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March 3, 2008
Mortgage
Lending
name='1'>U.S.
face='Times New Roman' size='3'> Trustees Sue Countrywide over
Alleged Abuses
Three
w:st='on'>
w:st='on'>
size='3'>U.S.
size='3'>trustees sued mortgage lender Countrywide Home Loans Inc. last
week in three separate homeowners'
bankruptcy cases, blasting the company's alleged “bad-faith
conduct that abused the judicial
process,” which they said was part of a nationwide, ongoing
pattern,
size='3'>Bankruptcy Law360 reported on Friday.
One complaint, filed Thursday by U.S.
Trustee Donald F. Walton, said that Countrywide twice
filed motions to lift the automatic stay
in which it claimed that the Atchleys were behind on payments they had
actually made. The company also repeatedly
failed to make sure that proofs of claims filed in the case were
correct, Walton said. A second complaint, also
filed Thursday by U.S. Trustee Habbo G. Fokkena in the
bankruptcy case of
w:st='on'>
size='3'>Ohio
size='3'>homeowner Marlyn O'Neal, makes similar allegations. Case
information for the
w:st='on'>
size='3'>lawsuit was not immediately
href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=48657'>Read
more.
(Registration required.)
In related news, a securities
filing shows that Countrywide Financial
Corp.'s mortgage portfolio continues to deteriorate rapidly as defaults
increase and home prices fall, the
Wall Street Journal reported today. The Calabasas, Calif.,
lender's annual filing with the Securities
and Exchange Commission, released late Friday, showed a big increase in
late payments on option adjustable-rate
mortgages (ARMs). At the end of 2007, payments were at least 90 days
overdue on 5.4 percent of option ARMs held
as investments by Countrywide's banking arm, up from 0.6 percent a year
earlier. Countrywide held $28.42 billion
of such loans as of Dec. 31. The company said that 71 percent of the
borrowers were making minimal payments. Only
about a fifth of the borrowers were required to fully document their
incomes before receiving the loans.
href='http://online.wsj.com/article_print/SB120451272111406901.html'>Read
more. (Registration
required.)
name='2'>Senate Dems Vow to Keep Pushing for Housing
Stimulus
Senate Democrats pledged
on Friday to renew their efforts to pass
a housing stimulus package after Republicans objected Thursday to
bringing the measure to the floor,
CongressDaily
size='3'>reported on Friday. Sen. Sherrod
Brown (D-Ohio) said that an estimated 2 million American families within
the next two years could face
foreclosure as a result of the adjustable-rate mortgages resetting to
higher rates. Bankers led opposition to the
bill because of a bankruptcy provision that would allow a judge to
adjust the principal of a loan if it were in
foreclosure. Lenders argue the cramdown would raise mortgage costs
because they would be unsure whether they
would generate sufficient profit if the loan terms could later be
rescinded. Democrats are reluctant to pull the
bankruptcy language from the package because they contend that it is the
only hammer to force banks to
renegotiate ill-suited loans that should not have been made in the first
place. They also noted that the
protection already applies to vacation homes, so expansion should not
cause much disruption. The House is
expected to take up its own housing stimulus package in the coming
weeks.
name='3'>Commentary: Relief for
Borrowers
As the housing stimulus
package was denied a vote last week in the
Senate, perhaps the wisest approach to the current housing crisis is to
give the Bush administration more time to
push the financial services industry into modifying the loans of needy
and capable borrowers, according to an
editorial in today’s
size='3'>Washington Post
size='3'>. Though loan modifications have been modest so far, the
program has been in operation for only a couple
of months. New progress reports are due out soon, and if the
administration's policy does not appear to be
working, there are a number of congressional alternatives.
size='3'>Most of the alternatives, such
as plans being floated by the Office of Thrift Supervision, Sen.
face='Times New
&
#13; Roman' size='3'>Chris
size='3'>topher J. Dodd (D-Conn.) and
Rep. Barney Frank (D-Mass.), involve the government buying up distressed
mortgages or mortgage-backed securities
at a discount and then moving homeowners into lower-cost
government-backed mortgages, which would cost the
government tens of billions of dollars. While such ideas do promise to
stem the subprime crisis quickly, their
costs, though high, are at least measurable and transparent.
