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June 19, 2008
New York Chief Judge Unveils Program to
Deal with Dramatic Rise in Foreclosures
Chief Judge Judith S. Kaye responded yesterday to the dramatic
rise in residential foreclosure filings throughout New York by
announcing a new statewide program intended to educate homeowners and
facilitate early negotiations and settlements, the New York Law Journal
reported today. The Residential Foreclosure Program will begin with a
trial run this summer in Queens, the epicenter of the state's
foreclosure crisis, and spread to the rest of the state's courts this
fall. The key components of the plan will be notifying parties as soon
as practicable of community resources, holding early conferences before
a hearing officer to develop a settlement or case management plan and
hiring dedicated, specialized court personnel. Although Manhattan has
had relatively few foreclosures, the rest of the state has mirrored the
national epidemic. Over the past three years, foreclosures have
increased by roughly 150 percent throughout the state, to an estimated
38,807 in 2008 from 15,599 in 2005, according to statistics provided by
the court.
href='http://www.law.com/jsp/article.jsp?id=1202422382184'>Read
more.
U.S. Trustee Objects to Mortgage
Lenders' Investments
Acting U.S. Trustee Roberta A. DeAngelis objected to
Mortgage Lenders Network USA Inc.'s proposal for the bankrupt mortgage
lender to invest $17 million in assets in a money market account,
Bankruptcy Law360 reported yesterday. On June 6, Mortgage
Lenders filed a motion with the bankruptcy court seeking approval to
invest the money, which the debtor had accumulated since its chapter 11
filing in February 2007 “from the sale of various assets and
various settlements reached in this case.” Mortgage Lenders is
hoping to invest the $17 million in Columbia Treasury Reserves (CRT), a
money market account that reportedly invests at least 80 percent of its
net assets in U.S. Treasury obligations and repurchase agreements
secured by such Treasury obligations. “Simply stated, the court is
being asked to allow the debtors to replace the safety and certainty of
collateralized investments pursuant to 11 U.S.C. §345(b) with an
alternative strategy that is not fully articulated in the motion,”
DeAngelis said, pointing out that Mortgage Lenders did not reveal how
CRT invests up to 20 percent of its assets. A hearing on the matter is
scheduled for June 24.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=59567'>Read
more. (Registration required.)
Senate to Begin Debate on
Housing-Assistance Package
The Senate will start debate today on a housing-rescue package as
conservative Republicans signaled that they might make an issue out of
the special VIP loans Senate Banking Chairman Christopher Dodd (D-Conn.)
and Senate Budget Chairman Kent Conrad (D-N.D.) received from
Countrywide Financial Inc., CongressDaily reported. Senate
Majority Leader Harry Reid (D-Nev.) said yesterday that he would allow
an open amendment process on the measure, which is expected to easily
pass. The bill would revamp oversight at mortgage giants Fannie Mae and
Freddie Mac, overhaul the Federal Housing Administration's
(FHA) mortgage insurance program, allow the FHA to guarantee up to
$300 billion in new loans for troubled loans and provide $14.5 billion
in tax breaks. As the bill comes to the floor, some GOP members hinted
they might make an issue of recent news that both Conrad and Dodd
benefitted from discounted home loans from Countrywide under a VIP
program supervised by its former CEO, Angelo Mozilo. Nine members, led
by Sen. Jim DeMint (R-S.C.) wrote to Reid asking him to delay floor
debate because of the controversy.
Regulator Calls for Expanded
Supervision of Investment Banks
Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair said
yesterday that any troubled U.S. investment bank headed toward
bankruptcy should be subject to supervisory intervention just like
commercial banks, Reuters reported yesterday. Renewing her call to
expand regulation of investment banks after the collapse of Bear
Stearns, Bair said that a receivership and resolution plan should be
created to maintain order in the markets and minimize losses for all
parties involved. 'The government cannot be put in the position of
having to simply write a blank check when these institutions get into
trouble,' Bair said. Bair urged Congress to consider the future role of
a prudential regulator for investment banks, the process to orderly
close down an investment bank and any potential bridge bank
structures.
href='http://www.nytimes.com/reuters/business/business-investmentbanks-fdic.html?sq=bankruptcy&st=nyt&scp=6&pagewanted=print'>Read
more.
Card Issuers Intensify Scrutiny of Credit
Applicants
While lenders have long relied on consumers' credit scores to decide
whether to approve card applications and how much credit to extend and
at what interest rate, some big card issuers are scrutinizing where
cardholders live and what line of work they are in, the Wall
Street Journal reported today. Card industry executives
say the heightened focus is directed especially at residents of states
hit hardest by the housing slump, such as California, Florida and
Nevada. Cardholders who work in struggling industries like construction
and finance also are feeling a tighter squeeze, with their credit lines
suddenly reduced sharply even if they always paid their bills on time
and in full.
href='http://online.wsj.com/article_print/SB121383214440886577.html'>Read
more. (Registration required.)
