April 302008

 

House

Panel Markups Focus on Bankruptcy Relief

for Active Duty Military, Housing Stimulus Legislation

The House Judiciary Committee
today will mark up H.R. 4044, a bill that

would exempt military reservists called to active duty and certain
others from application of the means test in

chapter 7. The House Financial Services Committee today will finish its
markup of legislation that would allow

the Federal Housing Administration to refinance up to $300 billion in
new guarantees for subprime loans at risk

of default. The panel began debate on the bill last week and the measure

will be part of the housing-stimulus

package that will be considered on the House floor the week of May 5.

/>

Click here to view the
Webcast of the House Judiciary

Committee markup of H.R. 4044.

href='http://www.house.gov/apps/list/speech/financialsvcs_dem/mu043008.shtml'>Click

here to view the

Webcast of the House Financial Services Committee markup of H.R.
5830.

name='2'>Senator to Introduce Legislation to Curb

Credit Card Company Abuses

Senate Banking
Chairman

face='Times New Roman' size='3'>Chris
size='3'>topher Dodd (D-Conn.) will introduce

legislation today that would curb certain credit card practices that
credit have labeled abusive, joining a

number of congressional members looking to address the issue,

size='3'>CongressDaily reported. Dodd has
pushed top issuers to take steps to provide

consumers more friendly terms. While some issuers such as JPMorgan Chase

& Co. and Citigroup have taken

initiatives to ban some practices, Dodd contends that there needs to be
a uniform playing field so all consumers

are treated fairly. The Dodd-sponsored bill would require cardholders to

be given 45 days' notice of any interest

rate change; the current limit is 15 days. It would ban a practice
called 'universal default,' in which customers

are charged a higher interest rate if they miss a payment on another
card or if their credit score has dropped,

and prohibit interest charges on all debt paid on time. If an issuer
were to raise interest rates on a card with

outstanding debt, the measure would require payments to be first applied

to the balance with the highest rate of

interest. It also would ban issuers from charging interest on late and
over-the-limit fees. Senator Carl Levin

(D-Mich.) and House Financial Institutions Subcommittee Chairwoman
Carolyn Maloney (D-N.Y.) have also introduced

measures aimed at curbing abusive credit card
practices.

Housing

name='3'>Critics Say Federal Mortgage Plan Falls

Short

Federal housing
statistics show that fewer than 2,000 homeowners

at risk of foreclosure have been helped by a Federal Housing
Administration (FHA) program that President Bush

promised would help homeowners who had fallen behind on their mortgage
payments, the New York Times reported
today. FHA officials have asserted in

recent weeks that more than 150,000 people have benefited from the FHA
Secure program, which was intended to help

troubled homeowners refinance into stable, government-issued loans.
Though more than 400,000 mortgages will be

refinanced through FHA Secure this year, statistics show that only about

4,000 will be held by homeowners who

have fallen behind on their payments, While the officials say that the
program has helped people who were

anticipating difficulties in paying their mortgages, some lawmakers and
industry analysts say that the statistics

prove that the program has failed to help the most vulnerable.
“FHA Secure, while a good idea, is not

addressing the magnitude of the problem,” Senate Banking
Chairman

face='Times New Roman' size='3'>Chris
size='3'>topher J. Dodd (D-Conn.), who is

calling for legislation that would help many more troubled
borrowers. 

href='http://www.nytimes.com/2008/04/30/business/30fha.html?_r=1&oref=slogin&ref=business&pagewanted=

print'>Read more.

name='4'>Proposal by FDIC Chair Seeks Government

Loans to Aid Homeowners

Federal Deposit Insurance

Corp. Chairman Sheila Bair is finalizing

a legislative proposal that would allow the Treasury Department to make
direct loans for close to one million

homeowners in the latest government initiative to stabilize the slumping

mortgage market, the

face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The plan would

authorize the new government loans so that borrowers could pay down up
to 20 percent of the principal they owed

on their mortgage. Bair has raised concerns that existing efforts to
stem mortgage foreclosures are not effective

enough. One difference between her plan and another measure advancing
through Congress is that the FDIC proposal

would not provide insurance for refinanced loans. Instead, it would
offer smaller loans to make existing loans

more affordable. According to the draft, borrowers would still be
required to pay their mortgage and the new

government loan, but they would not have to make any payments on the
Treasury loan for the first five

years. 

