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June 16, 2008
Regulator Questions Data on Housing
Relief
John C. Dugan, the Comptroller of the Currency, said that banks and
mortgage firms are providing questionable information about the number
of subprime mortgage borrowers they are helping and the rate at which
homeowners are falling into foreclosure, the Washington Post
reported on Friday. Dugan said that his agency found 'significant
limitations with the mortgage performance data reported by other
organizations and trade associations.' Dugan said that he was referring
to information provided by groups such as the Mortgage Bankers
Association, which reports a foreclosure rate widely cited by regulators
and the media. A report by the Office of the Comptroller of the Currency
calculated that the rate was higher based on raw data it collected from
nine of the country's largest banks.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203784_pf.html'>Read
more.
FHA Suspends Insurance Rule in Attempt
to Stabilize Housing Prices
HUD announced on Friday that it will make it easier for borrowers with
federally guaranteed loans to purchase foreclosed properties in a policy
designed to help stabilize home prices in areas that have been hit with
a wave of defaults such as California, Florida and Nevada,
CongressDaily reported. Under the rule, the Federal Housing
Administration will suspend for one year a policy that prevents it from
insuring a mortgage on homes owned by the seller for less than 90 days.
The policy was established to prevent a seller from 'flipping' a
property by trying to quickly resell the home at a higher price to an
unsuspecting buyer. The new policy will allow the immediate sale of
foreclosed properties for FHA borrowers as defaults increase.
Bankruptcy Judge Rejects Bonuses for
Aloha Executives
Bankruptcy Judge Lloyd King rejected a request
to have Aloha Airlines' top two officials receive bonuses of up to
$600,000 each, the Associated Press reported on Friday. The airline's
court-appointed bankruptcy trustee Dane Field proposed the bonuses last
month as an incentive for CEO David Banmiller and CFO Jeffrey
Kessler to fetch a higher price for Aloha's assets. Banmiller and
Kessler could have received as much as $600,000 from the airline's chief
lender if the assets sold for more than $26.5 million.
href='http://www.kpua.net/news.php?id=15110'>Read more.
Bear Stearns Hedge Fund Managers May
Face Indictments
Federal prosecutors, capping a yearlong investigation, are preparing to
file criminal charges against managers of two Bear Stearns Cos. hedge
funds whose collapse helped mark the start of the credit crisis, the
Wall Street Journal reported today. The former Bear Stearns
managers, Ralph Cioffi and Matthew Tannin, managed two high-profile bond
portfolios for the securities firm's asset-management unit. The collapse
of the Bear Stearns funds in June 2007, which eventually cost investors
$1.6 billion, came weeks after Cioffi and Tannin had given a positive
outlook to investors. The carnage of the two funds caused other
financial firms to begin to recalculate their valuations of mortgage
securities.
href='http://online.wsj.com/article_print/SB121358606462876535.html'>Read
more. (Registration required.)
Judge to Approve Coudert Amended
Disclosure Statement
Bankruptcy Judge Robert D. Drain said Friday that he
would approve an amended version of the bankrupt law firm Coudert
Brothers LLP's disclosure statement after certain changes are made,
Bankruptcy Law360 reported on Friday. Debtors' counsel Tracy
Klestadt declined to explain what modifications Judge Drain
required, but said that Coudert Brothers would be filing the amended
version of its disclosure statement today. A handful of objections had
been filed to the disclosure statement prior to Friday's hearing, and
the statement had already been modified once following a June 3 hearing.
The unsecured creditors' committee filed its objection to the first
amended disclosure statement on Thursday, claiming that the wording did
not adequately protect partners that participate in the liquidation plan
from being personally sued.
href='http://bankruptcy.law360.com/secure/printview.aspx?id=59089'>Read
more. (Registration required.)
