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August 8, 2007
Mortgage
Lending
id='1'>Senator Clinton Proposes Mortgage Lender Rules, Prepayment
Penalty Ban
Senator Hillary Clinton
(D-N.Y.) proposed new requirements for lenders and an end to prepayment
penalties for home mortgages as part of a plan to combat a growing
number of defaults in the
w:st='on'>
size='3'>United States
size='3'>, Bloomberg News reported yesterday.
size='3'>“We need to put an end to fly-by-night mortgage brokers
peddling loans to unqualified applicants based on inflated
appraisals,” she said.
w:st='on'>
size='3'>Clinton
she will introduce legislation in September that would ban penalties for
people who pay off their mortgages ahead of time and require federal
registration of mortgage brokers and greater disclosure of their fees.
She would also set up a $1 billion fund for state programs that help
borrowers avoid foreclosure and urge Fannie Mae and Freddie Mac, which
operate under a federal charter, to do more on the issue.
href='http://quote.bloomberg.com/apps/news?pid=20601087&sid=aFm.EjwziCOs'>Read
more.
id='2'>Commentary: Portfolio Caps Should Not Be Lifted for Fannie
Mae and Freddie Mac
Lifting the mortgage
portfolio caps placed on Fannie Mae on Freddie Mac that were put in
place to contain the systemic risk that those portfolios pose to the
economy would be ill-advised, according to an editorial in
today’s Wall
Street Journal. Fannie Mae and Freddie Mac are
saying that lifting the portfolio caps would enable the two firms to
stabilize the illiquid mortgage market. The two firms are currently
limited to buying mortgages of no more than $417,000. Regulators capped
the companies' MBS portfolios in the wake of accounting scandals, and
the companies have wanted them lifted ever since. Amid the current
widening of credit spreads, Fannie no doubt sees an opportunity to step
in and grab market share that it has lost while the cap has been in
place. But the types of loans Fannie Mae and Freddie Mac are likely to
buy are not the ones that have been in distress recently, since those
loans don't meet their underwriting requirements.
href='http://online.wsj.com/article/SB118653702930791270.html?mod=opinion_main_review_and_outlooks'>Read
more. (Registration required.)
id='3'>Banks Slam American Home's Plea for Cash
Just hours after American
Home Mortgage Investment Corp. filed for bankruptcy Monday, its requests
for financing loans and permission to use its cash collateral drew
objections and an adversary suit from major bank lenders,
Bankruptcy Law360
reported yesterday. The company said when it filed for
chapter 11 that it needed $50 million to finance its liquidation and
planned to request as much from billionaire Wilbur Ross' WLR Recovery
Fund III LP fund, but it added that it needed $12 million immediately to
stay afloat. It also said it wanted to use the cash collateral it had on
hand in the process of selling off its assets. ABN Amro was one of the
first to object to the requests Monday, laying claim to $146 million.
And Credit Suisse First Boston Mortgage Capital LLC filed an adversary
complaint saying the mortgage lender had failed to provide it with
documentation of the $46 million in loans American Home owes it.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=31810'>Read
more. (Registration required.)
2
Lenders Voice Confidence as 2 Others Curb Operations
The Countrywide Financial
Corporation and the CIT Group said they would be able to ride out the
mortgage industry’s credit squeeze as two more rivals, the
HomeBanc Corp. and Impac Mortgage Holdings, curtailed new loans,
Bloomberg News reported yesterday. Atlanta-based HomeBanc said yesterday
that it was selling assets to Countrywide after bankers cut off
HomeBanc’s credit and left the company unable to finance loans.
HomeBanc said it could not borrow to finance mortgages as of Monday and
did not expect to finance any pending or future loans.
w:st='on'>
size='3'>Irvine
w:st='on'>
size='3'>Calif.-
Impac also said yesterday that it would suspend making Alt-A loans and
had laid off some of its staff. Impac said
in a statement that the company has met all margin calls so far and that
a sale of $1 billion of loans is scheduled to close in the next 30
days.
href='http://www.nytimes.com/2007/08/08/business/08lenders.html?_r=1&oref=slogin&pagewanted=print'>Read
more.
