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December
7, 2007
Mortgage
Lending
name='1'>'Piggyback' Loans Allowed by Freddie Helped Feed Mortgage
Risks
While federal law
prohibits Freddie Mac from buying mortgages that cover more than 80
percent of a home's value, the government-funded loan giant permitted
home buyers to borrow all or part of the remaining 20 percent by using
second loans, called 'piggyback' loans, with no safety net, the
Washington Post
reported today. As early as 2005, an industry group
protested that the practice was designed to get around the law and
should be stopped. Regulators allowed it to continue, and Freddie Mac's
financial disclosures were silent on the subject until last month, when
the company noted that such arrangements could leave borrowers more
susceptible to foreclosure. Nothing prohibited Freddie Mac from taking
on uninsured piggyback loans, said Patricia Cook, Freddie Mac's
executive vice president and chief business officer. Including second
loans, Freddie Mac estimated that about one in seven of the
single-family mortgages it held on Sept. 30 had total loan-to-value
ratios of more than 90 percent, compared with one in 20 if it excluded
the piggyback loans.
href='http://www.washingtonpost.com/wp-dyn/content/article/2007/12/06/AR2007120602618_pf.html'>Read
more.
name='2'>House Financial Services Committee Looks for Industry
Cooperation on Mortgage Crisis
At a House Financial
Service Committee hearing yesterday looking at mortgage reforms,
Committee Chairman Barney Frank (D-Mass.) said that the willingness of
financial companies to modify the loans of homeowners facing foreclosure
will determine Congress' appetite for legislation clamping down on the
industry, Dow Jones Newswires reported yesterday. Overall, House
Financial Services Committee members reacted positively to a White House
plan to freeze interest rates on some subprime loans for five years to
help borrowers refinance into loans with lower interest rates. Frank
applauded the move, but criticized a part of the plan that would exclude
those with a credit score higher than 660, saying that borrowers who
managed their credit wisely should not be unfairly punished. Financial
Services Housing Subcommittee Chairwoman Maxine
Waters (D-Calif.) said that the plan should
broaden its scope to help more borrowers as an estimated 2 million
subprime adjustable rate mortgages are expected to reset over the next
18 months. Congress is not expected to weigh in on the issue of
rescuing borrowers, with the exception of $200 million proposed in the
Senate Transportation-HUD appropriations bill that would go to
counseling agencies to help at-risk borrowers refinance into more stable
href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/ht120607.shtml'>Click
here to read the written testimony from yesterday’s
hearing.
name='3'>Commentary: Administration Mortgage Relief Plan Criticized
by Consumer Advocates and Industry
President Bush’s
plan to help people trapped by the mortgage meltdown leaves plenty of
wiggle room for lenders and would affect only a small number of subprime
borrowers, according to a commentary in today’s
face='Times New Roman' size='3'>New York Times
size='3'>. The plan was the target of criticism from consumer advocates
who said its scope was too narrow, and from investment firms, who said
it went too far. Others warned that the plan, by letting some stretched
homeowners off the hook, could encourage more reckless borrowing in the
future. “The approach announced today is not a silver
bullet,” said Treasury Secretary Henry M. Paulson Jr., who
hammered out the agreement. “We face a difficult problem for which
there is no perfect solution.” One of
the financial industry’s lead negotiators estimated that at most
20 percent of subprime borrowers whose payments will increase sharply
over the next 18 months — 360,000 out of 1.8 million people
— would qualify for rapid consideration of a special five-year
freeze on interest rates as stipulated by the Administration’s
plan.
href='http://www.nytimes.com/2007/12/07/business/07mortgage.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
href='http://www.whitehouse.gov/news/releases/2007/12/20071206-9.html'>Click
here to read the President Bush’s speech on the mortgage
relief plan.
w:st='on'>
name='4'>New York
face='Times New
















