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April 2, 2008
Housing
Downturn
name='1'>Senators Agree to Craft Compromise on
Housing Stimulus
Under pressure from
voters to address the nation's housing crisis, Senate Republicans agreed
yesterday to work with Democrats on a compromise plan to stimulate
sagging home sales and help distressed homeowners avoid foreclosure,
the Washington
Post reported today. The agreement calls for
Senate Banking, Housing and Urban Affairs Committee Chairman
size='3'>Chris
(D-Conn.) and the committee's ranking Republican, Sen. Richard C. Shelby
(
size='3'>Ala.
a bipartisan substitute today for a Democratic housing bill that is
opposed by the Bush administration and was blocked in February by Senate
Republicans. Although the two sides had not
agreed on the specifics of a compromise yesterday, both offered
proposals that would strengthen truth-in-lending laws for the mortgage
industry, provide counseling to homeowners facing foreclosure and help
some borrowers refinance their homes.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040100156.html'>Read
more.
name='2'>Distressed Owners Frustrated by Aid
Group
Every day more than 4,500
people call Hope Now, the White House-backed group formed to help
struggling homeowners, but few of them appear to be getting the relief
they are hoping for, the
size='3'>New York Times reported today. A big
reason is that the financial powers behind Hope Now — mortgage
lenders, loan servicers and big investors — are reluctant to
change loan terms substantially if doing so hurts them.
Almost six months after Hope Now was created, the group
is largely resisting calls for broad relief for homeowners. The group
itself employs just three people as most of its work is done through
committees staffed by senior bank and mortgage executives who are part
of the Financial Services Roundtable. Hope Now’s executive
director, Faith Schwartz, is an executive at the subprime lender Option
One Mortgage. People who dial Hope Now’s toll-free number,
1-888-995-HOPE, typically are routed to call centers in
w:st='on'>
size='3'>Phoenix and
w:st='on'>
size='3'>Spokane
w:st='on'>
size='3'>Wash.
of four eventually are connected to credit counselors for a free,
informal consultation. However, only a fraction of all callers —
about 4 percent — end up talking in person with a housing
counselor, according to the Homeownership Preservation Foundation, a
nonprofit group at the center of Hope Now that also has ties to the
mortgage industry.
href='http://www.nytimes.com/2008/04/02/business/02hope.html?sq=bankruptcy&st=nyt&scp=4&pagewanted=print'>Read
more.
name='3'>Commentary: How Not to Save Housing
While Congress is intent
on aiding millions of homeowners who can't pay their mortgages and may
face foreclosure, it is a bad idea and might perversely delay the
housing recovery, according to a commentary in today’s
Washington Post
size='3'>. Congress is understandably upset with estimates of defaults
in 2008 likely to hit 2 million. If realized, that would be roughly
twice the 2006 level and about 2.7 percent of the nation's 75 million
owner-occupied homes. The best-known congressional proposal comes from
House Financial Services Chairman Barney Frank (D-Mass.), who would
authorize the Federal Housing Administration (FHA) to guarantee $300
billion of new home loans to strapped homeowners, allowing them to
refinance their mortgages at lower rates and reduce outstanding amounts.
However, there are glaring problems as it punishes financial prudence
and rewards irresponsibility. While nearly 50 million homeowners have
mortgages, Frank's plan reserves that privilege for an estimated 1
million to 2 million homeowners who are the weakest borrowers. With the
FHA now authorized to lend up to $729,750 in high-cost areas, some
beneficiaries could be fairly wealthy. By contrast, people who made
larger down payments or kept their monthly payments at manageable levels
would be made relatively worse off.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/04/01/AR2008040102196.html'>Read
more.
name='4'>Mortgage Company Looks to Resume Lending
Thornburg Mortgage Inc.
CEO Larry Goldstone said that he expects the company to resume making
loans 'within weeks, if not days,' the Wall Street
Journal reported today. The Santa Fe,
N.M.-based company, which has focused on making jumbo mortgage loans,
had to suspend funding new mortgages recently after a sharp drop in the
value of its mortgage securities triggered margin calls from its lenders
and left it short of cash. In recent weeks, the situation got worse
because the company wasn't able to meet $610 million in margin calls and
nearly had to file for bankruptcy.
href='http://online.wsj.com/article/SB120707596984280997.html?mod=us_business_whats_news'>Read
more. (Registration required.)
name='5'>Bernanke to Face Congressional Questioning on Bear
Stearns’ Deal
Federal Reserve Chairman
Ben S. Bernanke will face questions at a congressional hearing today
over the central bank’s role in JPMorgan Chase’s absorption
of the investment firm Bear Stearns and accepting $30 billion worth of
questionable mortgage-related assets as collateral for a Fed loan that
enabled the deal, the
size='3'>New York Times reported.
