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November 20,
2008

name='1'>HUD Secretary Says Mortgage Programs Are
Ineffective
Two government programs intended to help hundreds of thousands of
borrowers avoid foreclosure are having negligible effects, a top Bush
administration official acknowledged yesterday, according to the
Associated Press.  “The response has not kept up with the
need,” said Housing and Urban Development Secretary Steven C.
Preston. The FHASecure program announced in August 2007 has helped only
about 4,000 delinquent borrowers, Preston said. The other, Hope for
Homeowners, has received just 111 applications from distressed
homeowners since it was introduced on Oct. 1. He outlined changes
intended to encourage more participation in the Hope for Homeowners
program. Under the new rules, lenders would be allowed to take a smaller

loss. New loans can be made for 96.5 percent of the home's current
value, rather than the previous 90 percent. 

href='http://www.nytimes.com/2008/11/20/business/economy/20house.html?ref=business&pagewanted=print'>Read

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name='2'>Judiciary Committee Leaders Praise FDIC Mortgage
Modification Plan
Senate Judiciary Chairman Patrick Leahy (D-Vt.) and ranking member Arlen

Specter (R-Pa.) slammed Treasury Secretary Paulson for rejecting a $24
billion relief program proposed by FDIC Chairwoman Sheila Bair that
would provide incentives for lenders to modify the interest rates for
borrowers behind on mortgage payments, CongressDaily reported
yesterday. At a hearing on bankruptcy law and the foreclosure epidemic,
Specter argued that Paulson was wrong when he said that the $700 billion

bailout package approved by Congress last month was not intended to help

address the housing problem. Bair's plan, which could reduce
foreclosures for as many as 2 million borrowers, is a solid approach,
Specter added. Senate Majority Whip Dick Durbin (D-Ill.) has again
introduced legislation to authorize bankruptcy courts to modify primary
home mortgages. Durbin tried three times this year to push through his
measure, but the mortgage industry blocked the measure. Sen. Charles
Schumer (D-N.Y.) told the mortgage banking industry that it was
'standing in the way [of a good bill] and it's going to hurt your own
banks.'

name='3'>Mortgage Firms Cut Principal
As home prices slide and loan defaults pile up, some mortgage companies
are slashing the amount that borrowers owe, deciding that a permanent
cut in the loan balance may pay off if that helps teetering borrowers
avoid foreclosure, the Wall Street Journal reported today. Reducing the
principal on mortgages is 'a last resort,' says Paul Koches, executive
vice president at Ocwen Financial Corp., a West Palm Beach, Fla., loan
servicer that has shrunk the amount owed on 10,884 delinquent mortgages
as of Sept. 30, representing 23 percent of all the loans modified by
Ocwen so far this year. Many mortgage lenders and servicers have been
reluctant to drastically change loan terms, in part because of worries
that would antagonize investors who own securities tied to the loans.
Mortgage servicers are responsible for collecting mortgage payments and
working with troubled borrowers. Not all companies agree that reducing
the loan balance is the right move. J.P. Morgan Chase & Co.'s new
effort to restructure as much as $70 billion in mortgage loans doesn't
include principal write-downs. Instead, J.P. Morgan will sometimes base
new loan payments on a smaller loan balance, while requiring that the
full loan amount be repaid when the borrower refinances or sells the
home. 
href='http://online.wsj.com/article/SB122714443107243141.html'>Read
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name='4'>Companies Push Congress for Pension Changes
Stung by outsize investment losses, some of the nation's biggest
companies are pushing Congress to roll back rules requiring them to put
more money into their pension funds, just two years after a law was
passed looking to strengthen the pension system, the New York
Times reported today. The total value of company pension funds
is thought to have fallen by more than $250 billion since last winter.
With cash now in short supply for companies, they are asking Congress to

excuse them from having to replenish the required amounts. Several
senators late yesterday announced that they had reached agreement on a
bill that would provide pension relief. Even if it is not completed this

week, some congressional leaders say they will seek support for a
pension relief bill in January. “Congress needs to make the
funding less volatile,” said Rep. Earl Pomeroy (D-N.D.) “I
believe that taking this step will save thousands of jobs without
costing the Treasury anything.” 

href='http://www.nytimes.com/2008/11/20/business/economy/20pension.html?_r=1&hp=&pagewanted=print'>Read

