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February 26,
2008
Mortgage
Lending
name='1'>Foreclosure Bill Faces Senate
Test
The Senate is scheduled today
to vote on a bill, S. 2636, that includes
a provision to allow bankruptcy judges to reduce mortgage balances for
at-risk borrowers to current market
prices, CNNMoney.com reported yesterday. The Mortgage Bankers
Association claims that if judges are allowed to
reduce loan balances, cutting into lenders' profits, it would introduce
extra risk for lenders, which they would
pass on to borrowers. The MBA said that such a situation could increase
interest rates by the equivalent of 1-1/2
percentage points, which would add a couple of hundred dollars a month
to a $200,000, 30-year, fixed-rate
mortgage. Community and consumer advocates counter those numbers by
pointing out that no substantial premium
attaches to second-home mortgages, which judges are allowed to
adjust.
href='http://money.cnn.com/2008/02/25/real_estate/Senate_mortgage_bankruptcy_reform/?postversion=2008022516'>Read
more.
In related news, a
size='3'>Wall Street Journal editorial said
that the provision of S. 2636 allowing
bankruptcy judges to rewrite the terms of mortgages is a tough sale even
within the Democratic party. The
Congressional Budget Office, whose leadership is appointed by Democrats,
warned in January that such a change
could result in higher interest rates for homeowners and bigger
caseloads in bankruptcy courts. Other
nonlibertarians in opposition include 16 House Democrats who sent a
letter to House Judiciary Committee Chairman
John Conyers (D-Mich.) last fall. And then there's Supreme Court Justice
John Paul Stevens, who noted in a 1993
case that the special treatment of mortgages was specifically intended
to encourage lending to prospective
href='http://online.wsj.com/article_print/SB120398861694892295.html'>Read
more.
(Registration required.)
name='2'>Foreclosure Aid Rising Locally, as Is
Dissent
As the Bush
administration and Congress consider proposals to ease
the home foreclosure crisis, local governments across the country have
been lending money to imperiled homeowners
and confronting some opposition, the New York Times
reported today. Some of these municipal and state efforts
have met resistance from people who
consider the assistance undeserved and adamantly oppose anything that
resembles a taxpayer bailout. The goal of
these programs is not just to keep people from losing their homes, but
also to limit broader economic fallout,
including plummeting property tax revenues and widespread declines in
home values. Some of these programs tap
into taxpayer money directly, while others use revenue from the sale of
bonds or other sources. Most require
borrowers to pay back the loan eventually, though some forgive them
altogether.
href='http://www.nytimes.com/2008/02/26/us/26backlash.html?ref=business&pagewanted=print'>Read
more. (Registration required.)
name='3'>Bank of
w:st='on'>
size='3'>America
size='3'>Looks to Sell
American Home's Mortgages
Bank of America NA, the
administrative agent for lenders of American
Home Mortgage
size='3'>Holdings Inc., has asked for relief from the
automatic stay in order to sell $584 million in loans owned by the
bankrupt mortgage lender,
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Roman' size='3'>Bankruptcy Law360
reported
yesterday. Bank of
America is hoping to sell the 3,400
residential mortgage loans to pay off some of AHM’s debts before
they decline further in value. The loans
consist of fixed-rate, adjustable-rate, balloon and interest-only loans.
They boast an unpaid principal balance
total of $584 million, the bank said. In addition to the declining value
of the loans, the delinquency rates
continue to increase, Bank of America said. The delinquency rate on the
loans has increased from 8 percent when
AHM filed for chapter 11 in August to the current rate of 15
percent.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48079'>Read
more. (Registration
required.)
name='4'>Senator Continues to Push Proposal to Curb
Credit Card Abuses
Sen. Ron Wyden (D-Ore.)
renewed a pitch yesterday for his
legislation to rate cards on a five-star scale based on their consumer
protections, CongressDaily
reported. Wyden touted his bill as an alternative to measures by House
Financial Services Financial Institutions
Subcommittee Chairwoman Carolyn Maloney (D-N.Y.) and Sen. Carl Levin
(D-Mich.), both of whom would prohibit
certain practices that consumer groups have labeled abusive. Wyden said
that he wanted to focus on providing
incentives to banks to provide consumer-friendly terms, rather than
prohibiting certain practices that the
issuers could easily circumvent by attaching new fees and penalties.
