January 302008

 

Mortgage
Lending

name='1'>Mortgage Modification Backers Still Looking for More
Congressional Support

Supporters of legislation

to allow bankruptcy judges to restructure some risky home mortgages on
the verge of foreclosure made a renewed pitch for H.R. 3609 at a hearing

yesterday before the House Judiciary Commercial and Administrative Law
Subcommittee,
size='3'>CongressDaily reported today.
Movement on the bill has been stymied by lobbyists from mortgage
lenders, who contend the bill could increase loans by as much as 2
percent because banks would be unsure whether they could generate
sufficient profits if loans could be later rescinded. The full House
Judiciary Committee approved the bill by a 17-15 vote Dec. 12, but
Judiciary Chairman John Conyers (D-Mich.) took the rare step of
scheduling another hearing on the bill to bolster support. Bill sponsor
Rep. Brad Miller (D-N.C.) sponsor of the bill, conceded that supporters
do not have a hard count on the bill because most members have not
focused on it, but he said they are focusing their efforts on a
member-by-member basis and lobbying leadership to set a floor
date. 
href='http://judiciary.house.gov/oversight.aspx?ID=405'>Click
here to read the written testimony from yesterday’s
hearing.

name='2'>FBI Opens Subprime Inquiry

The Federal Bureau of
Investigation has opened criminal inquiries into 14 companies as part of

a wide-ranging investigation of the troubled mortgage industry,
the New York
Times reported today. The FBI said that it was

looking into possible accounting fraud, insider trading or other
violations in connection with loans made to borrowers with weak, or
subprime, credit. The agency declined to identify the companies under
investigation but said that the inquiry, which began last spring,
involves companies across the financial industry, including mortgage
lenders, loan brokers and Wall Street banks that packaged home loans
into securities. As part of its investigation, the F.B.I. is cooperating

with the Securities and Exchange Commission, which is conducting about
three dozen civil investigations into how subprime loans were made and
packaged, and how securities backed by them were valued. 

href='http://www.nytimes.com/2008/01/30/business/30fbi.html?ref=business&pagewanted=print'>Read

more.

name='3'>Countrywide Posts $421.9 Million Loss for Fourth
Quarter

Countrywide Financial
Corp. reported a loss of $421.9 million for the fourth quarter as
growing defaults and declining home prices battered the

size='3'>U.S.'s
largest mortgage lender by loan volume, the

size='3'>Wall Street Journal reported today.
The loss underscores the challenges facing Bank of America Corp., which
agreed three weeks ago to acquire Countrywide for about $4 billion in
stock. Bank of America's chairman and CEO Kenneth Lewis, said at an

investor conference in
w:st='on'>

size='3'>New York that the

Countrywide results were consistent with his bank's expectations.
Countrywide made a provision of $924 million for credit losses in the
fourth quarter, compared with provisions of $73 million a year earlier
and $937 million in the third quarter. The company also wrote down by
$831 million in the latest quarter the value of its 'residual' interests

in securities backed by mortgages. 

href='http://online.wsj.com/article/SB120159405139225025.html?mod=us_business_whats_news'>Read

more. (Registration required.)

name='4'>UBS Takes a $14 Billion Write-Off Due to Subprime
Investments

UBS, the largest Swiss
bank, said today that it would write off $14 billion in losses on the
troubled

face='Times New Roman'
size='3'>U.S.
size='3'>housing market and post a net loss for 2007, the
New York Times

size='3'>reported today. The numbers “include around $12 billion
in losses on positions related to the
w:st='on'>
size='3'>U.S. subprime
mortgage market and approximately $2 billion on other positions related
to the
face='Times New Roman'
size='3'>U.S.
size='3'>residential mortgage market,” the bank said. UBS said on
Dec. 10 that it was writing off $10 billion of subprime investments for
the fourth quarter, so the numbers today represented $4 billion more in
losses than it had previously disclosed. The bank had already announced
a $4.4 billion loss on subprime investments in the third quarter. The
figures released today bring its 2007
w:st='on'>
size='3'>U.S.
size='3'>residential mortgage-related losses to $18.4 billion. 

href='http://www.nytimes.com/2008/01/30/business/worldbusiness/31ubs.html?ref=business&pagewanted=print'>Read

more.

