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February 18,
2009
Housing
Administration’s
Housing Plan Likely to Include Cramdown Provisions
President Barack Obama's plan to aid troubled
homeowners set to be unveiled today will include efforts to cut monthly
mortgage payments, allow more borrowers to refinance their loans and
give bankruptcy judges greater power to modify mortgages, the
size='3'>Wall Street Journal reported today.
At the heart of the plan is an effort to make loans more affordable by
providing a government subsidy to help mortgage companies modify certain
troubled loans. The administration is expected to kick in $50 billion
out of the bailout fund to help mortgage companies with the costs of
such an effort. The administration is expected to make it easier for
judges to modify mortgages during chapter 13 bankruptcy proceedings. The
administration is also expected to create national standards for loan
modifications to be adopted by Fannie Mae and Freddie Mac. The plan
could include a mechanism to determine the value of homes facing
foreclosure.
href='http://online.wsj.com/article/SB123491170791203563.html'>Read
more. (Subscription required.)
Analysis: Loan
Modification Provides Biggest Challenge to Administration’s
Plan
The Obama administration's housing plan will have to
reckon with a little-understood fact underlying current efforts to slow
foreclosures: More than half of mortgage modifications have left
borrowers with the same or higher loan payments, the
face='Times New Roman'>Wall
Street Journal reported today. While
modifications are designed to keep owners in their houses, by the time
they are worked out, borrowers often are well behind on their loans.
Lenders often add these past-due amounts -- which can include principal,
interest, taxes and insurance -- driving monthly payments higher. At the
same time, lenders have been reluctant to reduce principal even for
borrowers who owe far more than their homes are worth. Thirty-eight
percent of recent loan modifications resulted in increased payments for
borrowers, according to an analysis by Alan M. White, a professor at
Valparaiso University School of Law in Indiana, while 13 percent
resulted in no change to payments. The study looked at more than 23,000
modifications between Dec. 26, 2008, and Jan. 25, 2009, involving
subprime mortgages and Alt-A loans that were packaged into
securities.
href='http://online.wsj.com/article/SB123491621223104267.html'>Read
more. (Subscription required.)
Automakers Seek $14 Billion
More in Aid
The price tag for bailing out General Motors and
Chrysler increased by another $14 billion yesterday, to $39 billion,
with the two automakers saying they would need the additional aid from
the federal government to remain solvent, the
face='Times New Roman' size='3'>New York Times
size='3'>reported today. GM and Chrysler admitted that their current
federal loans would be exhausted by March 31, the date that the
administration’s task force is expected to determine whether both
companies have restructured enough to be viable businesses to receive
additional funding. GM is pushing for a
deal with its bondholders to help it reduce its debt to $9 billion, from
$27 billion. The UAW said yesterday that it had reached
“understandings” with the Detroit companies on modifications
to their contracts. GM said yesterday that it had
increased its overall loan request from the government to a total of $30
billion, up from $18 billion. Company officials said they hoped to
receive another $2 billion loan in March and $2.6 billion in April.
Chrysler, which has received $4 billion in loans, also increased its
overall request for funding. In December, it said that it needed $3
billion more to survive 2009, but it raised that request to $5 billion.
Chrysler said it would cut another 3,000 jobs and discontinue three
models — the Dodge Durango, P.T. Cruiser and Chrysler Aspen.
href='http://www.nytimes.com/2009/02/18/business/18auto.html?_r=1&hp=&pagewanted=print'>Read
more.
Northwest Jesuits file for
Bankruptcy Protection
Confronted by scores of lawsuits alleging sex abuse by
priests, the Jesuits of the Oregon Province have filed for chapter 11
protection, the Associated Press reported today. The Oregon
Province’s petition filed yesterday in U.S. Bankruptcy Court in
Portland listed assets of less than $5 million and liabilities of almost
$62 million. Many of the lawsuits involve Alaska Natives who say they
were sexually abused as children while living in remote villages. The
Portland-based province contends it has worked 'diligently' to resolve
claims of misconduct, saying it has settled more than 200 claims and
paid more than $25 million to victims since 2001. That amount does not
include payments made by insurers.
href='http://www.washingtonpost.com/wp-dyn/content/article/2009/02/18/AR2009021800622_pf.html'>Read
more.