Countrywide CEO Allegedly Gave Special
Attention to Lawmakers
When Sen. Kent Conrad (D-N.D.) reached out to Countrywide Financial CEO
Angelo Mozilo for a mortgage on a vacation property in 2004, Conrad
became another VIP enrolled in the 'FOA' -- Friends of Angelo -- loan
program, the Washington Post reported on Saturday. Conrad, the
Senate Budget Committee chairman, said yesterday that he sees nothing
wrong with calling Mozilo and is adamant that he received no special
deals. The FOA program has only recently surfaced. Conrad received
Mozilo's phone number from former Fannie Mae CEO James A. Johnson, who
was chased from his job vetting potential running mates for presumptive
Democratic presidential nominee Barack Obama just four days after the
Wall Street Journal reported that Johnson may have received preferential
treatment on his own Countrywide loans. An investigation by Portfolio
Media alleges that favorable loans also were extended to Senate Banking
Committee Chairman Christopher J. Dodd (D-Conn.), President Bush's
former housing secretary Alphonso Jackson, former United Nations
ambassador Richard Holbrooke and former Health and Human Services
secretary Donna E. Shalala.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/06/13/AR2008061303738_pf.html'>Read
more.
Nearly Half of Wall St. Bank Profits
Are Gone
Since last July, seven of the nation's largest financial companies lost
almost half of the combined profits they had made between early 2004 and
mid-2007, the New York Times reported today. During that
timeframe, seven of the nation's largest financial companies earned a
combined $254 billion in profits. Since last July, however, those same
banks - Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers,
Merrill Lynch, Goldman Sachs and Morgan Stanley - have written down the
value of the assets they hold by $107.2 billion, gutting their earnings
and share prices. Worldwide, the reckoning totals $380 billion, much of
which reflects a plunge in the value of tricky mortgage
investments.
href='http://www.nytimes.com/2008/06/16/business/16earnings.html?_r=1&ref=business&oref=slogin'>Read
more.
Judge Approves $400 Million Sale of
Leiner Assets to NBTY
Bankruptcy Judge Kevin J. Carey authorized the sale of
most of Leiner Health Products Inc.'s assets to stalking-horse bidder
NBTY Inc. for nearly $400 million, Bankruptcy Law360 reported
on Friday. The assets' purchase price is $371 million, but Leiner
estimated that NBTY's agreed assumption of some liabilities as well as
potential price adjustments would place the actual value of the deal
above $400 million. Under the agreement, a downward purchase price will
be reached should the working capital not equal $110 million at the time
of closing, with an upward purchase price contemplated in the event that
working capital exceeds $110 million, according to NBTY.
href='http://bankruptcy.law360.com/Secure/printview.aspx?id=59153'>Read
more. (Registration required.)
Study: Bankruptcy Threatens All Big
Airlines
A new study by the consulting firm AirlineForecasts said that all of the
major airlines could be in bankruptcy by early next year if oil prices
continue at their current rate, the Fort Worth Star-Telegram
reported on Saturday. The study found that if fuel prices remain
high, the top 25 carriers will spend over $28 billion more for fuel
this year and the major airlines could lose up to $9 billion over that
time period. Even though airlines have been raising fares aggressively,
they've largely sidestepped routes where they compete against low-cost
airlines such as Southwest. The Bureau of Labor Statistics reported that
average fares were up about 4 percent during the fourth quarter of 2007,
the most recent data available.
href='http://www.kansas.com/107/v-print/story/435094.html'>Read
more.
Former Bankruptcy Judge Will
Represent Lenders in Move to Law Firm
Former Bankruptcy Judge Melanie Cyganowski is jumping
to the law firm of Otterbourg, Steindler, Houston & Rosen, a midsize
New York firm that specializes in representing lenders such as banks,
investment banks and hedge funds in restructurings and bankruptcy cases,
the Wall Street Journal reported today. Cyganowski, who spent
14 years on the bench in the Eastern District of New York, comes to
Otterbourg as a partner after 15 months at Greenberg Traurig LLP, a
large national corporate law firm. She was a commercial litigator for 11
years before being named a judge in 1993.
href='http://online.wsj.com/article_print/SB121358444938876439.html'>Read
more. (Registration required.)