href='http://online.wsj.com/article_print/SB120951181604654391.html'>Read

more. (Registration

required.)

name='5'>Report: More Subprime, Alt-A Mortgages May

Head `Underwater'

Barclays Capital reported that
about half of recent subprime and Alt-A

borrowers may soon owe more on their mortgages than their houses are
worth or hold minimal equity, putting $800

billion of debt at greater risk of default, Bloomberg News reported
today. Subprime loans from 2006 and 2007 that

exceed the value of the homes jumped 5 percentage points to 19.8 percent

in the fourth quarter, and may reach 26

percent by midyear if prices drop at the same pace, Barclays analysts
wrote in a report yesterday. Alt-A loans, a

grade better than subprime, would grow to 23 percent from 16.3
percent.

size='3'>Among two-year-old Alt-A mortgages that are underwater, 33
percent are at least 60 days late, the

analysts wrote. That compares with 7 percent delinquency on similar
loans in which homeowners have equity of at

least 20 percent. For corresponding subprime loans, the delinquency rate

is 58 percent for underwater debt and 29

percent where equity exceeds 20 percent.
size='3'> 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=a8rYIdIDvfIo&refer=home'>Read

more.

name='6'>Countrywide Loss Focuses Attention on

Underwriting

Countrywide Financial
Corp. reported an $893 million loss for the

first quarter, amid mounting evidence of serious problems with its
underwriting of many home loans, the

Wall Street Journal
reported today. A federal

probe of Countrywide, the nation's largest mortgage lender, is turning
up evidence that sales executives at the

company deliberately overlooked inflated income figures for many
borrowers. Some of the problems are surfacing in

a mortgage program called 'Fast and Easy,' in which borrowers were asked

to provide little or no documentation of

their finances. In many cases, Countrywide didn't even require loan
officers to verify employment, according to

an October 2006 presentation by Countrywide's consumer-lending division.

The quarterly financial results, which

included $3.05 billion of credit-related charges, did not provide
details about the performance of the company's

'no-doc' loans, including the 'Fast and Easy' ones. Nearly 36 percent of

subprime mortgage loans to people with

weak credit records were at least 30 days overdue, up from 20 percent a
year before. For all loans serviced by

Countrywide, a category mostly made up of prime loans, the delinquency
rate was 9.3 percent, nearly double the

year-earlier rate of 4.9 percent. 

href='http://online.wsj.com/article_print/SB120945775409852363.html'>Read

more. (Registration

required.)

name='7'>New Jumbo Mortgage Rules Come under

Fire

While Congress included
rules in the economic stimulus package

passed in February to make it easier and less expensive for people to
take out jumbo mortgage loans, many

prospective borrowers and their mortgage brokers say that the new loans
are either not available or the rates are

far higher than they expected, the New York Times

reported today. Under the new rules that went into effect

April 1, a sizable number of jumbo loan

would be treated by the mortgage industry in the same way as smaller
conventional loans. This change —

raising the ceiling for loans backed by government-sponsored housing
finance agencies to nearly $730,000 in the

nation’s costliest locations — was intended to bring rates
down for more borrowers and stimulate the

lending that is needed to get the economy moving again. Members of
Congress and the mortgage-backed securities

industry remain optimistic about the new rules. They say it is too soon
to declare success or failure and argue

that the credit market that fuels home ownership must be given time to
adapt to rule changes that affect billions

in potential loans. 

href='http://www.nytimes.com/2008/04/30/business/30jumbo.html?ei=5087&em=&en=2a42f362e92962f3&ex=1209

700800&pagewanted=print'>Read more. 

w:st='on'>

size='3'>
name='8'>Florida
face='Times








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Roman'
size='3'> Hires Firm to Explore Lawsuit

over Junk-Rated Investments

w:st='on'>

size='3'>Florida hired a
law firm to explore suing Wall Street

dealers who sold securities to the state before their ratings were cut
to below investment grade, Bloomberg News

reported yesterday. The Florida State Board of Administration, which
oversees state pension funds and a local

government investment pool, hired Berman DeValerio Pease Tabacco Burt
& Pucillo to examine sales of

securities to the board that had investment-grade ratings before their
purchase and were subsequently cut to junk

status.
face='Times New Roman'

size='3'>Florida's Local
Government Investment Pool held $26

billion before a run triggered by the discovery of downgraded and
defaulted investments in November cut its

assets almost in half. Assets have since declined to $8.37
billion. 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aTMcgbmb12v0&refer=home'>Read

more.

