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January 4, 2008
Mortgage
Lending
id='1' name='1'>Citi Objects to American Home Subservicing
Deal
A Citigroup Inc. subsidiary
objected yesterday to bankrupt mortgage lender American Home Mortgage
Holdings Inc.'s plan to enter into new subservicing agreements in
preparation for its impending sale,
size='3'>Bankruptcy Law360 reported yesterday.
Bankruptcy Judge
size='3'>Chris
Sontchi approved the $500 million sale of AHM’s servicing
business to the newly created AH Mortgage Acquisition Co., which is
owned by billionaire Wilbur L. Ross Jr., on Oct. 30. The closing of the
sale was scheduled to take part in two stages: an initial closing in
mid-November and a final closing in the following months but before
Sept. 8. CitiMortgage Inc. said in its objection that AHM has asked to
expand its business without providing any guarantee of continued
performance to its creditors.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=43120'>Read
more. (Registration required.)
In related news, American
Home Mortgage Investment Corp.'s plan to destroy 490,000 hard-copy
mortgage files has drawn fire from federal bankruptcy monitors, who say
it could hurt homeowners' ability to sue the failed lender, the
Wall Street Journal
reported today. The company, once one of the country's
largest mortgage lenders, says it can no longer afford the
$45,000-per-month rental on warehouse space to preserve paper files. Its
bid for court permission to destroy the files has been criticized by
U.S. Trustee Kelly Beaudin
Stapleton. A hearing on the document destruction has been
delayed until Jan. 14 so American Home can attempt to resolve
objections.
href='http://online.wsj.com/article_print/SB119941290597566781.html'>Read
more. (Registration required.)
w:st='on'>
size='3'>
name='2'>U.S.
face='Times New Roman' size='3'> Trustee Opposes Calls to Seal New
Century Report
U.S. Trustee
Kelly Beaudin
Stapleton opposed moves to seal an examiner's
report detailing
size='3'>events that led to New Century Financial Corp.'s collapse,
Bankruptcy Law360 reported yesterday. Stapleton told the
size='3'>Delaware
court Wednesday that New Century, which last month cited attorney-client
privilege in calling to keep the interim report under wraps, did not
identify any specific communications that deserved protection from
public scrutiny. She further noted that attorney-client privilege
covered a limited range of communications detailed in examiner Michael
Missal's first report, filed Nov. 21.
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=43075'>Read
more. (Registration required.)
name='3'>Brokers Probed by Regulators on Mortgage Security
Sales
w:st='on'>
size='3'>U.S.
size='3'>regulators, concerned that brokerages may have sold clients
money-losing securities tied to subprime mortgages, are seeking
information about how the investments were marketed, Bloomberg News
reported today. The Financial Industry Regulatory Authority (FINRA),
which polices about 5,100 brokerages, sent letters Dec. 14 to more than
a dozen firms that sell collateralized mortgage
obligations. Mounting losses from securities
tied to home loans are prompting regulators to examine how Wall Street
firms valued and promoted the products. FINRA CEO Mary Schapiro said in
September that the agency was scrutinizing sales of mortgage-backed
products to retirees, and had sent a round of letters seeking
information on the transactions.
href='http://www.bloomberg.com/apps/news?pid=20601103&sid=apNYRLoCVcUk&refer=us'>Read
more.
Mass Torts
name='4'>Credit Crisis Caused Rise in Class-Action Fraud
Suits
A study released
yesterday said that class-action lawsuits increased more than 40 percent
last year fueled by troubled mortgage investments and a volatile stock
market, according to the
size='3'>Washington Post today. Plaintiff
lawyers targeted 166 companies last year, including 47 financial
services businesses, which have been among the hardest hit by losses in
subprime mortgages, according to the report by
w:st='on'>
size='3'>Stanford
face='Times New Roman'
size='3'>University
size='3'>and Cornerstone Research. The 2007 tally contrasts with 116
cases during the comparable period a year earlier. A separate study
issued yesterday by NERA Economic Consulting drew similar conclusions.
