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September 5,
2007
Mortgage
Lending
name='1'>Regulators Urge Lenders to Help Homeowners Avoid
Foreclosures
Federal and state banking
regulators yesterday urged lenders and investors to restructure the
loans of millions of borrowers at risk of losing their homes as their
adjustable-rate mortgages reset to a higher rate, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Lenders should 'review to determine the full
extent of their authority to identify borrowers at risk of default' and
find a way to keep the borrower in a home, the regulatory bodies said in
a joint statement.
size='3'>The guidance doesn't compel lenders and the investors who buy
loans to restructure the loans -- but it puts an added burden on them to
try to do so, while clarifying that they shouldn't face negative tax or
accounting implications from such restructuring. The statement was
issued by the Federal Reserve, the Federal Deposit Insurance Corp., the
Office of the Comptroller of the Currency, the Office of Thrift
Supervision, the National Credit Union Administration and the Conference
href='http://online.wsj.com/article/SB118895083007417527.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
The statement comes on the
verge of federal regulators testifying at a hearing today before the
House Financial Services Committee focused on the issues related to the
broader credit and financial markets and how federal regulators are
responding to these developments. Witnesses will consist solely of
federal officials with regulatory oversight.
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/090507.shtml'>Click
here to watch the hearing at 10:30 a.m. ET.
name='2'>Rep. Frank Prepares Bill to Curb Predatory Mortgage
Lending
House Financial Services
Committee Chair Barney Frank (D-Mass.) is planning to unveil a bill
later this month to tighten consumer protections in the mortgage
industry, The
Hill reported today. Curbing predatory loans
won’t help people already trapped in unaffordable mortgages, but
it could prevent another binge in risky lending, proponents argue. The
prospects for the bill, which faces steeper odds in the Senate, are
likely to rise as conditions in the mortgage market worsen.
Frank’s legislation will tighten underwriting standards and
include language designed to prod states to enact minimum standards for
mortgage originators involving disclosure and broker licensing,
according to discussions that Financial Services Committee staffers had
with lobbyists over the recess. Frank suggested that he wanted to bring
the standards applied to non-bank mortgage lenders and brokers more in
line with those adhered to by the banking industry. “We have a
regulated and an unregulated sector in terms of mortgage loans, and the
regulated sector has worked much better,” he said.
href='http://thehill.com/business--lobby/frank-prepares-bill-to-curb-predatory-mortgage-lending-2007-09-05.html'>Read
more.
In related news,
legislation that would revamp the Federal Housing Administration's
mortgage insurance program appears to have the best chance for passage
in an effort to deliver relief to the nation's housing industry,
CongressDaily
size='3'>reported today. President Bush last Friday called for the
passage of legislation that would overhaul the FHA program, which
has lost market share in recent years because it has failed to offer new
products as lenders and borrowers have opted to go elsewhere, especially
in the subprime market. The House Financial Services Committee has
already approved its FHA measure, and the Senate Banking Committee has a
draft ready to be marked up. While prospects for FHA legislation appear
brighter with Bush's endorsement, the chances for approval of
legislation that would overhaul government-sponsored enterprises Fannie
Mae and Freddie Mac, which own or guarantee repayment of 40 percent of
the country's residential mortgages, still look slim.
name='3'>Housing Slump Strains Budgets of States,
Cities
Rising defaults on
subprime home loans are boosting the inventory of unsold homes and
driving sale prices lower, which is cutting into housing-related
revenues from building-permit fees, taxes on contracting and recording
property transfers, and even sales taxes, the
face='Times New


















Roman'
size='3'>Wall Street Journal reported today.
As a result, legislators in
w:st='on'>
size='3'>Florida
was at the forefront of the housing boom, plan a special session this
month to consider deep budget cuts to offset a projected $1.5 billion
funding gap.
face='Times New Roman'
size='3'>California
size='3'>forecasts a shortfall of at least $5 billion in next year's
budget. And
face='Times New Roman' size='3'>Chicago
faces a $217 million gap in its $5.6 billion budget for
2008. In many cases, budget officials knew that the fast pace of
housing-related revenue growth in recent years wasn't sustainable, but
they claim that the extent of the slowdown has sometimes surprised them.
Among other effects, the housing slump has caused a decline in revenue
from real estate transaction taxes, which are based on sales
prices.
href='http://online.wsj.com/article/SB118895953516217811.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='4'>Report: Layoffs Surge 85 Percent in August
Challenger, Gray
&
size='3'>Chris
today that planned
w:st='on'>
size='3'>U.S.
size='3'>layoffs increased 85 percent to 79,459 in August from 42,897 in
July as the housing slowdown and subprime mortgage downturn led to
record job cuts in the financial sector, Reuters reported
today August's
job cuts were the highest since February, when they totaled 84,014.
