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December 8, 2009
Mortgages
Mortgage Lienstripping
Proposal Returns as Part of Financial Regulatory Bill
House Judiciary Chairman John Conyers (D-Mich.) has
submitted an amendment to the financial overhaul package that would
allow a bankruptcy judge to modify the terms of a home mortgage,
including reducing the principal,
face='Times
New
Roman' size='3'>CongressDaily reported today.
Fifty-four amendments were filed two hours before deadline submission
yesterday, and the House Rules Committee will meet today to consider the
parameters for floor debate and again Wednesday before issuing its rule.
Debate on the legislation could start as early as Wednesday. Against
massive opposition from the banking industry, the House passed similar
legislation this year, but the Senate fell 15 votes short to enact
cloture.
Lenders to Meet on Loan Modifications
The Treasury Department summoned Bank of America
Corp., Citigroup Inc. and other mortgage servicers to Washington, D.C.,
yesterday to accelerate U.S. foreclosure prevention efforts ahead of a
year-end deadline for some loan modifications, Bloomberg News reported
yesterday. The banks, which also include Wells Fargo & Co., JPMorgan
Chase & Co. and Morgan Stanley, face a Dec. 31 deadline to make
permanent the trial refinancings and concessions they extended this year
to about 375,000 homeowners at risk of default. Banks have blamed the
shortcomings on borrowers failing to turn in all their paperwork and
confusion about eligibility standards. Banks are rushing to meet a new
Treasury deadline, announced Nov. 30, to permanently convert more than
half of the 650,994 loans that were in trial modification plans at the
end of October into permanent reductions by year’s end. The Obama
administration’s $75 billion program to encourage banks to lower
monthly mortgage payments and alter loan terms for those in need had
permanently modified 1,711 loans through September, according to a
congressional oversight panel. Of the 375,000 loans scheduled for
conversion to permanent modifications, those that aren’t switched
over by Dec. 31 may not be eligible for HAMP again in the future, the
Treasury said.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arfLiOez5X2s'>Read
more.
In related news, the House Financial Services
Committee will hold a hearing today at 10 a.m. ET titled “The
Private Sector and Government Response to the Mortgage Foreclosure
Crisis.”
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/fchr_120809.shtml'>Click
here to view the witness list and to obtain a link to a live
Webcast of the hearing.
Report: CMBS Loan
Defaults Rose to Record in Third Quarter
Delinquencies on commercial mortgage-backed securities
(CMBS) increased to a record in the third quarter as unemployment rose
and landlords struggled to retain tenants, Bloomberg News reported
yesterday. The Mortgage Bankers Association (MBA) reported yesterday
that the percentage of CMBS loans at least 30 days past due rose to 4.06
percent from 1.17 percent a year earlier—the largest increase
since the group began tracking the data in 1997. About 3.43 percent of
bank-owned loans on offices, apartment buildings, shopping centers and
other income-producing properties were at least 90 days past due, up
from 1.38 percent a year earlier, the MBA said. The loan delinquency
rate for bank-issued commercial loans is the highest since the second
quarter of 1994, when it was 3.49 percent. Of a total $3.47 trillion in
commercial and multifamily mortgage debt outstanding as of June 30, 50
percent was held by banks, 21 percent pooled in CMBS, 10 percent owned
or guaranteed by government-backed enterprises, 9 percent held by life
insurance companies and the rest by other government and private
entities, the Mortgage Bankers Association reported.
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aY9wHw8gZa6w&pos=7'>Read
more.
SEC Charges Former
Executives of New Century with Fraud
The Securities and Exchange Commission filed civil
fraud charges against three former executives of mortgage lender New
Century Financial Corp., alleging that they misled investors and
improperly overstated profits, Dow Jones
face='Times
New
Roman' size='3'>Daily Bankruptcy Review
size='3'>reported today. The SEC sued New Century cofounder Brad
Morrice, former CFO Patti Dodge and former Controller David Kenneally.
The agency is seeking to recover bonuses and incentive pay from Morrice
and Dodge. According to the complaint, in the second and third quarters
of 2006, New Century overstated its financial results by understating
expenses related to repurchased loans and pending repurchase requests.