T
size='3'>he public should not have to pay for even a carefully
calibrated bailout except as a last resort. No aid
should go to the many subprime borrowers who couldn't even pay their
teaser rates -- or those who used subprime
financing for speculative investments.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/02/AR2008030201763_pf.html'>Read
more.
name='4'>High-Yield Debt Market Mirrors '91
Recession
High-yield debt sales
have sputtered so far in 2008 and are off to
their weakest start in 17 years thanks to an anemic
w:st='on'>
w:st='on'>
size='3'>U.S.
size='3'>economy, a worldwide credit crunch and a pronounced absence of
investor appetite for risky assets,
Reuters reported on Friday. Globally, less than $2 billion in junk bonds
have been sold so far this year, all
in
size='3'>North America
size='3'>. That marks the slowest start since the 1991 recession, when
no junk bonds were sold in the first two
months, according to Thomson Financial data. 'Historically, high yield
sales and defaults rates have always been
a precursor to corporate bankruptcies,' said ABI Executive
Director
face='Times New Roman' size='3'>Sam
Gerdano. 'We see atmospheric
conditions that are troubling.' So far this year, at least 16 public
companies have filed for bankruptcy,
representing nearly $9 billion in assets. As measured by assets, that's
the fastest start since 2002, when a wave
of 220 firms filed for bankruptcy in the first two months of that year
in the wake of the dot.com market crash,
affecting $65 billion in assets.
href='http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN2947877720080229?sp=true'>Read
more.
face='Times New Roman' size='3'>
name='5'>Delphi Seeks to Maintain
Exclusivity to File Chapter 11
Plan
Delphi Corp., struggling
to line up the $6.1 billion in financing
it needs to exit chapter 11 protection, asked the U.S. Bankruptcy Court
in
w:st='on'>
size='3'>Manhattan to
extend
for two months its exclusive right to file a reorganization plan, the
Associated Press reported on
Friday. The company is also seeking an
extension through July 31 to win creditor
support for a reorganization plan. The auto parts supplier's
reorganization plan was confirmed by the bankruptcy
court last month, but the company has struggled to nail down the $6.1
billion in debt financing it needs to fund
its plan and post-bankruptcy operations.
w:st='on'>
size='3'>Delphi said that 'severe
dislocations' in the credit markets that
began in the summer of 2007 have complicated its efforts to line up the
financing.
href='http://biz.yahoo.com/ap/080229/delphi_bankruptcy.html?.v=1'>Read
more.
name='6'>Judge Approves
w:st='on'>
size='3'>U.S.
size='3'>Energy Systems Settlement
Bankruptcy Judge
size='3'>Robert Drain approved a proposed
settlement between
w:st='on'>
size='3'>U.S.
face='Times New Roman'>
size='3'> Energy Systems Inc. and its largest shareholder, Nakash
Energy LLP, Bankruptcy Law360
size='3'>reported on Friday. Judge Drain signed off
Wednesday on the governance agreement between U.S. Energy and Nakash
Energy LLP, with the debtor opting to
relinquish control over the makeup of the board in exchange for an end
to the legal battle that has been
unfolding in
face='Times New Roman'
size='3'>Delaware. The
litigation sought to force the company to
hold an annual general meeting of shareholders for the election of
directors and the removal of the then-current
members of the USEY board. Under the agreement, U.S. Energy's board will
now be reshuffled, with three
Nakash-backed directors taking a seat on the managerial panel. The
parties agreed that no further changes would
be made to the altered board until the confirmation and consummation of
U.S. Energy's chapter 11 plan, according
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=48636'>Read
more.