Fed
Leaves Interest Rate Unchanged
The Federal
Reserve’s policy committee unanimously voted to hold its target
interest rate at 5.25 percent and recognized that the outlook for
economic growth is weaker, a modification of the central bank's recent
solitary focus on inflation, the
size='3'>Wall Street Journal reported today.
The Fed said its 'predominant policy concern remains the risk that
inflation will fail to moderate as expected,' as it also said in June.
Yesterday's Fed statement addressed the need to show that inflation
vigilance won't be abandoned rashly, but that the central bank is aware
of the broader danger a credit meltdown poses. 'Financial markets have
been volatile in recent weeks, credit conditions have become tighter for
some households and businesses, and the housing correction is ongoing,'
it said. But the economy should still 'expand at a moderate pace over
coming quarters, supported by solid growth in employment and incomes and
a robust global economy.'
size='3'>
href='http://online.wsj.com/article/SB118650838435490620.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
Autos
id='6'>Court Approves Dana Settlement with Sypris
A federal judge approved
a settlement yesterday between Dana Corp. and component supplier Sypris
Technologies Inc. that ends long-running litigation between the two
companies and will save Dana millions of dollars, the Associated Press
reported yesterday. Sypris, Dana's biggest component-part supplier, has
agreed to cut prices on some parts and make quality enhancements. Under
the settlement approved by Bankruptcy Judge Burton R. Lifland, Dana and
Sypris will enter into a new, long-term master supply agreement in lieu
of the three existing agreements. The new pact, which runs through 2014,
provides Dana with enhanced pricing for certain commodities starting
next year and 'improved coverage in the areas of quality and warranty,'
Sypris said last month. In return, Sypris will receive an $89.9 million
unsecured claim in Dana's bankruptcy case.
href='http://biz.yahoo.com/ap/070807/dana_bankruptcy.html?.v=1'>Read
more.
id='7'>Noteholders Dispute Dura Offering
Bankrupt auto supplier
Dura Automotive Systems Inc.’s noteholders have objected to the
company's plan to enter into a backstop purchase agreement and rights
offering, arguing that the move is an effort to erase hundreds of
millions of dollars,
size='3'>Bankruptcy Law360 reported yesterday.
In their objection, the noteholders claim that Dura is touting its
rights offering as the best reorganization solution. Gaining access to
this undisclosed information is important to creditors because, if
approved by the court, the backstop motion will dictate the terms of
Dura’s reorganization plan. According to the noteholder’s
objection, the notes are not held by large, financially sophisticated
institutional investors, but rather by retail investors that
individually hold small positions in the securities.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=31785'>Read
more. (Registration required.)
The
Media Group Files for Bankruptcy
The Media Group (TMG),
previously known as Turner Media Group, said it filed for chapter 11
protection on Aug. 5, TVWeek.com reported yesterday. TMG was the owner
and operator of eight national television networks carried by EchoStar
Communications and was a leader in selling interactive advertising on
those channels. It also sold ads for EchoStar, although that arrangement
ceased to be exclusive earlier this year when EchoStar entered an ad
sales contract with Google. TMG, based in
w:st='on'>
is not associated with Turner Broadcasting.
id='9'>Dispute over Musicland's Liquidation Plan
Continues
Musicland Holdings
Corp.’s unsecured creditors on Monday joined the company’s
trade vendors’ committee in objecting to Wachovia Bank NA’s
bid to stop the approval of Musicland’s liquidation plan,
Bankruptcy Law360
reported yesterday. Wachovia’s objection hinges on
a $25 million lawsuit filed by a group of entertainment companies. The
bank said Musicland’s plan should not be confirmed until the
bankrupt entertainment store chain creates some mechanism to indemnify
Wachovia for potential losses connected with the suit. The suit, which
was originally launched in Southern New York District Court in January
and moved to bankruptcy court in May, was filed against
Wachovia and another bank, Harris
NA, over a last-minute $25 million loan paid to Musicland four months
before the retailer filed for bankruptcy.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=31830'>Read
more. (Registration required.)
id='10'>TROUBLED COMPANIES IN THE NEWS
The business news
articles below are taken from the U.S. Business Journal’s Daily
Summary of Troubled & Fast Growing U.S. Companies which is published
by Bastien Financial Publications.
