February 282008

 

Mortgage
Lending

name='1'>Senate Majority Leader Pushes for Housing

Bill Debate Despite Veto Threat

Despite a veto threat,
Senate Majority Leader Harry Reid (D-Nev.)

pledged to bring up his housing stimulus package by today, contending
that it is desperately needed to stabilize

the nation's shaky housing market, CongressDaily

size='3'>reported yesterday. Reid is working with Minority Leader Mitch
McConnell (R-Ky.) to strike a deal

limiting the number of amendments for S. 2636, which contains funding
and initiatives designed to help homeowners

who were placed into unaffordable mortgages. If not, GOP members may
filibuster the bill. Democrats sense they

have a politically resonant measure given that foreclosures are at
record highs and home values have fallen as a

result of problems that first started in the subprime mortgage market
but have spread to affect the entire

housing sector. The main point of contention centers on a provision
sponsored by Majority Whip Richard Durbin

(D-Ill.) that would allow a bankruptcy judge to change the terms of a
primary mortgage that has entered into

foreclosure. Reid noted the language has picked up the support of the
National Association of Federal Credit

Unions and the Credit Union National Association, along with some
community bankers. 

href='http://www.whitehouse.gov/omb/legislative/sap/110-2/saps2636-s.pdf'>Click

here to read the Statement of

Administration of Policy sent yesterday to the Senate warning of a veto
against S. 2636.

name='2'>House Financial Services Chairman Pushes

Refinancing Plan

House Financial Services
Chairman Barney Frank (D-Mass.) is

proposing an initiative that aims to refinance as many as one million
“distressed” homeowners out of

high-cost loans using government assistance, Dow Jones’

size='3'>Daily Bankruptcy Review reported this

morning. The proposal, which could cost

as much as $15 billion over five years, would likely involve the federal

government buying loans and then helping

move borrowers into mortgages backed by the Federal Housing
Administration. Certain loans, such as investment

properties and those on vacation homes, wouldn’t qualify. In order

to sell a loan to the government under

the plan, the lender would likely be required to discount the loan to a
level the borrower could repay.

“You can’t put an end to the economic problems without
reducing foreclosures,” Frank said. The

Bush administration has warned against a bigger government presence in
stabilizing the economy, but continued bad

economic news has prompted Democrats to advance more aggressive
proposals. (Subscription only)

In related news, the Bush

administration is hardening its

opposition to the chorus of Democrats, bankers, economists and consumer
advocates calling for a big-money

government rescue program for struggling homeowners, the

face='Times New Roman' size='3'>Wall

Street Journal reported today. Treasury
Secretary Henry Paulson branded many of the aid

proposals circulating in
w:st='on'>

size='3'>Washington as
'bailouts' for reckless lenders, investors

and speculators, rather than measures that would provide meaningful
relief to deserving, cash-strapped mortgage

borrowers. Paulson, citing estimates that as many as two million
Americans could lose their homes to foreclosure

this year, predicted that the administration's market-based approach
will be enough to keep the situation under

control. 

href='http://online.wsj.com/article_print/SB120416823532298975.html'>Read

more.

(Registration required.)

name='3'>Bernanke Signals Rate Cuts on Concerns

about Economy

Federal Reserve Chairman
Ben S. Bernanke testified before the

House Financial Services Committee yesterday about the risk that the
housing market will get even worse than

anticipated, that the labor market will soften more or that credit will
become even less available than it is

now, the Washington
Post reported

today. 'The risks to this outlook remain to the downside,' he said in a
semiannual report to Congress on the

state of the economy. Bernanke's testimony was the clearest indication
that a rush of bad news on the inflation

front -- both consumer and wholesale prices increased more in January
than expected -- has not deterred the Fed

from the most aggressive campaign of interest rate cuts in decades. The
central bank has cut the federal funds

rate, which it controls directly, by 1.25 percentage points in 2008 and
2.25 percentage points since

September. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/27/AR2008022700967_pf.html'>Read

more.

name='4'>Freddie Mac Posts $2.5 Billion

Loss

Freddie Mac, the
second-biggest provider of

w:st='on'>

size='3'>U.S.
size='3'>residential mortgage funding, said today

that its loss widened more than expected to $2.5 billion in the fourth
quarter as the housing crises worsened,

Reuters reported. The government-chartered company said that the net
loss increased from $401 million in the

year-earlier period. It is coming off a $2 billion loss for the third
quarter. A sharper-than-expected drop in

home prices that first sparked a crisis in subprime lending has since
tainted the entire

w:st='on'>

size='3'>U.S.
size='3'>housing market, hurting Freddie Mac and its

rival Fannie Mae. Rising delinquencies and foreclosures have led the
companies to write down values of mortgage

securities they own and increase reserves to cover their guarantees of
payment on bonds held by investors.

Freddie Mac, citing the 'severe' housing downturn, revised its estimate
of total credit losses for 2008 and 2009

to $2.2 billion and $2.9 billion, respectively. 

href='http://www.nytimes.com/reuters/business/business-freddiemac-results.html?ref=business&pagewanted=print'

>Read more.

name='5'>Lender Halts U.S.-Backed Student

Loans

The Pennsylvania Higher
Education Assistance Agency, one of the

nation’s largest student loan operations, announced yesterday that

it would suspend making

federal-guaranteed loans starting early next month, the
face='Times New Roman' size='3'>New York

Times reported today. The move offered further

evidence of how the tight credit markets

are affecting the industry, with some lenders warning that it could be
more difficult and more costly for many

students to obtain college loans for the 2008-9 academic year.
“Widespread lack of confidence in the

capital market has spilled over into other asset classes, driving up our

cost of borrowing and denying us the

capital needed to fund new student loans,” said James Preston, the

interim chief executive of the

size='3'>Pennsylvania
size='3'>lender, a state-owned company that both makes

and guarantees loans. 

href='http://www.nytimes.com/2008/02/28/business/28loans.html?ref=business&pagewanted=print'>Read

more.

