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April 13, 2007
Mortgages
name='1'>Groups Call for Bankruptcy, Mortgage
Reform
The Center for
Responsible Lending, the National Association of Consumer Bankruptcy
Attorneys (NACBA) and the Consumer Federation of America called on
Congress to make it easier for families facing foreclosure to file for
bankruptcy and keep their homes, the Associated Press reported
yesterday. Eric Stein, senior vice president of the Center for
Responsible Lending, said lenders who made high-interest rate loans to
borrowers with weak credit are to blame for pushing homeowners into
financial peril. NACBA said that 80 percent of 640 bankruptcy lawyers
surveyed nationwide this month said that the 2005 bankruptcy law reforms
are adding to the challenges borrowers facing foreclosure confront in
efforts to keep their homes. The two groups are calling for Congress to
take quick action Thursday as several more lawmakers joined calls for
providing hundreds of millions of dollars in federal aid to financially
troubled homeowners. Sen. Charles Schumer (D-N.Y.) renewed calls for a
government bailout Thursday, a day after the Joint Economic Committee,
which he chairs, released a report detailing the housing woes.
href='http://biz.yahoo.com/ap/070412/mortgages_bankruptcy.html?.v=4'>Read
more.
name='2'>Mortgage Lender SouthStar Files for Chapter
7
SouthStar Funding LLC, a
mortgage lender that earlier this month said it stopped making home
loans, has filed for chapter 7 bankruptcy, Reuters reported yesterday.
SouthStar listed more than $100 million of assets, more than $100
million of liabilities, and between 1,000 and 5,000 creditors in its
bankruptcy petition. SouthStar made subprime home loans to people with
poor credit histories. It is at least the sixth U.S. mortgage lender to
seek bankruptcy protection since December. New Century Financial Corp.,
Mortgage Lenders Network USA Inc., Ownit Mortgage Solutions LLC,
People's Choice Financial Corp. and ResMae Mortgage Corp. have also
filed for chapter 11. More than 30 subprime lenders have sold their
businesses, quit the industry or gone bankrupt in the last year as
homeowner delinquencies and defaults soared.
href='http://asia.news.yahoo.com/070412/3/308je.html'>Read
more.
name='3'>Delta Pilots Sell Bankruptcy Claim
More than 91 percent of
eligible Delta Air Lines Inc. pilots have opted to sell their portion of
a $2.1 billion unsecured bankruptcy claim the carrier had given them as
part of pay cut talks last year, the Associated Press reported
yesterday. The average payout would be about $185,946 based on the
number of pilots participating -- roughly 6,233 -- and the total amount
being paid for the claim distributions is $1.159 billion -- about 60
cents on the dollar. The actual cash distribution to participating
pilots will be based on their years of service, seniority and their
hourly pay rate, according to the pilots union. Those pilots who did not
opt to take the cash payout will retain their portion of the $2.1
billion unsecured claim.
href='http://biz.yahoo.com/ap/070412/delta_pilots.html?.v=1'>Read
more.
name='4'>More Courts Are Rejecting 'Deepening Insolvency'
Claims
Although there is
considerable recognition that the 'deepening insolvency' of a distressed
corporation may give rise to compensable corporate harm, whether
deepening insolvency is an independent cause of action or a measure of
damages arising from commission of a separate tort has been a fertile
source of confusion, according to a New York Law Journal report
today. What is certain is that directors and officers, as well as
lenders, underwriters and professionals, frequently must defend claims
alleging that a corporation suffered compensable injury through the
fraudulent prolongation of operations after the corporation was
insolvent, thereby expanding the corporate debt and exposure to
creditors. It is now commonplace for a bankruptcy trustee, creditors'
committee or statutory litigation trust formed under a bankruptcy plan
to pursue an action on behalf of the corporate debtor under a deepening
insolvency theory seeking damages for the estate, which ultimately flow
to creditors. The theory is particularly attractive to plaintiffs
because, if accepted, its vagueness lends itself to second-guessing of
management decisions made while the corporation struggled.
href='http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1176368649897'>Read
more.
name='5'>Sallie Mae Said to Be Talking to Suitors
Sallie Mae, the nation’s
largest lender to college students, is in talks to be bought out by
private equity in what could be a deal for more than $20 billion, the
New York Times reported today. One potential bidder reportedly is
the Blackstone Group. The company has come under scrutiny by state and
federal officials over the financial relationships between college
officials and student loan companies. This week, Sallie Mae agreed to
pay $2 million and to change its business practices to settle an
investigation by the New York attorney general’s office. Sallie Mae,
officially the SLM Corp., was created by Congress in 1972 to support a
secondary market for student loans issued by private lenders, much the
way Fannie Mae and Freddie Mac support the housing market. It was
privatized in the 1990s, becoming fully independent as a publicly traded
company by 2004. Now institutional investors like the Vanguard Group own
href='http://www.nytimes.com/2007/04/13/business/13deal.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='6'>Realtors Association Expects Home Prices to Show First
Annual Decline
The National Association
of Realtors reported that the 2007 median price for an existing home
probably will decline 0.7 percent to $220,300, the first drop since the
real estate trade group began keeping records in 1968 and probably the
first decline since the Great Depression, Bloomberg News reported
yesterday. The median price for new homes is projected to increase 0.4
percent to $246,200 this year, the smallest gain since prices fell in
1991. Home purchases are being derailed as subprime lenders stop
financing mortgages or go out of business, increasing inventory and
weakening demand, according to Lawrence Yun, an economist with the
association. In the last 12 months, at least 40 subprime lenders have
halted operations, gone out of business, or sought buyers as borrower
defaults increased.
href='http://www.nytimes.com/2007/04/12/business/12realtors.html?pagewanted=print'>Read
more.