Financial job cuts totaled 35,752 in August, the highest monthly total
for the industry since Challenger, Gray &
w:st='on'>
size='3'>Chris
them in 1993, the firm said. August's job cuts rose 22 percent from the
previous August, when 65,278 cuts were announced.
href='http://www.nytimes.com/reuters/business/business-usa-economy-jobs-challenger.html?pagewanted=print'>Read
more.
name='5'>Progress Seen in
w:st='on'>
size='3'>San Diego Diocese
Settlement Talks
After four years of
lawsuits, delays and bankruptcy proceedings, an agreement may be drawing
near between the Roman Catholic Diocese of San Diego and about 150
childhood sexual abuse victims, the
size='3'>San Diego Union Tribune reported
today. “I believe that they are very close,” said Bob Baker,
a prominent Catholic who recently helped form Parishioners for the
Churches and Schools to represent church members in the diocese's
bankruptcy case. The bankruptcy court has postponed until next week a
crucial hearing – further signaling that there may be progress
toward a deal. Bankruptcy Judge
size='3'>Louise DeCarl Adler was scheduled
tomorrow to consider whether to dismiss the bankruptcy case, citing a
court-ordered audit that she said found several irregularities in the
handling of church finances. Yesterday, she postponed the hearing on
that and other items until Tuesday. Details of the new offer were not
available yesterday.
href='http://www.signonsandiego.com/news/metro/20070905-9999-1n5diocese.html'>Read
more.
More
Delays in Congoleum's Chapter 11 Proceedings
Bankruptcy Court
Judge Kathryn C.
Ferguson rescheduled a hearing in the
Congoleum Corp. case on a rival reorganization plan proposed by
attorneys representing clients who have been exposed to asbestos in the
firm's products,
size='3'>Bankruptcy Law360 reported yesterday.
The hearing, originally scheduled for last Thursday, was pushed back to
Nov. 8th. That delay is yet another roadblock to the company's push to
emerge from bankruptcy protection this year. Congoleum faced another
setback in May after a judge ruled that insurers are not required to
fund the global asbestos settlement at the heart of the flooring
manufacturer's proposed bankruptcy plan. The company has said it hopes
to file a new plan with the bankruptcy court later this year.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33973'>Read
more. (Registration required.)
w:st='on'>
name='7'>U.S.
face='Times New Roman' size='3'>Trustees Appointed for Regions 20 and
21
Richard Wieland was appointed
Acting U.S. Trustee for Kansas, Oklahoma and New Mexico (Region 20) and
Donald Walton was appointed Acting U.S. Trustee for Georgia, Florida,
Puerto Rico and the U.S. Virgin Islands (Region 21), both for an interim
period effective on Sept. 1, according to a press release from the
Executive Office for U.S. Trustees (EOUST). Both Wieland and
Walton replace Felicia Turner, who has joined ABI as
deputy executive director. Wieland has served as a trial attorney in the
Wichita, Kan., office of the U.S. Trustee Program since 1988. Walton
joined the U.S. Trustee Program in 1987 as an Assistant U.S. Trustee in
Atlanta after practicing for 11 years with an Atlanta law
firm.
Magnus Asks Court to Approve $15 Million Loan
First Magnus Financial
Corp. asked a bankruptcy court judge Friday to authorize a $15 million
loan in order to execute a liquidation and wind-down plan, with the
mortage lender saying that it hopes to provide creditors with up to $26
million in net recovery,
size='3'>Bankruptcy Law360 reported yesterday.
Additionally, Tucson, Ariz.-based First Magnus, which filed for chapter
11 protection on Aug. 21, requested permission to use $3.8 million in
cash it has on hand and to borrow an additional $5 million from lenders
that have allegedly pledged to extend the sum immediately.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=33962'>Read
more. (Registration required.)
Rejects Iridium Creditor Claims
In a blow to Iridium's
unsecured creditors, Bankruptcy Judge
size='3'>James Peck partially rejected the
idea that Motorola is to blame for the satellite-based mobile phone
unit's collapse, putting a damper on their quest to regain $3.4
billion, Bankruptcy
Law360 reported yesterday. From 1987 through
1993, Motorola oversaw the development of the Iridium system, the first
network to provide global voice and data communication through a network
of low orbit satellites. In 1993, Motorola spun off Iridium, but
continued operation and maintenance services under a multibillion-dollar
contract. Iridium had roughly $4 billion in debt by March 1999 and
a little more than 10,000 subscribers—far less than the one
million subscribers it needed to be viable. After Iridium for bankruptcy
in August 1999, the unsecured creditors sued Motorola on behalf of the
unit's estate, hoping to recover billions of dollars in connection with
the collapse.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=33955'>Read
more. (Registration required.)