w:st='on'>
size='3'>
name='5'>Georgia Ranked

Second-Highest in Bankruptcy Filing Rate

The

w:st='on'>
size='3'>National
face='Times New Roman' size='3'>Bankruptcy

size='3'>Research
face='Times New Roman' size='3'>Center
size='3'>reported that
w:st='on'>
size='3'>Georgia
size='3'>bankruptcy courts processed one personal bankruptcy filing for
every 65 households, the second-highest filing rate in the country,
the Atlanta
Journal-Constitution reported today.
Only Tennessee
size='3'>had a higher rate with one filing being processed for every 59
households. Bankruptcy filings across the nation were up significantly
in 2007, and
w:st='on'>
size='3'>Georgia
size='3'>was no exception as bankruptcy courts statewide processed
48,227 personal bankruptcy filings last year, an increase of 24 percent
over the 2006 total, according to the research
center.'Many
of the things that make Georgia a wonderful place to live also make it
potentially vulnerable to spikes in bankruptcy filings,' said

size='3'>ABI Resident Scholar
Prof. Jack Williams of Georgia State University's Law
School.
face='Times New Roman'
size='3'>Georgia
face='Times New Roman' size='3'>also stands out for a healthy real
estate market that was buoyed in part by reliance on subprime mortgages,

Williams said. 

href='http://www.ajc.com/search/content/business/stories/2008/01/29/bankruptcy_0130.html'>Read

more.

$146
Billion Stimulus Plan Passes House

The House overwhelmingly
approved a $146 billion shot in the arm for the nation's ailing economy
yesterday, sending a stimulus package to the Senate with a bipartisan
appeal not to slow down the bill with significant changes, the
Washington Post
reported today. The bill would pump $146 billion into the

economy this year and $15 billion next year, before recouping some of
that money as businesses begin paying taxes on the investments that they

are expected to make under the plan, according to the Joint Tax
Committee. The package would cost $117 billion over 10 years. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/29/AR2008012901935_pf.html'>Read

more.

name='7'>Lionel Wins Court Approval for CEO Pay

Judge
face='Times New Roman' size='3'>Burton R. Lifland
size='3'>signed off on Lionel LLC's bid to pay CEO Jerry Calabrese, who
has shepherded the model train maker through bankruptcy for over three
years, a base salary of $1 million a year, the Associated Press reported

yesterday. Judge Lifland approved the deal for Calabrese and a new
$465,000-a-year pact for executive vice president of marketing and
business development Mark Erickson. Judge Lifland also signed off on
changes to Lionel's bankruptcy financing pacts provided by Wachovia Bank

and Guggenheim Corporate Funding, which have been funding Lionel's
chapter 11 case. The changes extend the maturity dates of Lionel's
bankruptcy loans to May 30. 
href='http://biz.yahoo.com/ap/080129/lionel_bankruptcy.html?.v=1'>Read
more.

L.
Tersigni Bids to Keep Billing Report Private

Bankrupt consulting firm
L. Tersigni Consulting CPA PC, accused of overbilling clients in
asbestos-related bankruptcies, wants to shield a Heller Ehrman LLP
investigative report into the firm's billing practices from the
public, Bankruptcy
Law360 reported yesterday. L. Tersigni filed a

limited objection last week to a subpoena for the report by the
Combustion Engineering 524(g) Asbestos PI Trust, a former firm client.
Combustion Engineering said the report is needed to determine the likely

range of claims against L. Tersigni. L. Tersigni filed for bankruptcy in

November after several groups dropped the firm amidst the fraudulent
billing accusations. The case is
size='3'>In re L. Tersigni Consulting CPA PC,
case number 07-50702 in the U.S. Bankruptcy Court for the District of
Connecticut. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=45525'>Read

more. (Registration required.)

w:st='on'>
name='9'>U.S.
face='Times New Roman' size='3'> Attorney Protests Bayou Chapter 11

Plan

The

size='3'>U.S. attorney for
the Southern District of New York has asked a
w:st='on'>
size='3'>U.S.
size='3'>district judge to pay out the millions of dollars available to
investors in bankrupt hedge fund Bayou Group LLC, which has been
operating under chapter 11 protection since May 2006, the Associated
Press reported yesterday. Judge Colleen McMahon of the U.S. District
Court in
face='Times New Roman' size='3'>Manhattan
last week sentenced Bayou co-founder James G. Marquez to
more than four years in prison for defrauding investors. She also
ordered him to pay nearly $6.26 million into a Bayou victims'
restitution fund.
size='3'>At the sentencing Jan. 22, McMahon proposed that the fund would

repay all investors whose money Bayou lost, even those who have already
settled their claims against the Connecticut hedge fund. 
The U.S. Attorney for the Southern District of New York,
Michael J. Garcia, however, asked McMahon to immediately distribute the
funds to those investors whose $309 million claims aren't the subject of

litigation. He recommended that the court reserve some of the
restitution funds to make a second distribution for the as-yet
unresolved claimants, whose claims are estimated at $85 million.

