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January 29, 2010
Treasury Streamlines Its
Mortgage Relief Program
Borrowers seeking to
improve their mortgages through a government program will soon find the
paperwork a little less cumbersome as the Treasury Department announced
yesterday that it was streamlining the Making Home Affordable program in
the hope of increasing the number of successful modifications,
the New York Times reported today. Starting on June 1,
mortgage companies participating in the program will be required to
collect a borrower’s
financial documents as part of the initial application process. Now,
most borrowers are first enrolled in a trial modification program, then
asked for more extensive documentation. Borrowers complain that the
servicers routinely lose the documents, causing delays and preventing
the modification from becoming permanent. In another change, instead of
having to submit their W-2 tax statement, borrowers will submit two pay
stubs and an electronic form allowing access to their tax
returns.
href='http://www.nytimes.com/2010/01/29/business/29mods.html?ref=business&pagewanted=print'>Read
more.
Judge Approves Five Reorganization Plans
for Fremont General
Bankruptcy Judge Erithe Smith has approved the disclosure
statements of five separate reorganization plans for Fremont General
Corp., setting up what promises to be a round of contested confirmation
hearings beginning in March, the Deal Pipeline reported today.
Since Fremont lost its exclusive right to file a plan in July, several
creditors and investors have filed plans of their own to reorganize or
liquidate the bankrupt mortgage lender. The plans up for confirmation
during hearings that will begin on March 12 are proposals filed by
Signature Group Holdings LLC, Ranch Capital LLC, the equity holders'
committee, the unsecured creditors' committee and an entity called New
World Acquisition LLC.
href='http://pipeline.thedeal.com/tdd/ViewArticle.dl?id=10005383445'>Read
more. (Subscription required.)
Commentary: In the Securitization of
Mortgage Loans, a Bust with Precedent
With the securitization market nearly dead, bankers and economists
say that getting that market going again is vital to providing Americans
with mortgage loans, according to a commentary in today's New York
Times. Real estate securitization was one of the great innovations
in finance in the last quarter-century, according to experts, as it
allowed vast sums of money to go into the real estate market from people
who traditionally did not take part in it. Although few people now
remember it, according to the commentary another wave of private
securitizations once altered the real estate landscape, particularly in
New York but also in Chicago and some other American cities. The
original wave of securitizations took place in the 1920s, when the
United States went on the greatest building boom ever. Many investors
saw how rapidly real estate prices were rising and wanted in on the
action. To be sure, the securitizations were not as complex as the ones
invented in recent years, but they were not all simple either. Most were
bonds backed by one commercial building whose construction was being
financed, but there were also pools of residential mortgages. Some of
the bonds included warrants for partial ownership of the building, and
some were convertible into stock. The commentary advocates for finding a
way to get banks and other long-term investors, like insurance
companies, to make and keep, rather than securitizing, most of the real
estate loans that are needed in society.
href='http://www.nytimes.com/2010/01/29/business/29norris.html?ref=business&pagewanted=print'>Read
more.
Bankruptcy Judge Rejects WaMu Subpoena
Request
Bankruptcy Judge Mary Walrath yesterday denied Washington
Mutual Inc.'s request to force government regulators and others to turn
over documents related to the 2008 collapse of Washington Mutual Bank,
the Associated Press reported yesterday. In a court filing last month,
the bank holding company asked the court to direct the handing over of
documents and the examination of witnesses from a host of regulatory
bodies, ratings agencies, banks and other entities. Some, including the
Federal Reserve and Treasury Department, agreed to turn over at least
some records, but the Federal Deposit Insurance Corp. objected to WaMu's
request. The FDIC seized Washington Mutual bank, a Seattle-based savings
and loan with about $307 billion in assets, in September 2008. It then
sold it to JPMorgan Chase & Co. for $1.9 billion, a price that
Washington Mutual claims was much too low.
href='http://www.washingtonpost.com/wp-dyn/content/article/2010/01/28/AR2010012804212_pf.html'>Read
more.
Large U.S. Aiport Parking Firm Files
for Bankruptcy
Parking Co. of America Airports LLC, a provider of parking services
at or near airports, filed for chapter 11 protection yesterday saying
that it plans to sell the company after sales were hurt by a slumping
airline industry, Bloomberg News reported yesterday. The Essington,
Pa.-based company listed assets of $94 million and debt of $233 million
as of Sept. 30. The company, which employs more than 1,000
workers, runs 31 offsite airport parking facilities with more than
40,000 parking spaces under the names AviStar, FastTrack, and SkyPark,
according to court documents. The company said it strategically
positioned its locations near major airports, including seven of the 10
busiest in the U.S.Parking Co. of America
lang='EN'>’s direct parent, PCAA Parent
LLC, also filed for bankruptcy. The company is indirectly owned by
Macquarie Infrastructure Company LLC, which didn
lang='EN'>’t file for bankruptcy. The lead
case is In re PCAA Parent LLC, 10-10250, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aU_Z18WtU188&pos=7'>Read
more.