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name='5'>Senate Probe to Look at Bond-Rating Firms
The Senate's Permanent Subcommittee on Investigations is opening a probe

into causes of the global financial crisis, focusing in part on whether
bond-ratings firms, driven by conflicts of interest, boosted mortgage
investments that have since collapsed, the Wall Street Journal reported
today. House Oversight and Government Reform Committee Chairman Henry
Waxman (D-Calif.) has already subpoenaed records from American
International Group Inc. and Lehman Brothers Holdings Inc. House
hearings have looked into the ratings firms, but the Senate
subcommittee's investigation is expected to go deeper into the matter.
Sen. Carl Levin (D-Mich.), who heads the investigations subcommittee,
has called attention to financial derivatives known as credit-default
swaps, which he calls 'one of the prime culprits responsible for this
financial disaster.' Investigators are expected to look into how those
derivatives were marketed and used by banks. 
href='http://online.wsj.com/article/SB122715374935343885.html'>Read
more. (Subscription required.)

size='3'>Autos

name='6'>Automakers' Rescue Drive Stalls
A full-court effort by U.S. automakers to secure federal aid
appeared to be on the rocks after the companies failed to convince
lawmakers of the urgent need for a rescue, the Wall Street
Journal reported today. Senate Majority Leader Harry Reid (D-Nev.)
yesterday backed away from efforts to force a vote this week on a
Democratic-backed automotive aid bill. The Nevada senator said that he
might move a Republican alternative proposal Thursday, but suggested it
faced strong opposition. Failure to gain support on Capitol Hill would
be a major setback for all three companies and could force General
Motors Corp. to file for bankruptcy protection, a move that would ripple

through the economy. GM is privately resisting suggestions from advisers

that it make preparations for a bankruptcy filing, despite telling
Congress this week it could soon run out of cash. GM is concerned that
if it were even to take steps such as hiring bankruptcy counsel, the
move would leak and unnerve potential GM customers. 
href='http://online.wsj.com/article/SB122710695099540967.html'>Read
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More Lawmakers Favor Chapter 11 over
Future Bailouts
More lawmakers are promoting chapter 11 as a condition for a government
helping hand for distressed companies, such as U.S. automakers, the
Associated Press reported yesterday. The bankruptcy process has worked
before to turn debt-saddled companies in the steel, airline and retail
industries into leaner successes. 'I'm very much attracted to the
prepackaged bankruptcy idea,' said Senate Banking Committee Chairman
Christopher Dodd (D-Conn.), who held hearings Tuesday on an auto
industry bailout. 'I believe their best option would be some type of
chapter 11 bankruptcy, where they can renegotiate - get rid of the
management,' Sen. Richard Shelby (R.-Ala.) said yesterday. Auto
executives argued that the stigma of bankruptcy would drive customers
away, eliminating a chapter 11 company's share of the market. Robert
Reich, who was Labor Secretary under President Clinton and is now on
Obama's board of economic advisers, has suggested that even if a company

receiving federal aid does not seek chapter 11, it should pay a similar
price. 'This needs a bankruptcy, not a bankruptcy-like model,' said ABI
Resident Scholar Jack Williams. 

href='http://www.google.com/hostednews/ap/article/ALeqM5g9_YzIcykt_QqWPWLuCciw2ugCQQD94IA0D00'>Read

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name='8'>South Could Gain as Detroit Struggles
As Detroit's automakers seek a government bailout, the
resilience of their foreign rivals could vault the South to the
forefront of the U.S. car industry, the Wall Street Journal
reported today. Foreign makers have been lured to South Carolina,
Alabama and other Southern states over the past decade by generous tax
benefits and laws that make it easier to build a largely nonunion
workforce. That labor flexibility has emerged as a key advantage during
the industry downturn, allowing foreign-owned plants to rapidly
downshift in ways their unionized U.S. competitors cannot. Looser work
rules are allowing German automaker BMW AG to lay off up to 733
employees at its Greer, S.C., plant by the end of the year. Toyota Motor

Corp also said yesterday that it plans to let go at least 250 people at
a Georgetown, Ky., factory in the first quarter of 2009. 
href='http://online.wsj.com/article/SB122714059184542693.html'>Read
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name='9'>NetVersant Solutions Files for Chapter 11
Network infrastructure company NetVersant Solutions Inc. filed
for chapter 11 protection on Wednesday, citing the impact of several
unprofitable projects around the country, Bankruptcy Law360
reported yesterday. The company listed liabilities and debts between
$100 million and $500 million in its bankruptcy petition. The company's
creditors to which it owes the most are $28.3 million to Anixter Inc.,
$4 million to Voda One, $3.6 million to Communications Supply Corp. and
$2 million Comstor. According to court documents, NetVersant has
physical locations in 14 states and offers a variety of network
services, including local and wide-area network infrastructure, wireless

network installations, high-end telephony systems, and electronic
security systems. The company said that its operating performance was
negatively affected by several large unprofitable projects in Southern
California and Phoenix and poor operating results from its locations in
Baltimore, Washington, D.C., and New York City. 
href='http://bankruptcy.law360.com/articles/77402'>Read more.
(Subscription required.)