Roman'
size='3'> Mortgage Lender to File for
Bankruptcy
Delta Financial Corp., a
Woodbury, N.Y.-based mortgage lender, said yesterday that it plans to
file soon for bankruptcy protection, after losses mounted and an
agreement to obtain new financing fell apart, according to Reuters. The
company also said that it intends to stop taking mortgage applications,
and it does not believe it can continue as a going concern. Delta said
that its warehouse lenders have notified it of events of default
under its financing agreements. As a result, it expects to abandon plans
to raise $100 million by selling senior notes and common stock to an
affiliate of Angelo, Gordon & Co., one of its largest shareholders.
Delta said that it lost $39.6 million in the third quarter, as
credit losses tripled and the company lost money on loans it
sold.
href='http://news.yahoo.com/s/nm/20071206/bs_nm/deltafinancial_dc_2'>Read
more.
Autos
name='5'>Committee Objects to
face='Times New Roman' size='3'>Delphi
size='3'>Equity Amendment
size='3'>Delphi’s unsecured
creditors’ committee filed a limited objection to the company's
bid to amend its equity purchase and commitment agreement with a unit of
Appaloosa Management LP and others, saying that it was concerned that
the monetary threshold in a condition of the agreement would be too low
given the volatility of the credit markets,
size='3'>Bankruptcy Law360 reported yesterday.
The motion filed Wednesday said that the second restated agreement would
add a condition to the plan investors' obligations to make investments
in support of the company's proposed plan of reorganization. The change
would modify the agreement so that if
face='Times New 

Roman'
size='3'>Delphi
expense for 2008 exceeded $585 million, the plan investors wouldn't be
obligated to consummate the agreement, the motion said.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=41733'>Read
more. (Registration required.)
name='6'>Dana Corp says Burns to Remain CEO
Post-Bankruptcy
Auto parts maker Dana Corp said
yesterday that it expects current Chairman and Chief Executive Mike
Burns to continue to serve as CEO after it emerges from bankruptcy
proceedings, but that another person would hold the chairmanship,
Reuters reported. The company also named the nine directors it expects
to hold board seats after emergence, including Burns.
PBGC
Deal with Global Home Subsidiary Approved
Bankruptcy Judge
Kevin Gross
size='3'>approved a settlement agreement between the
Pension
size='3'>Benefit Guaranty Corp. (PBGC) and a Global Home subsidiary,
putting to rest disputes over claims arising from the termination of the
company's pension plan,
size='3'>Bankruptcy Law360 reported yesterday.
The assets of Anchor Hocking, a Global Home subsidiary that manufactured
glass products such as drinking glasses, cookware, bakeware and home
décor items, were sold in April as part of Global Home’s
liquidation process. The company established its pension plan in 2004 to
provide retirement benefits to employees working in AHCG plants
in
size='3'>Ohio
w:st='on'>
size='3'>Pennsylvania
After Global Home filed for chapter 11 in April 2006, the PBGC filed
three consolidated, unsecured proofs of claim in the cases for
liabilities arising from the AHCG pension plan. In April 2007, the PBGC
filed a complaint against AHCG in the U.S. District Court for the
Southern District of Ohio, seeking to involuntarily terminate the
pension plan.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=41749'>Read
more. (Registration required.)
name='8'>Ethanol Plant Files for Chapter 11
E3 Biofuels Mead LLC, an
ethanol plant in
face='Times New Roman'
size='3'>Kansas
chapter 11 on Nov. 30 after it was unable to recover from
a boiler explosion earlier this year,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. A boiler at the company's plant in
Mead,
size='3'>Neb. exploded
earlier this year, keeping the 25 million gallon per year running at
around half capacity only. E3 said that it would have been able to take
on the increased costs of the ethanol business if it hadn't been for the
explosion, which kept production from reaching an efficient level. The
company’s first creditors' meeting is scheduled for Jan. 7, 2008
and a reorganization plan is due March 31, 2008. The case is
E3 Biofuels Mead Holding
LLC, case number 07-22734, in the U.S.
Bankruptcy Court for the District of Kansas.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=41761'>Read
more. (Registration required.)
w:st='on'>
name='9'>Florida
face='Times
















New








Roman'
size='3'> Fund Is Drained of $1.2 Billion
A week after shutting
down its state-run fund to avoid a run,
w:st='on'>
size='3'>Florida
it yesterday as investors promptly withdrew $1.2 billion, the
Wall Street Journal
reported today. That has left the Local Government
Investment Pool with about $10.8 billion in its main operating fund,
down from around $27 billion in September. The
w:st='on'>
size='3'>Florida
size='3'>investment pool also holds about $2 billion in subprime-related
investments in a separate fund that is in default or distress. The
government pool saw about $7 million in deposits. With so little money
trickling in, the investment pool's future remains uncertain.
href='http://online.wsj.com/article/SB119695297263815812.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
href='http://online.wsj.com/article/SB119695297263815812.html?mod=hpp_us_whats_news'>