Delta Says District
Court Should Decide Mesa Contract Dispute
Delta Air Lines Inc. contends that a ruling on its
contract dispute with Mesa Air Group Inc. should be made by the U.S.
District Court judge who has handled the lawsuit for nearly two years,
not by a bankruptcy judge who learned of the case this month, Dow Jones
Daily Bankruptcy Review reported today. In court papers
filed yesterday, Delta is asking for U.S. Judge Clarence Cooper in
Atlanta to make a ruling on the suit by the end of March. The Atlanta
airline is seeking to terminate its deal with Mesa, which operates
flights under the Delta Connection brand name, saying the regional
carrier has failed to meet on-time performance requirements. Mesa says
that the most expeditious way to settle its issues with Delta is to
bring the pending lawsuit into its bankruptcy case. Mesa is asking that
the bankruptcy court determine within six weeks whether the carrier can
assume the contract or whether Delta has the right to terminate
it.
href='https://www.fis.dowjones.com/News/News.aspx?ProductIDFromApplication=1003&SIDFromApplication=BEA84613-C05C-4501-B9EF-9B0BE236C26E'>Read
more. (Subscription required.)
Former
Clients File Malpractice Suit Against Milbank
Two former clients have sued Milbank, Tweed, Hadley
and McCloy, charging the firm with malpractice, breach of fiduciary
duty, and breach of contract over the firm's work on the financing of a
failed Nebraska ethanol project, American Law Daily reported
today. In a complaint filed on Tuesday in state court in San Francisco,
Medley Capital LLC and Fourth Third LLC allege that Milbank lawyers
failed to secure a first, secured interest in the ethanol project for
the former clients. The firm's work on the matter occurred from March
2007 to March 2009. The ethanol project subsequently went into
bankruptcy in August 2009. The lawsuit stems from a $22.5 million loan
made to Altra Nebraska, LLC, a biofuels company developing an ethanol
plant in Thayer County, Nebraska. According to the complaint, in the
spring of 2007, Medley Capital explored the possibility of making the
loan to Altra for the Nebraska project through an affiliated company
called Fourth Third LLC. Milbank was hired, the complaint says, 'to act
to protect the interests of Fourth Third as well as those of Medley' in
making the loan to the Nebraska project.
href='http://amlawdaily.typepad.com/amlawdaily/2010/01/milbank-suit.html'>Read
more.
SEC Resolves Civil
Fraud Case Against Stockman
U.S. District Judge Shira Scheindlin yesterday halted
proceedings against the defendants after the Securities and Exchange
Commission said it had reached 'agreements in principle that would
resolve this matter,' Reuters reported yesterday. The SEC sued Stockman
and eight other former Collins & Aikman offices and directors in
March 2007. The suit alleged that Stockman, a former U.S. Congressman
from Michigan and President Ronald Reagan's budget director from 1981 to
1985, fraudulently inflated the company's income by accounting
improperly for supplier payments. In January 2009, prosecutors dropped
criminal fraud charges against Stockman and three other company
officials.
href='http://www.reuters.com/article/idUSN2811692520100128'>Read
more.
Hedge Funds Oppose
Settlement Between Dreier, GSO Capital
Hedge funds bilked out of millions of dollars by former attorney Marc
S. Dreier are objecting to a proposed settlement they say allows fellow
victim GSO Capital Partners LP to retain the bulk of the fraudulent
proceeds it received from Dreier's Ponzi scheme, Dow Jones Daily
Bankruptcy Review reported today. Fortress Investment Group LLC and
several other investment firms are opposing a settlement struck by GSO
Capital and the officials liquidating the assets of Dreier and his
defunct law firm, Dreier LLP. Under that deal, GSO Capital would hand
the officials the $9.5 million it received as the investment manager for
parties that purchased fake promissory notes from Dreier. In exchange
for the cash, all claims against GSO Capital would be waived. The firm
in total received $196 million from Dreier's Ponzi scheme, $31 million
of which it has been ordered to turn over to the federal government for
restitution. In court papers filed on Wednesday, Fortress and funds
managed by Concordia Advisors LLC and Eton Park Asset Management LLC
said it isn't fair that it and other hedge funds that suffered losses
from the Ponzi scheme could be hit with lawsuits seeking to recover
funds while GSO Capital will be released from such claims and may keep
the bulk of its profits from the scheme.
href='https://www.fis.dowjones.com/News/News.aspx?ProductIDFromApplication=1003&SIDFromApplication=BEA84613-C05C-4501-B9EF-9B0BE236C26E'>Read
more. (Subscription required.)