name='10'>People's Choice Settles Washington Mutual Claim for $2.6
Million
A bankruptcy judge has approved a $2.6 million compromise
settlement between the liquidating trusts of bankrupt People's Choice
Home Loans Inc. and Washington Mutual Inc., Bankruptcy Law360
reported yesterday. Per the settlement with Washington Mutual, the
liquidating trust of People's Choice will pay $2.6 million plus more
than $170,000 in interest. The judge's order, issued Tuesday in the U.S.

Bankruptcy Court for the Central District of California, also approved a

smaller compromise settlement of $250,000 between People's Choice and
Credit Suisse First Boston Mortgage Capital LLC and DLJ Mortgage Capital

Inc. Read
more. (Subscription required.)

name='11'>Shares Trade Near 6-Year Low, More Losses
Feared
Investors' confidence in the nation's financial industry is continuing
to slip after the Dow Jones industrial average fell below 8,000
yesterday, the New York Times reported. Many analysts agree
that the short-term outlook seems grim now that the Dow has fallen below

8,000, a level that had lured buyers again and again in recent weeks.
The Dow has lost nearly 40 percent this year, and many of its blue
chips, from Alcoa to General Electric, are down even more than that.
Junk bonds also fell to record-low levels yesterday that drove the
average yield on high-risk corporate bonds to more than 20
percent. 

href='http://www.nytimes.com/2008/11/20/business/economy/20markets.html?ref=business&pagewanted=print'>Read

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name='12'>Mall Owner Lines Up Bankruptcy Law Firm
Debt-laden mall giant General Growth Properties Inc. has hired the law
firm Sidley Austin as bankruptcy counsel while it negotiates with
lenders for more time to restructure its $27 billion debt load, the
Wall Street Journal reported today. While the move does not
mean a chapter 11 filing is imminent, General Growth's financial
situation has steadily deteriorated this year and its stock trading
value has plummetted. The company, which owns more than 200 U.S. malls,
has struggled to repay debt it amassed during an acquisition binge near
the market's peak. General Growth's most pressing problem is $900
million of mortgages due next week on the Fashion Show mall and Shoppes
at the Palazzo in Las Vegas. The company has asked for, and may get, a
few months' breather. The company also has $58 million in bonds due Dec.

1 and $600 million in bonds due in March and April. 
href='http://online.wsj.com/article/SB122714438806843117.html'>Read
more. (Subscription required.)

name='13'>GMAC Applies for Status as Bank to Receive Federal Rescue
Funds
GMAC LLC, the largest lender to General Motors Corp. car dealers, has
applied for status as a bank holding company so it can get access to the

Treasury's $700 billion rescue fund for the financial industry,
Bloomberg News reported today. The lender also began an exchange offer
for $38 billion of debt issued by the company and its Residential
Capital home lending unit, Detroit-based GMAC said today. Converting to
a bank and swapping debt may help GMAC quell doubts about its survival.
Losses at GMAC since mid-2007 reached $7.9 billion through last quarter,

as home foreclosures pressured the mortgage unit and GM's auto sales
plummeted to the worst level since 1945. 

href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.n1OTYW68TA'>Read

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name='14'>Ambac Reaches Agreement on $3.5 Billion in Mortgage
Exposure
Bond insurer Ambac Financial Group said yesterday that it had reached an

agreement with counterparties to terminate $3.5 billion of its exposures

to risky mortgage-backed debt, the Associated Press reported yesterday.
The company, whose business virtually dried up after its insurance arm
Ambac Assurance Corporation lost its AAA ratings in June, said that it
had paid $1 billion to terminate the exposures it had from selling
protection on the assets through collateralized debt obligations. The
company said it expected to be able to make positive adjustments to its
mark-to-market and impairment reserves as a result of the
settlements. 

href='http://www.nytimes.com/2008/11/20/business/20ambac.html?ref=business&pagewanted=print'>Read

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