“There’s a lot of concern that this was done
face='Times New Roman' size='3'>ad hoc,”
said Joint Economic Committee Chairman Charles E. Schumer (D-N.Y.),
whose committee will hold the hearings today. Senate Banking Committee
Chair
size='3'>Chris
(D-Conn.) has also signaled that at his panel’s hearing tomorrow
that he will ask Bernanke about Bear Stearns and why the financial
sector’s problems were allowed to fester.
href='http://www.nytimes.com/2008/04/02/business/02fed.html?_r=1&ref=business&oref=slogin'>Read
more.
Bonds Push Diamond Glass into Chapter 11
Faced with substantial
debt as well as senior notes scheduled to come due, automobile glass
replacement company Diamond Glass Inc. filed for chapter 11 with
tentative plans to be sold,
size='3'>Bankruptcy Law360 reported yesterday.
The company listed assets between $10 million and $50 million and
liabilities over $100 million. Diamond Glass' tentative financial
restructuring plan anticipates a sale to Guggenheim Corporate Funding
LLC, albeit after a June auction in which other competitive bidders
would be permitted to participate. Under an agreement, the company said,
Guggeinheim would gain substantial assets before the auction in exchange
for forgiving a “significant portion” of the roughly $45
million it is owed in secured prepetition loans.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=51742'>Read
more. (Registration required.)
w:st='on'>
name='7'>Judge Bars
w:st='on'> New
Jersey
size='3'>'s $800 Million Lawsuit against W.R.
Grace
Bankruptcy Judge
Judith Fitzgerald
yesterday barred
w:st='on'>New
Jersey
regulators from imposing an $800 million fine against W.R. Grace &
Co. for allegedly lying about asbestos contamination in the state, the
Associated Press reported yesterday. Judge Fitzgerald ordered the New
Jersey Department of Environmental Protection to drop a lawsuit it filed
against W.R. Grace in 2005 in an effort to collect the fines. The
lawsuit said that Grace lied to the state about asbestos dangers at
a
size='3'>Hamilton
w:st='on'>
size='3'>N.J.
it processed vermiculite for more than 40 years. When Grace closed
the
size='3'>Hamilton
1994, it submitted an environmental report to the New Jersey Department
of Environmental Protection that said the vermiculite Grace processed
didn't contain harmful levels of asbestos, leading the state to conclude
there was no need to test the soil or clean up the site.
href='http://www.chron.com/disp/story.mpl/ap/fn/5666628.html'>Read
more.
Critical of Pacific Lumber’s Reorganization Plan
Bankruptcy Judge
Richard Schmidt
said that he is likely to grant a creditors' request to
throw out Pacific Lumber Co.'s primary reorganization plan during a
hearing that starts April 8, Bloomberg News reported yesterday. Judge
Schmidt has scheduled a four-day hearing next week to decide which of
five competing reorganization plans he will approve. Creditors have
proposed two competing plans that strip the company of its equity. The
case is Scotia Pacific
Co. LLC, 07-20027, U.S. Bankruptcy Court,
Southern District of Texas (
w:st='on'>Corpus
face='Times New Roman' size='3'>Chris
size='3'>ti
href='http://www.chron.com/disp/story.mpl/business/5665583.html'>Read
more.
name='9'>Asarco Requests Approval of Financing Deal
Asarco LLC is seeking
court approval to enter into a $5 million financing deal under its
chapter 11 restructuring, the Associated Press reported yesterday. The
copper-mining company said that it needs the financing because its $75
million bankruptcy loan expired in December, according to court
documents filed Monday in the U.S. Bankruptcy Court in
w:st='on'>
size='3'>Chris
size='3'>ti
w:st='on'>
size='3'>Texas
href='http://www.chron.com/disp/story.mpl/ap/business/5666318.html'>Read
more.
name='10'>Enron Creditors Get another $1 Billion in
Distributions
The Enron Creditors
Recovery Corp. said yesterday that it had distributed $1.03 billion to
holders of general unsecured claims and allowed guaranty claims,
Bankruptcy Law360
reported yesterday. The distribution included
$980,600,000 in cash; $37. 4 million in Portland General Electric
Company common stock and $9 million in interest, dividends and gains
from the sale of the PGE stock. The distribution brings the total cash
handed out to about $14.6 billion. Future distributions will be
bolstered by the funds collected in the recently settled MegaClaims
litigation, which will include a $1.66 billion settlement from Citigroup
Inc., the last remaining defendant in the massive suit.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=51726'>Read
more. (Registration required.)
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=51726'>