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October
29, 2007
Mortgage
Lending
name='1'>Congressional Report Warns of Subprime Crisis
Fall-Out
Joint Economic Committee (JEC)
Chairman Charles E. Schumer (D-N.Y.) released a report Thursday
revealing that families, neighborhood property values, and state and
local governments will lose billions of dollars as two million subprime
mortgage homes are foreclosed, according to a press release. The JEC
report entitled “The Subprime Lending Crisis: The Economic Impact
on Wealth, Property Values and Tax Revenues, and How We Got Here”
argues in favor of foreclosure prevention, which can save the economy
billions in housing wealth and ease falling housing prices. The JEC
report is the first of its kind to project economic costs on a
state-by-state basis from the third quarter of 2007 through
2009.
href='http://www.jec.senate.gov/Documents/Reports/10.25.07OctoberSubprimeReport.pdf'>Click
here to read the full report.
name='2'>Moody's, S&P, Fitch Subpoenaed by Connecticut Attorney
General
As the nationwide probe
into the credit rating industry's alleged role in the subprime collapse
widens to examine potential anti-competitive conduct,
w:st='on'>
size='3'>Connecticut
attorney general has subpoenaed the three major ratings agencies,
Bankruptcy Law360
reported on Friday. Connecticut Attorney General Richard
Blumenthal issued subpoenas to McGraw-Hill Cos. Inc.'s Standard &
Poor's, Moody's Corp.-helmed Moody's Investors Service and
Fimalac SA-owned Fitch
Ratings on Oct. 10. Blumenthal said that he hoped to gather information
so he could determine whether the companies had exploited their dominant
positions to unfairly raise prices or block competition in their
concentrated market for assessments of corporate, financial, mortgage
and other borrowers' abilities to repay loans. “Assuring debt
ratings are honest and untainted is vital to investors, companies and
government. I will vigorously and aggressively enforce
w:st='on'>
size='3'>Connecticut
antitrust laws if my investigation uncovers evidence of anticompetitive
activity,” he said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38637'>Read
more. (Registration required.)
name='3'>Study Links Lenders to Swift Foreclosures in
w:st='on'>
York
In neighborhoods in
Brooklyn, Queens and the
size='3'>Bronx hit hard by the
subprime lending crisis, a report released yesterday by State Senator
Jeffrey D. Klein showed that mortgages that had the shortest of life
spans — taking about a year to go from approval to notice of
foreclosure —were originated by the same few lenders, the
New York Times
size='3'>reported today. In
face='Times New Roman' size='3'>Queens
size='3'>, the study found that the greatest number of mortgages that
resulted in foreclosure notices were issued by three lenders: Fremont
Investment and Loan, WMC Mortgage, and the New Century Financial
Corporation. Those lenders had also approved the most mortgages set for
foreclosure in
size='3'>Brooklyn
The three lenders totaled 618 foreclosure notices in the city and
size='3'>Westchester
w:st='on'>
size='3'>County
the 13 months studied. In the
face='Times New Roman' size='3'>Jamaica
and South Jamaica sections of
w:st='on'>
size='3'>Queens
mortgage origination to notice of foreclosure was 11 months. In
size='3'>Wakefield
the
size='3'>Bronx
report said.
href='http://www.nytimes.com/2007/10/29/nyregion/29foreclose.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='4'>Judge Approves Extension in
w:st='on'>
size='3'>Davenport
Bankruptcy
The Diocese of Davenport,
Iowa, received an extension until Nov. 16 to file its
reorganization plan in federal bankruptcy court, the
face='Times New Roman' size='3'>Quad City Times
size='3'>reported on Saturday. The first extension gave the diocese more
time to analyze 156 claims of sexual abuse, many of which date to the
1950s and ’60s, and determine what insurance coverage may exist.
Some of those issues still are being resolved, according to the new
motion. The diocese and the creditors' committee filed a request for the
extension in September and have asked for and received permission to
request additional information from three insurance
organizations.
href='http://www.qctimes.com/articles/2007/10/27//news/local/doc4722be61a1b85138800858.txt'>Read
more.
name='5'>Solutia Looks to Have $15 Billion in Claims Reclassified as
Torts
Solutia Inc. is asking
the court overseeing its chapter 11 proceedings to reclassify claims
totaling more than $15 billion as “tort claims” and expunge
claims predicated on retiree benefits,
size='3'>Bankruptcy Law360 reported on Friday.
The claims Solutia wants reclassified as tort claims include personal
injury and product liability claims related to exposure of contamination
from chemicals. Solutia's reorganization plan calls for tort claims to
pass through the chapter 11 process without being affected and then be
resolved in the normal course of business by either Solutia or Monsanto,
the company said. Solutia's conditional objection to the retiree claims
seeks to implement a retiree settlement as well as the most recent
incarnation of Solutia's plan, which both require the claims be
expunged, the company asserted.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=38628'>Read
more. (Registration required.)