American Express, Capitol
One See Surge in Credit Card Defaults
American Express Co. said that defaults on loans
packaged into securities rose to 8.29 percent from 7 percent in
December, while payments at least 30 days overdue climbed to 5.28
percent from 4.86 percent the month earlier, Bloomberg news reported
yesterday. American Express got $3.39 billion from the U.S. Treasury
last month to boost capital as surging consumer defaults forced it to
set aside more reserves and the market for bonds backed by credit card
debt seized up. Capital One Financial Corp. also said that defaults rose
to 7.82 percent and late payments reached 5.02 percent. The lender
expects $8.6 billion in soured loans in the next year.
href='http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVkJt3wXBCdA'>Read
more.
Broadcaster Files for
Chapter 11
TV station owner Young Broadcasting Inc. has sought
chapter 11 protection, pointing to a heavy debt burden and a decline in
advertising exacerbated by the economic downturn as factors that led to
the filing,
size='3'>Bankruptcy Law360 reported yesterday.
Young Broadcasting Inc., which owns and operates 10 TV stations, filed
for bankruptcy along with 24 affiliates Friday in the U.S. District
Court for the Southern District of New York. Young Broadcasting said
that it had more than $575 million in assets and $980 million in debts
as of September 30. The bankruptcy filing came just days after Young
Broadcasting decided to forego making a $4.5 million interest payment on
the company's senior secured credit facility to preserve liquidity, and
less than a month after the company's common stock was delisted from The
NASDAQ Stock Market.
href='http://bankruptcy.law360.com/articles/87506'>Read
more. (Registration required.)
SEC Accuses Texas Financier
of $8 Billion Fraud
The Securities and Exchange Commission charged Texas
financier R. Allen Stanford with an $8 billion fraud, alleging in a
civil complaint that he lured investors with promises of high returns on
certificates of deposit but poured their money into a 'black box' of
hard-to-trade assets, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. According to the SEC, Stanford representatives
told people who bought CDs from Stanford International Bank that it was
putting their money in easy-to-trade assets had more than 20 analysts
monitoring the portfolio and underwent yearly audits by Antiguan
regulators. In fact, the SEC alleged, the bulk of the money went into
real estate and private equity, and the investments were reviewed by
only two people: Stanford and James M. Davis, the bank's chief financial
officer.Antigua regulators didn't verify the assets, according to the
SEC complaint, and the agency said it couldn't reach a small accounting
firm on the island responsible for the audits. The CDs aren't insured by
the Federal Deposit Insurance Corp.
href='http://online.wsj.com/article/SB123489015427300943.html?mod=testMod'>Read
more. (Registration required.)
MBIA Creates Public Finance
Bond Insurance Company
Bond insurer MBIA Inc. started a public finance-only
financial-guarantee insurance company, which will operate only in the
United States, as part of its restructuring plan, the
face='Times New Roman'>Wall
Street Journal reported today. Late last year,
Moody's Investors Service cut its debt ratings on MBIA to junk status,
citing its exposure to losses on U.S. mortgages and problems in the
bond-insurance business. MBIA had already lost most of its business
insuring government bonds after losing its AAA credit rating in June.
But the company received a big boost in September, when it reinsured a
$159 billion municipal-bond portfolio for FGIC Corp., which is operating
under the supervision of the New York Department of Insurance.
href='http://online.wsj.com/article/SB123495885876010243.html'>Read
more. (Subscription required.)
Analysis: Accounting Firms
that Missed Fraud at Madoff Could Face Lawsuits
Legal and accounting experts said that the numerous
accounting firms that missed the alleged fraud at Bernard L. Madoff
Investment Securities LLC could now be legally vulnerable to claims that
they should have uncovered red flags, the
face='Times 

New Roman'
size='3'>Wall Street Journal reported today.
Madoff feeder fund Maxam Absolute Return Fund LP claims in a lawsuit
filed in Connecticut Superior Court against its own auditor, McGladrey
& Pullen LLP, that the firm was 'in the best position to understand
that an operation of Madoff's size required a much larger audit team.'
KPMG LLP allegedly overlooked a 'highly suspicious claim' as it audited
the books of a big Madoff feeder fund managed by Tremont Group Holdings,
according to a lawsuit filed last week by an investor. According to
Madoff's statements, Tremont's assets went entirely into Treasury bills
every Dec. 31.
href='http://online.wsj.com/article/SB123491638561904323.html'>Read
more. (Subscription required.)
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