January 242008

 

Housing
Downturn

name='1'>Senate Banking Chairman Sets Committee

Agenda, Seeks to Add Housing to Stimulus

Banking Chairman

face='Times New Roman' size='3'>Chris
size='3'>Dodd (D-Conn.) launched an ambitious

agenda yesterday that includes pushing for housing issues as a part of
any economic stimulus package,

CongressDaily
size='3'>reported yesterday. Dodd

unveiled a wide-ranging to-do list for his committee, focusing primarily

on stabilizing the nation's rattled home

mortgage market. He endorsed proposals that would allow cities to
finance the purchase of foreclosed homes and

the creation of a temporary government agency to provide liquidity to
the mortgage-backed securities market. Dodd

said that he is working on a proposal that would create a temporary
government program to purchase troubled

subprime mortgages at a steep discount and then refashion the loans into

new notes at 30-year fixed rates. Such

refinanced mortgages would be insured by the Federal Housing
Administration or backed by Fannie Mae or Freddie

Mac. He said he believes that after initial funding of up to $20
billion, the program would be able to fund

itself by covering the difference between the old and new
mortgages. 

href='http://banking.senate.gov/index.cfm?Fuseaction=Articles.Detail&Article_id=233'>Click

here to

read Dodd's remarks on the Senate Banking Committee agenda for
2008.

name='2'>Commentary: The Courts and

Mortgages

If bankruptcy judges had
the power to adjust mortgage interest

rates, as is being proposed in various pieces of legislation, lenders
would have to demand higher down payments

and higher monthly installments, covering themselves against the new
uncertainties of the court system, according

to a Las Vegas Review
Journal editorial

today. If the legislation were to pass, mortgages would no longer be
viewed as contracts, but rather like a list

of suggestions. The mortgage bankers estimate that the new uncertainties

introduced into the market by this bill

would require boosting interest rates on future mortgages by 1.5
percentage points. 

href='http://www.lvrj.com/opinion/14177627.html'>Read
more.

w:st='on'>

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

size='3'> Pension Fund Accuses Freddie Mac of
Fraud

An
w:st='on'>

face='Times New Roman' size='3'>Ohio
pension fund filed an investor

class action lawsuit against Freddie Mac, accusing the mortgage finance
giant of securities fraud for failing to

disclose risks from its investments in the subprime mortgage market,
Reuters reported yesterday. Ohio Attorney

General Marc Dan, who filed the suit in U.S. District Court, the
Northern District of Ohio, on Tuesday said

Freddie Mac had 'secretly and intentionally participated in one of the
largest housing investment deceptions in

modern
face='Times New Roman'

size='3'>U.S.
size='3'>economic times.' According to Dann, the Ohio

Public Employees Retirement System suffered losses of up to $27.2
million as a result of the fraud. The suit was

filed on behalf of the Ohio Public Employees Retirement System and all
other purchasers of Freddie Mac stock

between Aug. 1, 2006, and Nov. 23, 2007. 

href='http://www.reuters.com/article/governmentFilingsNews/idUSN2362909020080123'>Read

more.

name='4'>Suit Claims Fidelity Abuses

Homeowners

Homeowners have sued
Fidelity National Information Services Inc.,

a giant financial data-processing company, accusing it of raising the
price that cash-strapped consumers must pay

to avoid foreclosure of their homes, the Associated Press reported
yesterday. The lawsuit, filed Jan. 16 in the

U.S. Bankruptcy Court in
w:st='on'>

size='3'>Houston, contends
that Fidelity has conspired with

mortgage-servicing companies and law firms to 'add to the indebtedness'
of homeowners by tacking on secret fees

that remain undisclosed for years. 'The
fees the Fidelity-controlled law firms

charge in chapter 13 bankruptcies are inflated by 25 percent to 50
percent,' the lawsuit asserts. The law firms,

it says, then 'kick back' the extra amount to Fidelity under a formal
agreement under which the law firms' fees

are set. 'Fidelity keeps its role, as well as the kickback, hidden from
the courts as a matter of systematic

policy.' The lawsuit involves the
w:st='on'>

size='3'>Jacksonville,

size='3'>Fla., company's
'default management services' business,

which handles bankruptcies and foreclosures for mortgage
companies. 

href='http://www.forbes.com/feeds/ap/2008/01/23/ap4565323.html'>Read
more.

name='5'>New Century Gets More Time to File Exit

Plan

Bankruptcy Judge

size='3'>Kevin J. Carey granted New Century
Financial Corp.'s third motion for extra

time in chapter 11, giving the company until next week to file an
exclusive exit plan,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. New Century now

has until Jan. 28 to file a plan and another two months after that in
which to solicit approval for the plan. New

Century moved for the exclusivity extension at the end of last year,
claiming in a filing to the court on Dec. 28

that it needed another month to work with creditors to draft a
satisfactory joint liquidating plan. New Century

said that it has already reached agreement with the unsecured
creditors’ committee on the plan's overall

structure. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=44908'>Read

more.