Dodge and Kenneally reduced the company's reserve provision for these
loans resulting in a third quarter profit of $90 million compared with
what the SEC said should have been an $18 million loss. New Century was
at one point the third-largest subprime lender in the U.S., the SEC
said. The company was among the first large mortgage underwriters to run
into serious trouble and filed for bankruptcy in April
2007.
Judge Rebuffs Alternative
Reorganization Plans in Six Flags Bankruptcy
Bankruptcy Judge
face='Times
New
Roman' size='3'>Christopher Sontchi said
yesterday that Six Flags Inc. can keep its exclusive right to file its
chapter 11 reorganization plan, overruling objections from a group of
noteholders that sought to offer their own plan.
size='3'> The ruling allows the world's
largest regional theme park operator to begin soliciting votes from
creditors on a reorganization plan, crafted by a group of lenders headed
by hedge fund Avenue Capital. A group of
lenders known as the SFI noteholders, led by Stark Investments, had
opposed the plan, saying it undervalued the company. However, Judge
Sontchi ruled that Six Flags and the Avenue-led group had made 'good
faith' progress on their restructuring plan. Avenue's plan provides
so-called SFO noteholders owed $420 million with 7 percent of the
company. The Stark group, with claims of $1.3 billion, opposed this
plan, which gave them 4.8 percent of the company.
size='3'>The case is
face='Times New Roman' size='3'>In re Premier International Holdings
Inc., U.S. Bankruptcy Court, District of
Delaware, No. 09-12019.
href='http://www.reuters.com/article/idUSN0712801420091207'>Read
more.
Creditors Fight Approval of
FairPoint DIP Loan
Creditors of FairPoint Communications Inc. have
objected to the company's proposed $75 million debtor-in-possession
financing, which they say is designed to force a reorganization plan
favored by FairPoint and its prepetition lenders,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
FairPoint's unsecured creditors’ committee on Friday objected to a
provision in the DIP loan that would force the debtor to file a
reorganization plan conforming to certain terms within 45 days of
approval. Those terms include giving FairPoint's prepetition
lenders pro rata shares of $1 billion
in new loans, and giving unsecured creditors some recovery in stock if
they accept the plan but none if they reject it. The creditors also said
that the debtor's prepetition lenders weren't entitled to adequate
protection or fees and expenses, which they would receive under the
proposed DIP order. Bankruptcy Judge
face='Times New Roman' size='3'>Burton R. Lifland
size='3'>already granted the proposed DIP loan preliminary approval in
October. A hearing on final approval is set for Dec. 16.
href='http://bankruptcy.law360.com/print_article/137800'>Read
more. (Subscription required.)
Coyotes Reject Call for
Conversion to Chapter 7
The former owners of the National Hockey League's
Phoenix Coyotes have filed a chapter 11 liquidation plan and rebuffed a
recent call to convert the proceedings to a chapter 7 case, claiming
that doing so would merely prolong the wind-down and eat away at the
liquidation trust proposed for the unsecured creditors,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.
The plan proposes to pay in full each holder of an allowed nontax
priority claim, to provide a
face='Times
New
Roman' size='3'>pro rata share of the
liquidation trust to offset the general unsecured claims and to wipe out
altogether the stakeholders in the old team. The wind-down plan is a
retort to the city of Glendale’s 'emergency' motion to force a
chapter 7 conversion. The debtor argues the city is merely trying
postpone the court’s adjudication of a $500 million lease
rejection claim.
href='http://bankruptcy.law360.com/print_article/137937'>Read
more. (Subscription required.)
GGP Bankruptcy Plan
The Texas Comptroller of Public Accounts on Friday
objected to bankrupt mall operator General Growth Properties'
reorganization plan, arguing that it does not provide for the payment of
disputed tax claims that remain unpaid as of the effective date,
size='3'>Bankruptcy Law360 reported yesterday.
The Texas Comptroller said that GGP's plan should be modified to require
that post-effective date interest be paid on priority tax claims at the
rate required by the Bankruptcy Code. The Texas Comptroller had
previously filed an estimated proof of claim in GGP's bankruptcy for
2009 Texas franchise taxes that the debtor may owe. According to the
Texas Comptroller's objection, Texas' franchise tax laws recently were
overhauled, and as a result many tax returns did not automatically
process through the Texas Comptroller's electronic filing system. The
Texas Comptroller's office said it has 600,000 franchise tax returns for
2009 left to process manually, a task that may take until early 2010, so
it cannot know at present whether GGP will owe additional franchise
taxes and will not know prior to the confirmation hearing on the
plan.
href='http://bankruptcy.law360.com/print_article/137727'>Read more.