(Registration required.)
name='7'>Court Approves Settlement in
size='3'>College
size='3'>Bankruptcy
Kentucky Attorney General
Jack Conway said that a bankruptcy court
has approved a settlement in the
face='Times New Roman'
size='3'>Decker
face='Times New Roman'
size='3'>College bankruptcy case
in
w:st='on'>
size='3'>Louisville, the
Associated Press reported on Friday.
face='Times New Roman'
size='3'>Conway’s office said
that the agreement provides immediate relief
in the form of loan forgiveness for about 2,200 students who have
private student loans directly with
size='3'>College
size='3'>. Other students currently liable to other lending institutions
may receive financial relief to offset
their loan debts if the trustee recovers assets and priority claims are
paid.
w:st='on'>
size='3'>Decker
size='3'>College
size='3'>was a for-profit school that shut down in 2005 amid a
bankruptcy and federal and state
href='http://www.bostonherald.com/news/regional/politics/view.bg?articleid=1076899&format=text'>Read
more.
Denies Consultant Bonuses in Northwest
Bankruptcy
A bankruptcy judge on Friday
rejected almost $4.3 million in 'success
fees' for consultants in the Northwest Airlines bankruptcy, saying that
they were paid well enough for their work
without the bonuses, the Associated Press reported on Friday. The
airline emerged from bankruptcy protection on
May 31. Objections to the completion fees came from a hedge fund, the
bankruptcy trustee and the union that
represents Northwest flight attendants, who took steep pay cuts in
Northwest's reorganization.
href='http://biz.yahoo.com/ap/080229/northwest_bankruptcy.html?.v=1'>Read
more.
name='9'>Banking Fees Are Rising and Often
Undisclosed
The Government
Accountability Office will release a report today
saying that banks are failing to provide consumers with information
about fees on savings and checking accounts
even though federal rules require such disclosures, the
face='Times New Roman'
size='3'>Washington Post reported yesterday.
The GAO report also says that some of the
invisible fees have climbed substantially in recent years. The average
overdraft fee, for instance, increased 11
percent from 2000 to 2007. GAO staff members made undercover visits to
185 branches of 154 depository
institutions throughout the country and were unable to get comprehensive
lists of checking and savings account
fees at more than a one-fifth of the locations. The information was not
available on the Web sites of half of the
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/03/01/AR2008030100189_pf.html'>Read
more.
name='10'>States and Cities Start Rebelling on Bond
Ratings
State and local officials say
that a complex system of credit ratings
and insurance policies that Wall Street uses to set prices for municipal
bonds makes borrowing needlessly
expensive for many localities, the New York Times reported
today. States and cities have begun to fight
back, saying they can no longer afford the status quo given the
slackening economy and recent market turmoil. The
bonds cities and states sell to investors are generally tax-free and
much safer than those issued by
corporations. However, some officials complain that ratings firms assign
municipal borrowers low credit scores
compared with corporations. Taxpayers ultimately pay the price, the
officials say, in the form of higher fees and
interest costs on public debt.
href='http://www.nytimes.com/2008/03/03/business/03bond.html?_r=1&oref=slogin&ref=business&pagewanted
=print'>Read more.
name='11'>Judge Delays Decision on
Enron Funds
A federal judge on Friday
delayed a decision on whether to approve a
plan to distribute the money, part of a $40 billion lawsuit alleging
that financial institutions that worked with
Enron participated in the accounting fraud that led to the company's
downfall, the Associated Press reported on
Saturday. U.S. District Judge Melinda Harmon also held off on whether to
approve $688 million in attorneys' fees
being requested by San Diego-based Coughlin Stoia Geller Rudman &
Robbins LLP, the law firm for the lead
plaintiffs in the case. If approved, the attorneys' fees would be the
largest in a securities fraud case. After a
4 1/2 hour hearing during which attorneys, Enron investors and former
Enron employees argued both for and against
the distribution plan and the attorney fees, Judge Harmon said that she
would make decisions on both issues as
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/29/AR2008022904182.html'>Read
more.
href='http://www.washingtonpost.com/wp-dyn/content/article/2008/02/29/AR2008022904182.html'>