Aloha

Airlines Closes Cargo Unit, Converts

Case to Chapter 7

Aloha Airlines Inc. has
shut down its cargo division and converted

its chapter 11 reorganization to a chapter 7 liquidation after two
suitors interested in purchasing the cargo

side of Aloha's business pulled out and GMAC Commercial Finance wouldn't

provide further financing,

size='3'>Bankruptcy

Law360 reported yesterday. Aloha filed for
chapter 11 protection on March 20 and

stopped passenger operations on March 31, but had kept its cargo service

running. Aloha and its parent company,

Aloha Airgroup Inc., listed assets of $216 million and liabilities of
$285 million as of Jan. 31. Aloha carried

almost four million passengers a year and handled about 85 percent
of

w:st='on'>

size='3'>Hawaii's nonmail
inter-island cargo, according to court

papers. The two potential buyers that withdrew are Saltchuk Resources
Inc. and Jupiter Holdings Group. An auction

for the cargo division had been slated for this week. Saltchuk had been
willing to pay $13 million for the

division and Jupiter had offered $13.65 million. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54550'>Read

more. (Registration

required.)

face='Times New Roman' size='3'>

name='10'>California
w:st='on'>

size='3'> Developer
w:st='on'>

size='3'>Empire
face='Times New Roman'

size='3'>Land Files for

w:st='on'>Ch.
size='3'>11

The spiraling real estate

market claimed another victim Friday as

Empire Land LLC, a major large-scale commercial and residential
developer in

face='Times New Roman' size='3'>California
size='3'>and

w:st='on'>
size='3'>Arizona

size='3'>, filed for chapter 11 protection, Bankruptcy

Law360 reported yesterday.
w:st='on'>

face='Times New Roman' size='3'>Empire
Land
size='3'>listed assets and liabilities in the range

of $100 million to $500 million and requested more time to prepare the
company's financial records. The filing

states that Empire
Land and its
affiliates own approximately 11,800 lots in 14

separate land projects, including 12 in
w:st='on'>

size='3'>California and two in

w:st='on'>
size='3'>Arizona. As of
Jan.

31, the company claims assets with a book value of about $106.4
million.

w:st='on'>
size='3'>Empire

size='3'>Land

size='3'>'s filing listed ownership of or partnership in 22 nondebtor
affiliates. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54517'>Read

more. (Registration

required.)

name='11'>Home Interiors & Gifts Files for

Bankruptcy

Home décor company
Home Interiors & Gifts Inc. filed for

chapter 11 protection yesterday due to dwindling sales and ineffective
cost-cutting measures,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported. The Carrolton, Texas-based

company listed assets and liabilities both in the $100 million to $500
million range on its chapter 11 petition.

The company’s six affiliates that also filed for bankruptcy
protection were Titan Sourcing LLC, Laredo

Candle Co. LLC, HIG Holdings LLC, Home Interiors de Puerto Rico Inc.,
Dallas Woodcraft Co. LLC and DWC GP LLC.

Home Interiors filed a motion asking the court to jointly administer all

seven cases. The company said that two

foreign affiliates in
face='Times New Roman'

size='3'>Mexico and one
in

w:st='on'>

size='3'>Canada,
as well as subsidiary Dormistyle Inc.,

weren't part of the bankruptcy filing and would continue operating
outside of the reorganization. 

href='http://bankruptcy.law360.com/secure/ViewArticle.aspx?Id=54634'>Read

more. (Registration

required.)

name='12'>Ziff Davis Creditors Blast Chapter 11

Plan

The unsecured creditors
of Ziff Davis Media have attacked the

media company's disclosure statement and proposed reorganization plan
and asked the court to order the company to

amend both, Bankruptcy
Law360 reported

yesterday. According to the creditors’ filing, the company's
statement omits information about the value of

the new stock to be created as part of the reorganization and does not
identify the reorganized company's board

of directors, analyze potential litigation the company may face or
provide reasonable financial projections for

its future. The creditors doubt Ziff Davis' claim that its earnings
before taxes will grow from $3.6 million in

the first half of 2008 to $7.6 million for the second half of 2008 and
to $13.8 million in 2010. 

href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=54576'>Read

more. (Registration

required.)