href='http://biz.yahoo.com/ap/080129/bayou_group_bankruptcy.html?.v=1'>Read

more.

href='http://biz.yahoo.com/ap/080129/bayou_group_bankruptcy.html?.v=1'>

In related news, the
former chief financial officer of Bayou Management LLC was sentenced to
20 years in prison in connection with a scheme to defraud the hedge
fund's investors out of more than $400 million, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. U.S. District Judge Colleen McMahon in

size='3'>Manhattan
size='3'>sentenced Daniel Marino to 240 months in prison, to be followed

by three years of supervised release. Marino and Samuel Israel III, the
hedge-fund firm's former CEO who is awaiting sentencing, pleaded guilty
in September 2005 to conspiracy, investment adviser fraud and other
charges in connection with a scheme to defraud investors through the
improper inflation of the value of Bayou's funds. 

href='http://online.wsj.com/article/SB120163868091226221.html?mod=us_business_whats_news'>Read

more. (Registration required.)

IRS

Cuts Bankrupt NYRA's Claim by $1.58 Billion

The New York Racing
Association (NYRA) may have cleared at least one hurdle in seeking
confirmation of its reorganization plan, now that a hefty $1.6 billion
tax claim from the Internal Revenue Service has been reduced to $15.2
million, Bankruptcy
Law360 reported today. The IRS said in
November that it would reduce the $1.6 billion tax claim to an amount no

greater than $25 million at a disclosure statement hearing, satisfying a

condition of the plan. Now the claim has been further reduced, though it

is still subject to NYRA's objections. The IRS is determining its claim
by auditing NYRA's tax obligations from 2000 to 2005. NYRA filed for
bankruptcy protecting in November 2006. A hearing regarding confirmation

of the reorganization plan is scheduled for Feb. 7. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=45531'>Read

more. (Registration required.)

name='11'>Bankruptcy Allegations Move Forward Against

size='3'>New York Law
Firm

Stressing that the case
raised 'important issues concerning the integrity of the bankruptcy
process,' a federal bankruptcy judge in
w:st='on'>
size='3'>Manhattan has
declined to dismiss claims by a trustee against a Westchester County,
N.Y.-based law firm, the
size='3'>New York Law Journal reported today.
Bankruptcy Judge Martin
Glenn ruled in

size='3'>In re Food Management Group
size='3'>(

size='3'>Grubin v. Rattet), 04-22880, that
allegations of fraudulent concealment, breach of fiduciary duty,
negligence and fraud on the court could proceed against attorneys Robert

L. Rattet and Jonathan S. Pasternak, as well as the law firm Rattet,
Pasternak & Gordon Oliver. The lawyers and the firm are accused of
failing to disclose that an 'insider' of debtor Food Management Group
had violated a court order by submitting a bid in the auction of the
company's assets. The trustee also alleged that the lawyers improperly
failed to disclose that they had represented one of the insiders before
the auction. 

href='http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1201601156809'>Read

more.

name='12'>Challenges Await Dana after Chapter 11

Auto parts maker Dana Corp. is
about to step out of bankruptcy and into an uncertain future as worries
about the economy and an expected slowdown in U.S. vehicle production
this year will make it tough on parts suppliers that depend heavily on
Detroit's automakers, the Associated Press reported yesterday. Dana is
on track to emerge from chapter 11 protection as early as this week and
is hoping that moving manufacturing to lower-cost countries and cutting
labor costs will help it avoid the huge losses it had before entering
bankruptcy nearly two years ago. Since then, Dana has shed three
businesses, moved to sell eight plants and struck a deal with unions to
create a two-tier wage system. It also shifted retiree health care costs

to a union-controlled trust fund, eliminating $1.1 billion in
liabilities. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/30/AR2008013000399_pf.html'>Read

more.

name='13'>Airlines Cite Fuel Costs for Losses

Three airlines —
Northwest, JetBlue and AirTran Holdings — posted fourth-quarter
losses yesterday as rising fuel costs erased gains from fare increases,
Bloomberg News reported. Northwest said that its deficit was $8 million
after a $267 million loss in bankruptcy in the period a year earlier.
JetBlue’s $4 million loss compared with net income of $17 million.

AirTran pared its loss to $2.17 million from $3.55 million.
Tuesday’s results from the three carriers echoed those reported
earlier by larger rivals, including American and United, which also
blamed fuel for blunting benefits from higher fourth-quarter ticket
prices. 

href='http://www.nytimes.com/2008/01/30/business/30air.html?ref=business&pagewanted=print'>Read

more.

href='http://www.nytimes.com/2008/01/30/business/30air.html?ref=business&pagewanted=print'>