Sen. Barack Obama (D-Ill.) is a co-sponsor
of the bill, and while on the presidential campaign trail last week he
warned university students in
size='3'>Texas about the
perils of charging up credit card
debt.
FDIC
to Add Staff as Bank Failures
Loom
The Federal Deposit
Insurance Corp. is taking steps to brace for
an increase in failed financial institutions as the nation's housing and
credit markets continue to worsen,
the Wall Street
Journal reported today.
The FDIC is looking to bring back 25 retirees from its division of
resolutions and receiverships. Many of these
agency veterans likely worked for the FDIC during the late 1980s and
early 1990s, when more than 1,000 financial
institutions failed amid the savings-and-loan crisis. The agency, which
insures accounts at more than 8,000
financial institutions, is also seeking to hire an outside firm that
would help manage mortgages and other assets
at insolvent banks. 'Regulators are bracing for well over 100 bank
failures in the next 12 to 24 months, with
concentrations in Rust Belt states like Michigan and Ohio, and the
states that are suffering severe
housing-market problems like California, Florida and Georgia,' said
Jaret Seiberg, Washington policy analyst for
financial-services firm Stanford Group. The FDIC ran a newspaper ad on
Sunday seeking companies that could
service commercial loans, mortgages and student loans in the event of a
bank failure.
href='http://online.wsj.com/article_print/SB120398607404892133.html'>Read
more. (Registration
required.)
name='6'>Solutia Settles Bankruptcy
Lawsuit
Solutia Inc. has settled
a closely watched lawsuit against three
banks that balked at providing the chemical company with financing
necessary to exit bankruptcy, the
Wall Street Journal
reported today. The
agreement, which must be first approved by a bankruptcy court, calls for
Solutia to drop its lawsuit against its
three lenders and agree to some renegotiated terms on the original loan.
In return, Citigroup Inc., Goldman Sachs
Group Inc. and Deutsche Bank AG will agree to provide $2.05 billion in
exit financing, approximately $50 million
more than the original loan. The banks will also strike the 'materially
adverse condition' clause in the loan
that the three financial giants had cited as reasons for reneging on the
original agreement from October. The
banks will fund the loan on Thursday, which should allow the company to
exit bankruptcy proceedings after more
href='http://online.wsj.com/article_print/SB120397957769091913.html'>Read
more.
(Registration required.)
w:st='on'>
name='7'>California Town
face='Times New Roman' size='3'>Teeters Closer Bankruptcy
Filing
A labor agreement aimed
at keeping the general fund of
size='3'>Vallejo
size='3'>,
size='3'>Calif., from
going broke fell apart yesterday, prompting
top administrators to recommend that the city file for bankruptcy
protection, the Vallejo Times-Herald reported
today. The city faces a $6 million
shortfall, with top staff members saying that the general fund will run
out of money by the end of March.
However, Mayor Osby Davis said yesterday that he will work to try to
salvage the accord that city staff members
were close to reaching with public safety unions Friday. City Manager
Joe Tanner said that despite the unions
working 'diligently' to help find a solution, no deal was reached and
the city would run out of money by March
31. Read
more.
name='8'>Leading Polyester Maker Enters
size='3'>Ch.
size='3'>11
Facing mounting costs and
diminishing business opportunities,
polyester manufacturer Wellman Inc., along with 11 subsidiaries and
affiliates, filed for chapter 11 on
Friday, Bankruptcy
Law360 reported
yesterday. The company estimates its assets between $50 and $100 million
and debts between $100 and $500 million.