Stalking-Horse Bidders Win Auction for
Plastech Units
Bankrupt auto supplier Plastech Engineered Products Inc. revealed that
the stalking-horse bidders for three units prevailed at an auction, with
the bidder for the largest unit upping its price by over $20 million,
and that another bidder stepped forward to buy a fourth unit,
Bankruptcy Law360 reported yesterday. An affiliate of Johnson
Controls Inc. and lender Goldman Sachs Credit Partners LP secured
Plastech's interiors business as well as the bankrupt company's 51
percent unsecured interest in bankrupt TrimQuest LLC, the transcript
revealed. The buyers' initial $177 million bid was raised to $199.5
million, reflecting an increase in the cash portion of the deal. A unit
of Canadian auto parts maker Magna International, Decoma International
of America Inc., in conjunction with Goldman Sachs, bought Plastech's
exterior components division for its stalking-horse price of $24.6
million, while JD Norman Ohio Holdings Inc. will make good on its $4.5
million stalking-horse bid for Plastech's stamping business.
href='http://bankruptcy.law360.com/secure/printview.aspx?id=59497'>Read
more. (Registration required.)
Thornburg Mortgage Receives SEC
Subpoenas, Survival in Doubt
Thornburg Mortgage Inc., the jumbo mortgage lender that lost $3.31
billion in the first quarter, said yesterday that it has received
subpoenas from U.S. securities regulators and its survival remains in
doubt, Reuters reported. The disclosures reflect further problems for
the Santa Fe, N.M.-based lender, which was on the brink of bankruptcy in
March before raising $1.35 billion of capital. It said that the
subpoenas, issued on April 24 and May 23, relate to a previously
disclosed probe into Thornburg's restatement of 2007 financial results,
demands for more collateral by its lenders, its accounting for
mortgage-backed securities, and various disclosures.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/18/AR2008061801161_pf.html'>Read
more.
Fallout from Bad Loans Rocks Regional
Banks
Home mortgages and other loans that the banks made in good times are
souring so fast that analysts say that many regional banks across the
nation may eventually seek out suitors, most likely large national
rivals, the New York Times reported today. However, no
investors seem to want the regional banks as they are deserting them en
masse. “Everybody is trying to figure out where the bottom
is,” said Jennifer Thompson, a regional bank analyst for Portales
Partners in New York. The regional banks descent in the stock market has
been remorseless, reflecting the weakening housing and construction
markets in regions like the Midwest, Southeast and Southwest. Small and
midsize lenders are in far less danger than they were during the 1980s
and early 1990s, when about 1,600 federally insured institutions failed
during a savings and loan crisis. However, federal regulators are
particularly concerned about the exposure of smaller banks to the
commercial real estate market, which has softened in some parts of the
country.
href='http://www.nytimes.com/2008/06/19/business/19bank.html?sq=bankruptcy&st=nyt&scp=3&pagewanted=print'>Read
more.
Prosecutors in Bear Stearns Case Focus
in on E-mail
The indictments of two former Bear Stearns Cos. hedge-fund managers are
expected to cite a personal e-mail sent from one to the other suggesting
that the funds were headed for the rocks -- four days before they told
investors there was little to worry about, the Wall Street
Journal reported today. Fund manager Matthew Tannin e-mailed his
more senior colleague Ralph Cioffi that he feared the market for complex
bond securities in which they had invested was 'toast.' He suggested
they discuss the possibility of shutting down the funds, according to
the e-mail, which was sent from Tannin's private account. Federal
prosecutors are set to announce the indictments of the two men in a
Brooklyn, N.Y., federal court as early as Thursday on securities-, wire-
href='http://online.wsj.com/article/SB121382160737185879.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Judge Tosses Claims by Adelphia
Creditors
A federal judge in New York yesterday dismissed certain claims by
Adelphia Communications Corp. creditors who sought $4 billion from
hundreds of commercial banks and investment firms, ruling that the cable
operator's bankruptcy plan already had paid creditors what they were
owed, the Wall Street Journal reported today. The creditors
sought recovery of $3.4 billion in loan claims and $605 million in
interest and fees from Citigroup Inc., Bank of America Corp. and
Deutsche Bank AG, among others, alleging wrongdoing on their part in
dealings with Adelphia's former management. Several other dismissal
motions still are pending. The Adelphia Recovery Trust, representing the
creditors, filed its complaint in 2003 saying that the banks and
investment funds received more money than they should have from the
company as the result of fraudulent wire transfers.
href='http://online.wsj.com/article/SB121384276738387571.html?mod=us_business_whats_news'>Read
more. (Registration required.)