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Advance
America, a Spartanburg, S.C.-based payday
lender, was ordered to cease operating in
w:st='on'>
size='3'>Pennsylvania
size='3'>.
face='Times New Roman'
size='3'>Pennsylvania
face='Times New Roman'>authorities accused Advance with
charging excessive fees and with operating without a license.
Aegis Mortgage
Corp., a
Houston, Tx. mortgage lender, suspended all loan originations amid the
sagging housing and credit markets, saying that it won’t be able
to fund loans currently in its pipeline.
Bon-Ton Stores
Inc.’s
stock price plunged 11% after Buckingham Research reduced its own second
quarter earnings estimates for the York, Pa.-based department-store
operator and warned that Bon-Ton itself will cut its own guidance as
well.
Chrysler
LLC
size='3'>’s new boss, Robert Nardelli, has been installed as chief
executive by the carmaker’s 80%-owners, Cerberus Capital
Management LP, which is sending a strong signal that there will be no
more business as usual at the Michigan-based company. Mr. Nardelli
is an outsider, coming from retailer Home Depot Inc., where he came
under criticism for his strategic decisions and fat pay package, but he
is expected to play a key part in negotiations with union workers as the
firm continues trying to reduce expenses. But Mr. Nardelli will
have more freedom at Cerberus than he did at Home Depot, which is
publicly-held, since Chrysler has been taken private by Cerberus and
won’t be under quarter-to-quarter public scrutiny. Further,
his pay will be directly connected to Chrysler’s performance and,
in fact, he won’t be paid if Chrysler’s results don’t
improve. Chrysler, which lost $1.5 billion last year, earlier announced
a restructuring plan that calls for slashing 13,000 jobs and investing
$3 billion in technology to improve fuel efficiency.
Entegris
Inc., a
Chaska, Mn. maker of semiconductor and disk-drive products, reported its
second quarter net income declined 19%–to $14.8 million. Revenue
declined 14%–to more than $153 million.
ESS Technology
Inc., a
Fremont, Ca. designer of multimedia chips and electronic products,
reported a second quarter net loss of $660,000. Revenue declined
41%–to $17.2 million.
Extreme Networks
Inc., a
w:st='on'>Santa
Clara
size='3'>, Ca. designer of switching products, reported a fourth quarter
net loss of more than $5 million. Revenue increased 6%–to $87.1
million. For the year, it lost $14.2 million, on a 4% revenue
decline–to $343 million. The quarter and year included
restructuring charges of more than $2.8 million and $4 million
respectively.
Ford Motor
Co., Dearborn, Mi., wants to have at least a
tentative deal to sell its Jaguar and Land Rover luxury car units
in
face='Times New Roman' size='3'>Great
Britain
Volvo business by winter. However, Ford, which has already
received a number of preliminary bids from private-equity firms such as
TPG Inc., Cerberus Capital Management LLC and others, could run into a
snag amid a lack of clarity about how the European Union will impose new
carbon-dioxide emissions regulations. The possible private-equity
bidders for the luxury units are apparently worried about the new rules
and how and when they will be implemented. The two car units, which are
being sold together, could fetch more than $3 billion, although Ford
will likely maintain an interest in both Land Rover and Jaguar.
Sun Microsystems
Inc., the
w:st='on'>
size='3'>Santa Clara
face='Times New Roman'>, Ca. computer server and software
developer, now expects to make an undisclosed number of job cuts.
The move, part of its restructuring efforts, could result in
charges of as much as $150 million.
Tyco International
Ltd. , the
face='Times New Roman' size='3'>Bermuda
size='3'>manufacturing and services firm, reported a third quarter net
loss of $3.5 billion. The results, which include charges of $3.1
billion for settling a class-action lawsuit as well as for restructuring
charges, compares with income of $868 million for the same period one
year earlier. Revenue increased nearly 8%–to $5.1
billion.