Approves Werner Liquidation Plan
Bankruptcy Judge
Kevin J. Carey
size='3'>signed off on the liquidation plan of bankrupt ladder company
Werner Holding, Inc., allowing the company to finish winding down its
operations. Bankruptcy
Law360 reported on Friday. The judge set up a
liquidation trust, saying that it was an essential element of the plan,
and named Charles Stanziale as the liquidation trustee. The plan
stipulates that holders of administrative and priority tax claims will
be paid by the companies that bought Werner's assets, and
classifies the remaining claims and equity interests in the bankruptcy
proceedings. Allowed administrative claims from the wind-down in
operations will be paid from an account set aside for such matters and
any remaining claims from one of Werner's buyers, Milk Street Investors
LLC. A group of investors including Black Diamond Capital Management
LLC, Brencourt Advisors LLC, Levine Leichtman Capital Partners III LP,
Milk Street Investors LLC, Schultze Asset Management LLC and TCW Shared
Opportunity Funds, bought the assets of Werner in June for $265
million.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=38606'>Read
more. (Registration required.)
name='7'>Suit Alleges Delta Air Lines Deceived Creditors to Prep
Comair for
w:st='on'>Sale
w:st='on'>Five Wall
Street
have accused Delta Air Lines Inc. of cheating creditors of its regional
subsidiary, Comair Inc., to increase the price it could collect if
Comair were sold, the Associated Press reported on Friday. In a lawsuit
filed with the U.S. Bankruptcy Court in
w:st='on'>
size='3'>Manhattan
firms said that Delta deliberately inflated estimates of payments Comair
creditors would receive in the airlines' bankruptcy reorganization. Once
the airlines exited bankruptcy, however, Delta reduced the estimate by
about 25 percent.
size='3'>Approval of Comair's reorganization plan was obtained 'by
fraud,' the suit said, and the judge was asked to revoke his
approval of the plan. The lawsuit was filed by affiliates of two
investment banks – Bear Stearns Cos. and Societe Generale –
and several hedge funds, including Varde Investment Partners, Cypress
Management Master LP and Par-Four Master Fund. The firms say they hold
$125 million in bankruptcy claims against Comair.
href='http://money.cnn.com/news/newsfeeds/articles/apwire/99ceb3d9079cee772dce076a020ee37d.htm'>Read
more.
name='8'>Merrill Lynch CEO to Resign after Multi-Billion Dollar
Write-Off
After an $8.4 billion
write-down due in large part to the subprime mortgage downturn and an
unauthorized merger approach to a rival bank, Wachovia, Merrill Lynch
CEO E. Stanley O’Neal has lost the confidence of his board and is
expected to resign as chairman and chief executive as early as today,
the
size='3'>New York Times reported today. For a
time, Merrill’s business flourished as O’Neal took on more
risk and made deep cuts. In 2006, Merrill made $7 billion from using its
capital to trade for itself and clients, compared with $2.2 billion in
2002. Some riskier businesses that the firm was involved with, like
private equity and lending, fared well over
the summer. Merrill’s exposure to
the volatile market for complex debt instruments called collateralized
debt obligations exploded to more than $40 billion from around $1
billion about 18 months ago. In the second quarter, just before the
collapse in the credit markets, fixed-income revenues skyrocketed 201
percent over the same quarter a year earlier. Underpinning this growth
was the firm’s market-leading position in packaging different and
risky kinds of debt.
href='http://www.nytimes.com/2007/10/29/business/29merrill.html?ref=business&pagewanted=print'>Read
more.
International
name='9'>U.K.
face='Times New Roman' size='3'> Mortgage Approvals Decline to
26-Month Low
w:st='on'>
size='3'>U.K.
size='3'>banks approved the fewest mortgages in 26 months in September
as borrowing costs increased, adding to evidence that the property
market is cooling, Bloomberg News reported today. Lenders granted
102,000 loans for house purchase, the fewest since July 2005 and down
from 108,000 in August, the Bank of England said in
w:st='on'>
size='3'>London
Borrowing rates for home loans are rising after the central bank lifted
its benchmark interest rate to a six-year high in July and credit dried
up following the collapse of the
w:st='on'>
size='3'>U.S.
size='3'>subprime mortgage market. The Bank of England raised the
benchmark interest rate to 5.75 percent in July, the highest among Group
of Seven industrial nations, in an effort to curb inflation.
href='http://www.bloomberg.com/apps/news?pid=20601102&sid=adEVUb6WB0SE&refer=uk'>Read
href='http://www.bloomberg.com/apps/news?pid=20601102&sid=adEVUb6WB0SE&refer=uk'>