York Governor Wants NYRA to Retain Horse Racing Franchise
New York Gov. Eliot
Spitzer said yesterday that the state’s thoroughbred horse racing
franchise should remain in the hands of the bankrupt New York Racing
Association (NYRA), which has run the state’s three thoroughbred
racetracks since 1955, the
size='3'>New York Times reported today. Under
Spitzer’s plan, the state would contribute $75 million to help
stabilize the NYRA, which is currently in bankruptcy proceedings, and
would forgive further debt it has with the state. That money would
eventually be recouped with revenue from the lottery-terminal franchise,
which would also help subsidize the racetracks in later years. The
association would then give up claims that it owns the land on
which the tracks are built, averting a potentially lengthy and expensive
battle with the state. Under Spitzer’s
proposal, which requires approval from the legislature, the association
would retain the rights to run
face='Times New Roman' size='3'>Belmont
size='3'>,
face='Times New Roman' size='3'>Saratoga
and Aqueduct racetracks for the next 30 years while
agreeing to a broad overhaul of its corporate structure and
management.
href='http://www.nytimes.com/2007/09/05/nyregion/05racing.html?_r=1&oref=slogin&pagewanted=print'>Read
more.
name='11'>Auto Makers Report Mixed August
w:st='on'>
size='3'>U.S.
size='3'>Sales
Weak
w:st='on'>
size='3'>U.S.
size='3'>sales in August deepened the gloom and damped the forecast for
major auto makers, despite a surprise sales uptick for General Motors
Corp., the Wall Street
Journal reported today.
w:st='on'>
size='3'>Detroit
Three, working to reverse losses in their North American operations, may
have to intensify their restructuring plans if sales don't pick up.
Earlier this year, major auto makers had been counting on sales to rise
in the second half of the year. Now, several major auto makers have cut
their forecasts. GM said yesterday that it planned to slash its fourth
quarter North American production plan by 10 percent from year-ago
levels, and trimmed third-quarter production plans by 2 percent. The
pain is spreading beyond
w:st='on'>
size='3'>Detroit
Motor Corp.'s August sales dropped 2.8 percent, and executives
attributed the decline to continuing housing woes and reduced credit
tied to the subprime mortgage squeeze.
href='http://online.wsj.com/article_print/SB118849605890213660.html'>Read
more. (Registration required.)
name='12'>TROUBLED COMPANIES IN THE NEWS
The business
news articles below are taken from the U.S. Business Journal’s
Daily Summary of Troubled & Fast Growing U.S. Companies which is
published by Bastien Financial Publications.
size='3'>ABI
50% discount off of our regular subscription rate of $500 when
subscribing to the complete Daily Summary.
To subscribe email
steve@creditnews.com
href='mailto:steve@creditnews.com'>
color='#0000ff'
size='3'><mailto:steve@creditnews.com>
size='3'>or call 800-407-9044—use
w:st='on'>
size='3'>ABI
size='3'>Code 37
Ameriquest Mortgage
Co., not long ago the biggest subprime lender
in the
face='Times New Roman'
size='3'>U.S.
closing up shop as its parent company sells off assets. Citigroup Inc.
of
size='3'>Manhattan,
w:st='on'>
size='3'>N.Y.
size='3'>is buying the wholesale mortgage-origination and servicing
assets of the parent company, ACC Capital Holdings, for an undisclosed
amount. ACC is also shuttering its retail mortgage unit.
Dorel Juvenile
Group,
Columbus, In., is recalling nineteen models of its children’s car
seats on worries that a harness may come loose. The car seats affected
by the recall are sold under various names including Eddie Bauer and
Cosco.
Ford Motor
Co., the
w:st='on'>
size='3'>Dearborn
size='3'>, Mi. automaker, reported its national sales of light trucks
and cars for August declined 14% while its retail sales fell 13%.
The firm reported that it anticipates its production in the fourth
quarter to be greater than in the same period one year earlier.
General Motors
Corp.,
face='Times New Roman' size='3'>Detroit
size='3'>, Mi., will lay off 1,200 workers at its plant in
size='3'>Oshawa
w:st='on'>
size='3'>Ontario
size='3'>and cut one shift at the site, where it makes Chevrolet
Silverado and GMC Sierra pickup trucks.
Gottchalks
Inc., a
w:st='on'>
size='3'>Fresno
size='3'>, Ca. operator of department stores, said that it’s no
longer up for sale and that it will instead carry on independently and
continue its growth. The retailer had considered and rejected a
number of possibilities, including a sale, merger or joint venture. The
company will go ahead with new-store openings and expand its program to
remodel existing locations. Gottschalks, which operates nearly sixty
department stores and another four specialty apparel stores, recently
reported a loss in its second quarter of $4.8 million, compared to net
income of $486,000 in the year-earlier period and worse than analysts
had expected. Sales in the recent quarter fell 5%–to $147 million.
For this year’s first six months, the company’s losses
reached $9.4 million.
GreenPoint Mortgage
Funding in Deerfield, Beach, Fl. will lose
thirty-two jobs as a result of Capital One Financial Corp. of
size='3'>Virginia
size='3'>deciding to shut down its GreenPoint wholesale mortgage
unit.
Sears Holdings
Corp.had
its stock downgraded by Bear Stearns & Co. only a day after the big
retailer reported a 40% plunge in its second quarter earnings, along
with higher inventories and declines in sales and margins.
Separately, with the big retailer sitting on about $2.6 billion as
of the end of the second quarter, the firm’s chairman, Edward
Lampert, has said he may be looking into making an acquisition.
Spansion
Inc., a
w:st='on'>
size='3'>Sunnyvale
firm which markets and manufactures flash memory devices, reported a
second quarter net loss of $67 million, on a 7% sales decline–to
$609 million. The results included a loss of $3.4 million related
to early extinguishment of debt.