Wellman also said that it had $575 million in secured debt encompassing
three credit agreements. The company
announced Friday that it had obtained a commitment from its pre-existing
revolving credit facility lenders for as
much as $225 million in debtor-in-possession financing.
size='3'>The case is In
re Wellman Inc.
size='3'>, case no. 08-10595, in the U.S. Bankruptcy Court for the
Southern District of New York.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=48058'>Read
more. (Registration
required.)
name='9'>Jeweler Receives Approval to Auction
Assets
Bankruptcy Judge
face='Times New Roman'
size='3'>Christopher S. Sontchi
on Friday approved
Friedman's Inc.’s request to sell the leases to its stores and
other assets at an auction set for March 6,
the Associated Press reported yesterday. Friedman's and subsidiary
Crescent Jewelers Inc., which is also under
chapter 11 protection, operate more than 470 stores across the country.
The jewelry retailer asked for a quick
sale process before its $17.5 million bankruptcy loan from Harbinger
Capital Partners Master Fund I Ltd. runs out
by the end of March. Friedman's hasn't yet named a stalking horse
bidder. If it does, the first competing bid
must exceed the stalking horse's offer by $500,000. Bids for the assets
will be due March 3, and interested
parties have through the following day to file any objections to the
bids. Several landlords had objected to this
timeframe, saying it didn't give them sufficient time to evaluate their
prospective new tenants.
href='http://biz.yahoo.com/ap/080225/friedman_s_bankruptcy.html?.v=1'>Read
more.
name='10'>Wickes’ Creditors Object to $30
Million DIP Financing Plan
The unsecured
creditors’ committee in Wickes Furniture Co.'s
chapter 11 case filed an objection to the furniture retailer's proposed
financing plan, claiming that it ignores
their interests and paves the way for a conversion to chapter 7,
size='3'>Bankruptcy Law360 reported yesterday.
Wickes filed for bankruptcy Feb. 3 and
later obtained an interim order granting approval for their proposed
financing plan. The committee, along with
other individual creditors, filed objections requesting that the final
order be denied or modified to meet their
concerns during a hearing slated for Feb. 28. The objection stated that
the proposed $30 million post-petition
financing deal, led by Wells Fargo Retail Finance, failed to provide
Wickes with enough funds to satisfy its
obligations under the asset purchase agreement with the successful
bidder at auction or pay February rent and
other administrative expenses that it incurred during or after the sale
process.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48098'>Read
more. (Registration
required.)
name='11'>Reliant Unit Gets $468 Million for Power
Plant
Reliant Energy Inc.
announced on Monday that it will sell a power
plant for $468 million in a deal that will help the electricity
provider's four bankrupt subsidiaries emerge from
chapter 11, Bankruptcy Law360
reported yesterday.
Proceeds from the sale of the plant, located in
w:st='on'>
to power producer Kelson Energy LLC will
go toward settling claims by secured and unsecured creditors and be put
into a cash-sharing agreement, according
to Reliant. The sale is still subject to approval by the U.S. Bankruptcy
Court in
w:st='on'>
size='3'>Delaware
size='3'>. The bankrupt units owe secured creditors about $379 million
in debt, interest and make-whole payments.
The units owe unsecured creditors close to $29 million as of Jan. 31,
Reliant said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48087'>Read
more. (Registration
required.)
name='12'>Ford Pushing Buyouts to
Workers
The Ford Motor Company is
aggressively pitching a variety of
buyout packages to its workers that include one-time cash payments
of $140,000 or college tuition plans for
an entire family, the
size='3'>New York Times
size='3'>reported today. The push to move workers out reflects the tough
times in
w:st='on'>
size='3'>Detroit
size='3'>as Ford has lost $15 billion in the last two years, and General
Motors and Chrysler are also revamping
after heavy losses. Ford executives say that the buyout packages, which
are the most lucrative and diverse ever
offered in the industry, reflect a belief that Ford should look after
its workers and ease their transition into
different careers. Ford is not saying how many workers it expects to
take the buyouts by a March 18 deadline, but
Wall Street analysts say the company has set a goal to get 8,000
employees to sign up. General Motors is also
extending buyout offers to all of its 74,000 hourly employees, while
Chrysler is offering buyouts to workers on a
regional and individual plant basis.
href='http://www.nytimes.com/2008/02/26/business/26ford.html?_r=1&oref=slogin&ref=business&pagewanted
=print'>Read more.
href='http://www.nytimes.com/2008/02/26/business/26ford.html?_r=1&oref=slogin&ref=business&pagewanted
=print'>