TARP Panel Widens Inquiry into Commercial Real
Estate Woes
The Congressional Oversight Panel is widening its inquiry into the
souring commercial real-estate bank-loan market as part of its review of
a federal bailout program, Dow Jones Daily Bankruptcy
Review reported today. At a hearing in Atlanta, the panel's head,
Prof. Elizabeth Warren of Harvard University, asked whether loan
workouts that give borrowers a reprieve are instead allowing banks to
stave off recognizing losses. She also expressed concern that federal
bank guidelines issued last fall are cutting banks too much of a break.
Those guidelines don't force banks to recognize losses on commercial
loans solely because collateral backing the loan has fallen in value. In
the latest example of a high-profile struggling borrower, Sea Island
Co., a famous coastal Georgia resort facing debt it can't cover, said
Wednesday it will hire an investment bank to advise the resort on
options, which could include a sale. Sea Island also said that its
lenders, including Columbus Bank and Trust, a unit of Georgia-based
Synovus Financial Corp., had agreed to a forbearance agreement after Sea
Island defaulted on an estimated $250 million in debt that had been
restructured. The lenders also support the plan to hire an advisor for
Sea Island.
LyondellBasell Creditors Seek to
Halt Chapter 11 Plan Process
Unsecured creditors of
LyondellBasell Industries AF are asking the court to block the chemical
company from sending its reorganization plan to creditors for a vote
while a key settlement with its lenders in the chapter 11 case remains
in dispute, Dow Jones Daily Bankruptcy
Review reported today. In papers filed Wednesday with the
U.S. Bankruptcy Court in Manhattan, the creditors said they should have
the opportunity to object to the company's proposal to settle a $21
billion lawsuit against the lenders for $300 million before its chapter
11 plan is sent for a vote. The creditors fear the company will use the
approval of its disclosure statement, a plain-language reading of its
plan, as justification for a judge signing off on the settlement over
their objections. At a Feb. 8 court hearing, LyondellBasell will seek
permission to poll creditors on its chapter 11 restructuring plan. Three
days later, the company would return to court to ask a judge to sign off
on the settlement that forms the basis for unsecured creditors'
recoveries under the reorganization proposal.
Stay of Patent
Litigation Between Samsung and Spansion Approved by
Court
Bankruptcy Judge Kevin J. Carey yesterday
signed off on a deal between bankrupt chip maker Spansion Inc. and
Samsung Electronics Co. Ltd. to stay multimillion-dollar flash memory
patent litigation before the U.S. International Trade Commission and
elsewhere until the debtor can complete its reorganization,
Bankruptcy Law360 reported yesterday. The agreement will remove a
'significant obstacle' to plan confirmation, the sides said in a Jan. 15
court filing. Judge Carey signed off on Spansion's disclosure statement
in December. A confirmation hearing is planned for February.
href='http://bankruptcy.law360.com/articles/146299'>Read
more. (Subscription required.)
Surge in Loans Is
Unlikely from Obama's Small Business Plan
President Barack Obama's plan to divert $30 billion of
federal bailout funds into new small business loans will prop up
thousands of struggling entrepreneurs but is unlikely to break the
lending logjam, the Wall Street Journal reported today.
The $30 billion in Troubled Asset Relief Program funds targeted by Obama
represent about 4.3 percent of the $700 billion in small business loans
held by U.S. banks and savings institutions, according to the Treasury
Department. As of November, the 22 largest banks that got capital
infusions through TARP had $257 billion in small business loans, the
Treasury said. Many details of the plan remain unclear. In one scenario
being considered, the U.S. government would let banks get an amount
equal to 3 to 5 percent of their assets. Required dividend payments by
the banks would be reduced if they substantially increase their business
href='http://online.wsj.com/article/SB10001424052748704194504575031581595482888.html?mod=WSJ_Markets_LEFTTopNews'>Read
more. (Subscription required.)
AIG Employees Agree
to Bonus Cuts
Most employees currently at the financial-products
unit of American International Group Inc. have indicated they will
accept cuts in a batch of March retention awards if the bonuses are paid
out as early as next week, the Wall Street Journal reported
today. AIG sought the arrangements to help meet requests from U.S. pay
czar Kenneth Feinberg that the government-controlled insurer reduce its
promised $195 million in March 2010 bonuses to AIG Financial Products
employees and recoup $26 million of what it paid out last year. The
company is trying to defuse a potential showdown over the bonus payments
at the unit, which was behind the problematic trades that brought the
company to the brink of failure in September 2008 and is now in the
midst of winding down its businesses. AIG last week asked current
employees of AIGFP if they would accept a 10 percent reduction in
previously promised retention bonuses that are to be paid out by March
15; it indicated that those who agreed would get the discounted payouts
by Feb 5.
href='http://online.wsj.com/article/SB10001424052748704194504575031652885007426.html?mod=WSJ_business_whatsNews'>Read
more. (Subscription required.)
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