(Registration required.)

name='6'>Agreement Pares Down Mortgage Lenders'

Exclusivity Extension

Mortgage Lenders USA Inc.

has received an extension of its

exclusivity rights, but the company didn't get the 90-day extension it
asked for in December because of an

agreement between the debtor, its primary pre-petition warehouse lender
and its unsecured creditors'

committee, Bankruptcy Law360 reported
yesterday. Bankruptcy Judge Peter J.

Walsh signed off on an order extending Mortgage Lenders USA's
exclusive filing rights through Feb. 22,

and its exclusive solicitation rights through April 7. The debtor's
exclusive filing and solicitation rights were

slated to expire on Jan. 2 and March 3. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=44931'>Read

more. (Registration

required.)

name='7'>Commentary: Beyond Payday Loans

Business leaders and
community activists should come together to

help 'unbanked' Americans enter the financial mainstream by opening
checking and savings accounts, and working

collaboratively with financial institutions and community groups to
develop and market products that work for

this untapped market, according to a commentary by former President Bill

Clinton and California Governor Arnold

Schwarzenegger in today’s
size='3'>Wall Street

Journal. Millions of Americans spend too
much of their hard-earned money on fees

to cash their paychecks or pay off high-priced loans meant to carry them

over until they get paid at work,

according to the commentary. Clinton and Schwarzenegger said
that the economic and social benefits of

putting more than $8 billion in the hands of low- and middle-income
Americans would be tremendous as that is the

amount the demographic set now spends each year at check-cashing
outlets, payday lenders and pawnshops on basic

financial services that most Americans receive for free. 

href='http://online.wsj.com/article_print/SB120113610711211855.html'>Read

more. (Registration

required.)

name='8'>Negotiators Grappling with Economic Stimulus

Plan

The White House and
congressional leaders struggled yesterday to

preserve their newfound alliance on the economy in the face of revolts
in both parties over the shape of a

potential stimulus package and of debates over issues such as health
care and warrantless surveillance,

the Washington
Post reported today.

Treasury Secretary Henry M. Paulson Jr. and House Speaker Nancy Pelosi
(D-Calif.) neared agreement last night on

a tentative plan aimed at reinvigorating a battered economy. Pelosi met
last night with committee chairmen while

Paulson was running the tentative agreement by the White House ahead of
what could be a final meeting this

morning. Some Republican lawmakers tried to slow the momentum toward a
deal, while Democrats piled on additional

spending demands. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/23/AR2008012303844_pf.html'>Read

more.

name='9'>Financing Delays Solutia Bankruptcy

Exit

Solutia Inc. said yesterday
that it will not emerge from bankruptcy this

week as planned because problems in the credit markets have left banks
working with the chemical producer unable

to come up with the necessary financing, the Associated Press
reported.

size='3'>Solutia said the lead arrangers of its $2 billion exit
financing package -- Citigroup Global Markets

Inc., Goldman Sachs Credit Partners L.P., Deutsche Bank Trust Co.

w:st='on'>
size='3'>Americas

size='3'>and Deutsche Bank Securities Inc. -- informed the company of
the problem Tuesday.

face='Times New Roman' size='3'>The company had expected to emerge from
chapter 11 protection on Friday. 

href='http://biz.yahoo.com/ap/080123/solutia_credit.html?.v=1'>Read
more.

w:st='on'>
name='10'>U.S.
face='Times New

Roman' size='3'> Trustee Protests Dura's Sealed Motion in GM
Deals

U.S. Trustee
Kelly Beaudin Stapleton objected to

Dura Inc.'s request to seal a motion to approve new deals with General
Motors Corp., Bankruptcy Law360 reported

yesterday. Earlier this month, Dura

asked for permission to seal its motion to approve Dura's assumption of
certain executory contracts with GM in

order to protect confidential information related to GM's business.
Stapleton said that the requested seal went

too far and that without seeing more of the proposed contracts, the
company's creditors could not evaluate the

motion. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=44936'>Read

more. (Registration

required.)

