing apartment

buildings, is working on a proposal that would allow it to create and
sell bonds backed by multifamily mortgages,

the Wall Street
Journal reported today.

If approved, the move would allow the government-sponsored provider of
home funding to be more competitive with

Wall Street. Freddie Mac, together with its bigger rival Fannie Mae, has

grabbed a much bigger share of the

market for financing home mortgages as other investors have retreated in

the face of rising defaults. Now they

are also gaining market share in commercial mortgages for apartment
buildings. The proposal comes at a time when

rising fears of weakening credit quality in the commercial property
market have scared investors away from buying

commercial-mortgage-backed securities (CMBS). Bonds packaged with
multifamily mortgages account for about 18

percent of the CMBS market, which totals about $800 billion. 

href='http://online.wsj.com/article_print/SB120209947949540225.html'>Read

more. (Registration

required.)

name='7'>Plastech Files for Bankruptcy

Distressed auto supplier
Plastech Engineered Products Inc. filed

for chapter 11 on Friday,
size='3'>The Detroit News

size='3'>reported on Saturday. The company, which produces
injection-molded plastic components for vehicle

interiors, is dependent on oil-based resins which continue to increase
in price. However, the supplier said that

it cannot pass along those costs to its customers as automakers
typically demand price reductions throughout the

duration of supply contracts. The bankruptcy filing came on the same day

that Chrysler LLC canceled its contract

with Plastech. General Motors Corp., Ford Motor Co., Chrysler and
supplier Johnson Controls Inc. gave the company

a $46 million bailout early last year. 

href='http://www.detnews.com/apps/pbcs.dll/article?AID=/20080202/AUTO01/802020383'>Read

more.

name='8'>Lenders Imperil Solutia's Chapter 11

Exit

Three underwriters that were
expected to provide a $2 billion loan to

finance Solutia
Inc.'s exit from bankruptcy told the chemical

company on Wednesday that they would no longer provide the funding,
saying that circumstances had changed since

their agreement last fall,
size='3'>Bankruptcy Law360

size='3'>reported on Friday. Citigroup Global Markets Inc., Goldman
Sachs Credit Partners L.P., and Deutsche Bank

Trust Co. Americas informed Solutia in a letter that they were backing
out of the deal. The court approved the

three underwriters' $2 billion exit financing loan in October. Solutia
said in a filing that it believed the

lenders were still bound by the commitments they made in October, which
promises the loans by Feb. 6, and that

“they have breached their obligations under the commitment letter
in refusing to do so.” 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=45939'>Read

more. (Registration

required.)

Judge

Cuts Firm's Fees over Failure to Show

Ties to Client

Nearly $75,000 in legal
fees have been blocked by a federal judge

who said that a Long Island, N.Y., law firm was 'purposefully vague' in
disclosing that its lead attorney in a

bankruptcy case was the son-in-law of the executive of one of several
unsecured creditors it was representing,

the New York Law
Journal reported

today. Bankruptcy Judge Stephen D. Gerling
wrote that the court would

have been reluctant to appoint Berkman, Henoch, Peterson & Peddy of
Garden City in 2002 to represent a

committee of creditors in the chapter 11 case had it known of the
relationship. In a 2002 affidavit, Berkman

Henoch attorney Ronald M. Terenzi stated that an unnamed partner in the
firm who would be primarily responsible

for representing the creditors 'is related to and [sic] officer and
shareholder of one of the general unsecured

creditors of the Debtors.' In fact, Gerling wrote in
face='Times New Roman' size='3'>In re Matco

Electronics Group Inc., 02-bk-60835, that
Berkman Henoch attorney Douglas Spelfogel was

the son-in-law of Joel Girsky, the chief executive officer of Jaco
Electronics Inc., one of the creditors in the

action. The judge said that it also appears that Spelfogel's wife,
Wendy, later became in-house counsel at Jaco.

Spelfogel did not disclose his relationship to Jaco until 2005, after he

had moved to Nixon Peabody, Gerling

noted. 

href='http://www.law.com/jsp/article.jsp?id=1201918757809&pos=ataglance'>Read

more.