(Subscription required.)
NY Bank Gains $11B AmTrust
Assets in FDIC Deal
New York Community Bancorp Inc. has acquired
approximately $11 billion in assets and assumed liabilities of about $11
billion from the failed AmTrust Bank in a deal brokered by the Federal
Deposit Insurance Corp. (FDIC),
face='Times
New
Roman' size='3'>Bankruptcy Law360 reported
yesterday. The FDIC seized AmTrust Bank's assets on Friday after the
bank had struggled for more than a year with bad bets made during the
housing bubble. As part of the deal to transfer AmTrust's assets to New
York Community Bancorp, the FDIC has agreed to a loss-share arrangement
in which it takes the hit for much of the losses on AmTrust's assets.
New York Community Bancorp said on Friday that it had not acquired any
of AmTrust Bank's nonperforming loans serviced by AmTrust Bank or any
other real estate owned, nor did it pick up any assets or obligations of
the bank's holding company. The bankruptcy case is
face='Times



New
Roman'>In re AmTrust Financial,
case number 09-21323, in the U.S. Bankruptcy Court for the Northern
District of Ohio.
href='http://bankruptcy.law360.com/print_article/137851'>Read
more. (Subscription required.)
Justices Hear
Sarbanes-Oxley Law Challenge
The Supreme Court heard arguments yesterday that could
lead to the overturning of the Sarbanes-Oxley Act, which governs public
companies' business practices, CongressDaily reported yesterday. The
case,
size='3'>Free Enterprise Fund v. Public Company Accounting Oversight
Board, could either strike down the 2002 law
passed in the wake of scandals at Enron, WorldCom and Tyco or force
Congress to revisit the law. Attorney Michael Carvin, representing the
Free Enterprise Fund and Nevada accounting firm Beckstead and Watts,
argued that Congress insulated the PCAOB, designed to oversee the
practices of accounting companies, from the president and thus violated
the separation of powers and appointments clauses of the Constitution.
Justice Antonin Scalia noted that the president has the authority to
throw out the chairman of the SEC but not members of the PCAOB,
signaling some agreement that the president has little authority over
how the board conducts its business. Members of the PCAOB can only be
dismissed by the SEC and only for cause, and not policy differences. The
government has argued that the president can effect changes at the board
through the chain of command at the SEC.
Obama Preparing New Push
to Add Jobs, Tackle Deficit
President Obama today plans to outline a major push to
tackle one of the biggest threats to the economy and to his
administration: the soaring unemployment rate, the
face='Times New Roman'>
size='3'>Washington Post reported today.
Administration officials said yesterday that Wall Street firms are
repaying federal bailout funds faster than expected, a development that
is sparking a debate in Washington over what to do with the repayments.
Leading House Democrats want to tap those funds for a new jobs bill.
Republicans, who want to rein in the nation's growing deficit, oppose
the efforts to spend money from the bailout fund. Aside from supporting
legislative efforts by Democrats in the House, administration officials
are also examining new ways the government could use TARP to spark
small-business lending with the aim of creating or saving jobs.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/12/07/AR2009120704125_pf.html'>Read
more.
GM Ready to Pump More
Spending into Development of New Vehicles
General Motors CEO Edward E. Whitacre Jr. has one big
advantage as he tries to turn around the automaker — a stockpile
of cash to develop new cars and trucks, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. GM had already pumped up its
vehicle-development programs since emerging from bankruptcy with $42.6
billion in cash reserves, the bulk of which came from the government.
During the company’s slide into bankruptcy, it had to suspend some
of its investments. The cash hoard is as large as GM has ever had,
including the days when the company was earning big profits on SUV sales
early this decade. Some of GM’s cash is already spoken for. The
company pledged to pay back $8.1 billion in loans from the United States
and Canada by next year, and another chunk will go toward downsizing its
href='http://www.nytimes.com/2009/12/08/business/08auto.html?_r=1&ref=business&pagewanted=print'>Read
more.
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