SEC
Shift May Lead to Lower Penalties
The Securities and
Exchange Commission (SEC) is changing how it negotiates settlements with
companies in a way that could reduce the number and size of financial
penalties that businesses pay, the Washington Post reported
today. Under the change, which has not been made public, SEC enforcement
lawyers must seek approval from the agency's five commissioners before
they begin settlement talks that involve fining corporations, including
seeking ranges for possible fines. Currently, staff members have the
authority to negotiate with businesses and draft settlements in
principle before they take the deals to the agency leaders for final
approval.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/04/12/AR2007041202188_pf.html'>Read
more.
name='8'>Watchdogs Target Pentagon Rules on Abusive
Loans
Consumer groups said yesterday
that a proposed Defense Department rule to curb abusive lending to
military personnel is loophole-ridden, CongressDaily reported
yesterday. The Consumer Federation of America, the National Consumer Law
Center and the Center for Responsible Lending said the rule, which
narrowed language in a 2006 law to protect military personnel from
abusive loans, would exempt some high-cost loans that were previously
criticized by the Pentagon, such as military installment loans. The
proposed rule would impose a 36 percent cap on interest rates for payday
loans, tax refund loans and vehicle title loans. It would not apply to
car loans, home equity loans, reverse mortgages and refinancing and
credit cards. The groups have one last chance to change the rule because
there is a 60-day comment period before it will be finalized and go into
effect in October.
name='9'>TROUBLED COMPANIES IN THE
NEWS
1000’s of companies lose money or
experience some form of difficulty each quarter.
The business news articles below are
taken from the Daily Summary of Troubled & Fast Growing U.S.
Companies and Other Business News published by Bastien Financial
Publications.
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e-Summary, that emails you information on over 70 such companies each
morning, email
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Indicate “ABI CODE 27” in your email.
Biolase Technology’s stock price
sank 21% after the dental-laser-products company warned that it will
incur a loss in the first quarter as a result of a greater-than-expected
drop in sales in the fourth quarter.
CellStar Corp., a Coppell, Tx. wholesale distributor of
cellphones and accessories, reported a first quarter net loss of $3
million, compared with net income of nearly $2.2 million in the
year-earlier period. Revenue declined nearly 5%–to $196 million. The
firm blamed the revenue decline on the loss of customers.
Comverse Technology Inc.’s stock price bumped up 3.5% after
the Manhattan, N.Y. software maker named a new chief executive.
According to a company statement, the announcement of the new CEO may
help speed up its restructuring efforts, which include a possible
spinoff of some assets. The previous CEO is one of a number of Comverse
individuals who were charged with backdating stock options.
Federated Department Stores Inc., the Cincinnati, Oh. parent
of both the Macy’s and Bloomingdale’s department store chains, reported
a disappointing March same-store sales increase of 2.3%, significantly
shy of its forecasted increase of as much as 4%.
Jewett-Cameron Inc. of North Plains, Or. reported its second
quarter net income declined 48%–to $320,000. Revenue declined 14%–to
$16.4 million.
Nature Vision Inc., Brainerd, Mn., reported a fiscal net loss
of $1.1 million. Revenue declined 23%–to $9 million.
NovaStar Financial Inc., a Kansas City, Mo. subprime mortgage
provider, hired a unit of Deutsche Bank AG to advise it on strategic
alternatives, including possibly putting itself up for sale. The firm,
continuing to struggle with a rise in delinquencies and other financial
challenges, also announced that it arranged a $100 million credit line
through Wachovia Capital Markets.
Novelis Inc., an Atlanta, Ga. maker of aluminum products,
reported a fiscal net loss of $275 million on revenue of $9.8 billion.
The results included $19 million in restructuring charges.
Pier 1 Imports Inc., the Forth Worth, Tx. retailer of exotic
furniture and accessories, reported a fourth quarter net loss of $58.7
million on a 6% revenue decline–to $473 million. The loss compares with
a $10 million loss for the same period one year ago. For the year, the
company reported a net loss of $227.6 million on an 8% revenue
decline–to $1.6 billion. The losses for both the quarter and the year
included nonrecurring and unusual charges of $45.8 million and $114.1
million respectively.
Vonage Holdings Corp., the Holmdel, N.J. Internet phone
company which is embroiled in a patent lawsuit with Verizon, has
announced plans to cut 180 jobs (10% of its workforce) while
implementing a hiring freeze to cut $30 million in
costs.