Judge

Approves Solutia

Settlement

Bankruptcy Judge

size='3'>Prudence Carter Beatty approved
Solutia Inc.'s $220.5 million settlement with

a group of bondholders, ending a dispute over unpaid interest that
threatened to complicate the company's

business plans after it exits chapter 11 protection, the Associated
Press reported yesterday. Judge Beatty

approved the settlement on Tuesday, which ends Solutia's fight with the
bondholders over interest the chemical

company would have paid had it continued making payments on the notes
through their 2009 maturity date. The

$220.5 million cash settlement, payable upon Solutia's emergence from
chapter 11 protection, allows it to avoid

keeping $37.5 million in reserve while awaiting the outcome of
litigation with the holders of the 11.25 percent

senior notes. 
href='http://www.chron.com/disp/story.mpl/ap/fn/5575606.html'>Read

more.

face='Times New Roman' size='3'>

name='7'>Delphi Asks for Pension-Funding
Waiver Extension

Delphi Corp. has entered
into an agreement with the Pension

Benefit Guaranty Corp. (PBGC) to extend a waiver related to the minimum
funding provisions for its pension plans

as it continues to fine-tune its chapter 11 exit plan,
face='Times New Roman' size='3'>Bankruptcy

Law360 reported yesterday. Under the agreement

with the PBGC,

w:st='on'>
size='3'>Delphi must increase the
value

of its letters of credit issued to the federal guarantor by $10 million.

Last year, the company issued a $100

million letter of credit to the PBGC in connection with its hourly
pension plan and a $50 million letter of

credit for the pension plan associated with the company’s salaried

workers. The company claims that the

waiver gives it a little more breathing room to emerge from chapter 11
and shifts $1.5 billion in pension debts

to its former parent, General Motors Corp. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=48301'>Read

more. (Registration

required.)

name='8'>California Agencies Balk at Pacific Lumber

Disclosure Statement

A group of

face='Times New Roman'
size='3'>California state
agencies has

lodged a protest over Pacific Lumber Co.’s joint disclosure
statement, calling parts of the plan outlining

the proposed transfer of various lands inadequate,
face='Times New








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size='3'>Bankruptcy Law360 reported yesterday.

The California Resources Agency, flanked

by the California Department of Fish and Game, the California Wildlife
Conservation Board and others, expressed

concern over the lack of discussion in the disclosure statement about
what is being done to satisfy the transfer

of incidental take permits and waste discharge requirements. News of the

protest comes barely a week after U.S.

Sen. Dianne Feinstein (D-Calif.) weighed in on Pacific Lumber's
bankruptcy proceedings, pushing for any

reorganization plan that would adhere to long-standing conservation
agreements — 1996 Headwaters Agreement

and the 1999 Habitat Conservation Plan — designed to protect
old-growth redwoods. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48355'>Read

more. (Registration

required.)

w:st='on'>
name='9'>U.S.
face='Times New

Roman' size='3'> Trustee Objects to ACandS
Plan

U.S. Trustee
Kelly

Beaudin Stapleton is opposing ACandS Inc.'s
pending reorganization plan, arguing that

the company failed to justify its proposal to release certain claims of
some of the claimant groups,

Bankruptcy Law360
reported yesterday.

Stapleton points to two classes of claimants, some of whose claims the
plan would release upon confirmation.

Without directly questioning the propriety of such releases, she argues
that the plan as written fails to justify

their releases as required by the Bankruptcy Code and local precedent.
Objections to the plan are due by

March 24, and a hearing on the reorganization plan has been scheduled
for April 21. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48348'>Read

more. (Registration

required.)

name='10'>Sirva Creditors Oppose Chapter 11

Loan

Unsecured creditors of
Sirva Inc. called the moving company's

proposed $150 million bankruptcy loan 'unnecessary' and said it
shouldn't be approved, the Associated Press

reported yesterday. Sirva, the parent of Allied Van Lines Inc., will ask

the U.S. Bankruptcy Court in

size='3'>Manhattan to sign
off on the loan at a final hearing today.

The court has already given the company the go-ahead to borrow up to
$110 million on the loan pending the final

hearing. The unsecured creditors’ committee said the bankruptcy
funding is an attempt by the senior lenders

to cover apparent 'holes' in their pre-chapter 11 filing collateral
position. 

href='http://www.chron.com/disp/story.mpl/ap/fn/5575919.html'>Read
more.

FTC

Head to Step Down

Federal Trade Commission
Chairman Deborah Platt Majoras will

resign next month, according to the Wall Street

Journal today. William Kovacic, a
Republican now serving as one of the

commissioners, is the likely White House choice to succeed her,
according to antitrust lawyers. Under Majoras,

the agency stepped up federal enforcement of data-security laws, forcing

corporate boards to safeguard consumer

data and imposing penalties for breaches. It has worked to curtail
identity theft and pressed advertisers to curb

junk-food pitches to children. Majoras is expected to be named vice
president and general counsel at Procter

& Gamble Co., the consumer-products giant. 

href='http://online.wsj.com/article_print/SB120415346489397857.html'>Read

more. (Registration

required.)

href='http://online.wsj.com/article_print/SB120415346489397857.html'>