name='11'>Calpine Creditors Object to Motion for Stay

of Plan Approval

Calpine Corp.’s
unsecured creditors’ committee asked a

bankruptcy court on Tuesday to deny a temporary stay request for the
confirmation of the company's chapter 11

plan by Compania Internacional Financiera SA, Coudree Global Equities
Fund, Standard Bank of

w:st='on'>
size='3'>London

size='3'>and Leonardo Capital Fund SPC, Bankruptcy

Law360 reported yesterday. The unsecured
creditors asked the court to deny the motion

filed by the banks, all major shareholders in Calpine, on the grounds
that they do not have standing to request

modifications to Calpine's reorganization plan. The unsecured creditors
also said that allowing the stay would

hurt both Calpine and its creditors. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=44924'>Read

more. (Registration

required.)

name='12'>Diamond Sellers Seek Friedman

Bankruptcy

A group of jewelry
sellers owed $9.1 million from Friedman's Inc.

are trying to force the company into chapter 7 bankruptcy -- the
retailer's second trip to bankruptcy court in

just over three years, the Associated Press reported yesterday. Three
New York-based jewelry firms -- including

the
size='3'>U.S.

arm of
face='Times New Roman'

size='3'>India's Rosy Blue
Group -- filed the involuntary chapter 7

petition against Friedman's on Tuesday in the U.S. Bankruptcy Court
in

w:st='on'>
size='3'>Wilmington,

w:st='on'>
size='3'>Del. According to

court papers, Friedman's owes two Rosy Blue affiliates about $6.3
million. The company also owes Paul

Winston-Eurostar LLC $.19 million and two affiliates of Jay Gems Inc.
about $950,000. 

href='http://biz.yahoo.com/ap/080123/friedman_s_bankruptcy.html?.v=1'>Read

more.

name='13'>Ford Looks to Trim Up to 13,000 More

Jobs

Ford Motor Co., still
needing to cut costs amid worsening economic

conditions, will announce as soon as today that it has reached an
agreement with the United Auto Workers union on

terms for a new wave of buyouts that could trim thousands of jobs,
the

size='3'>Wall Street Journal reported today.
The auto maker's goal in offering the

companywide buyouts will be to cut as many as 11,000 hourly jobs and as
many as 2,000 salaried positions on top

of the some 44,000 jobs the company has shed since the beginning of
2006. Ford hopes to part with most of the

additional workers by the end of the first quarter. Hourly union workers

who accept a buyout could be allowed to

depart as soon as March 1, while salaried employees could leave by April

or May. 

href='http://online.wsj.com/article_print/SB120110001996710003.html'>Read

more. (Registration

required.)

name='14'>Sallie Mae Records Huge Loss

Student lending giant
Sallie Mae said yesterday that it lost $1.6

billion in its fourth quarter as it prepared for a jump in student loan
defaults and took a hit from bad bets on

its stock price, the New York
Times reported

today. Contributing to Sallie Mae’s loss was a $1.5 billion
write-down related to its falling stock price

and a $575 million loan-loss provision, meant to buffer against expected

defaults in the high-risk portion of the

company’s portfolio. The company has also had to grapple with cuts

in federal subsidies and drastically

tighter credit markets, which have increased the cost of the
company’s financing. Since April, Sallie Mae

has relied on an expensive $30 billion credit line provided by two of
its former suitors, JPMorgan Chase and Bank

of America. 

href='http://www.nytimes.com/2008/01/24/business/24sallie.html?_r=1&oref=slogin&ref=business&pagewant

ed=print'>Read more.

International

name='15'>Societe Generale Hit by Fraud,

Write-Downs

Massive fraud by a rogue
trader at Societe Generale SA has led to

a €4.9 billion ($7.16 billion) write-down and is roiling markets
as far away as Asia and further shaking

investor confidence in

size='3'>Europe's biggest banks,
the

size='3'>Wall Street Journal reported today.
The bank,

w:st='on'>

size='3'>France's

second largest after BNP Paribas SA,

revealed early today that it had detected a case of 'exceptional fraud'
due to a single trader who had concealed

enormous losses through a scheme of 'elaborate fictitious transactions.'

The trader, whom the bank hasn't named,

was in charge of futures hedging on European equity market indices. The
bank said the trader was able to dupe the

bank's own security system because he had inside knowledge of the
control procedures gained from previous jobs

with the bank. It
also said it was taking additional

€2.05 billion write down in assets related to subprime exposure,
and it would launch a capital increase of

€5.5 billion in the 'following weeks.' The write-down and losses
related to the trading incident will lead

the company to post a net profit of €600 million to €800
million for all of 2007. 

href='http://online.wsj.com/article_print/SB120115814649013033.html'>Read

more. (Registration

required.)

href='http://online.wsj.com/article_print/SB120115814649013033.html'>