Researchers said that the increase reflected a surge in lawsuits in the
last six months of the year, when the markets bounced on reports of
tightened credit access and widening troubles with housing
investments.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/01/03/AR2008010304095_pf.html'>Read
more.
name='5'>State Street Corp. Is Sued over Pension Fund
Losses
The State Street
Corporation, which manages $2 trillion for pension funds and other
institutions, ousted a senior executive yesterday and said it would set
aside $618 million to cover legal claims stemming from investments tied
to mortgage securities, the
size='3'>New York Times reported today. State
Street made the announcement after five clients sued it, claiming they
had lost tens of millions of dollars in
w:st='on'>
size='3'>State Street
size='3'>funds that they were told would be largely invested in
risk-free debt like Treasuries. One fund lost 28 percent of its value
during the credit troubles in the summer after placing big bets on
mortgage-related securities, according to the lawsuits.
href='http://www.nytimes.com/2008/01/04/business/04state.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
name='6'>Asarco Deal Receives Court Approval
A bankruptcy judge has
given Tucson-based copper miner Asarco LLC authority to settle
environmental claims filed by the federal environmental
authorities,
face='Times New Roman' size='3'>Montana
environmental regulators and Montana Resources Inc.,
Bloomberg News reported yesterday. The three claimants will have
approved unsecured claims totaling $18.9 million. The bankruptcy court
in late November denied a request by Asarco's parent, Grupo Mexico SA de
CV, for veto power over settlements approving claims over $10 million.
The court took control away from Grupo
w:st='on'>
size='3'>Mexico
2005 and set up a board of three, giving Grupo
w:st='on'>
size='3'>Mexico
size='3'>only one seat. Asarco filed for bankruptcy in August 2005 to
deal with asbestos claims.
name='7'>WorldCom Reaches Settlement to Avoid Appeal
WorldCom reached an
agreement on Wednesday with a group of claimants in its bankruptcy case,
allowing the defunct telecommunications company to avoid a lengthy
district court appeal as it continues to tie up the loose ends of its
long-standing chapter 11 case,
size='3'>Bankruptcy Law360 reported yesterday.
The claimants are a group of shareholders of WorldxChange, a company
that in 2000 merged with World Access Inc., which was partially owned by
WorldCom at the time. The claimants alleged that they agreed to trade
their 38,918,213 shares of WorldxChange for 25,619,859.62 shares of
World Access in
size='3'>February 2000. At the time, World Access stock was valued at
$22.875 a share, so the total price of the transaction totaled over $286
million, court documents said. However, by the time the merger was
officially finalized in December 2000, World Access stock had dropped to
around $3 a share and the company filed for bankruptcy a few months
later in April 2001.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=43134'>Read
more. (Registration required.)
As
Buyouts Falter, New Tactics Aim to Lock in Deals
As several other buyout
firms have recently bowed out of deals they made before the credit
markets seized up, companies and their lawyers are now changing tack and
focusing on strengthening the language in takeover contracts to help
ensure that transactions are completed, the
size='3'>New York Times reported today. The
issue of when buyers can walk away — and how much they have to pay
to do so — gained new urgency with a Delaware ruling in late
December. Chancellor William B. Chandler III, the chief judge of the
Delaware Chancery Court, ruled that Cerberus, the private equity firm
that bought Chrysler last year, did not have to close on its $4.1
billion planned buyout of United Rentals, the rental equipment operator.
Cerberus could terminate the deal by paying United Rentals a $100
million fee, he said.
href='http://www.nytimes.com/2008/01/04/business/04legal.html?ref=business&pagewanted=print'>Read
more.
name='9'>December Slump in Vehicle Sales Bodes
w:st='on'>
size='3'>Ill
Figures
Autodata Corp. yesterday
reported a 3 percent drop in sales of cars and light trucks in December
as housing woes and high fuel prices kept consumers away from showrooms,
the Wall Street
Journal reported today. General Motors Corp.'s
vehicle sales for December fell 4.4 percent compared with the same
period a year earlier, while Ford Motor Co. suffered a 8.9 percent drop.
Chrysler LLC increased sales 0.5 percent, thanks to an extended year-end
sale featuring heavy rebates and incentives. Toyota Motor Corp.'s
vehicle sales fell 1.7 percent in December. Overall in 2007, industry
sales declined 2.5 percent to 16,556,423, and most analysts expect
further declines in 2008.
href='http://online.wsj.com/article/SB119911559442159505.html?mod=hpp_us_whats_news'>Read
more. (Registration required.)
name='10'>Housing Glut Could Help War Wounded
Operation Homefront, a
nonprofit that aids the families of deployed and wounded servicemembers,
has launched what it says is a first-of-its-kind effort to match wounded
soldiers with lenders and homebuilders to help them buy homes at prices
they can afford in communities near Veterans Administration medical
facilities, the Associated Press reported today. ''Especially with so
much inventory, it seems like the perfect match,'' said Meredith Leyva,
co-founder of Operation Homefront. Her group, which helped 1,700 injured
servicemembers' families pay utility bills or other living expenses last
year, is seeing more families fall into bankruptcy with the threat
of homelessness, she said.
href='http://www.nytimes.com/aponline/business/AP-War-Wounded-Finances.html?pagewanted=print'>Read
more.
href='http://www.nytimes.com/aponline/business/AP-War-Wounded-Finances.html?pagewanted=print'>