%1

Obama Signs Puerto Rico Debt Bill, But Says Tough Work Still Ahead

U.S. President Barack Obama today signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) into law to help Puerto Rico address its $70 billion debt, but said more tough work was ahead to help the U.S. territory regain financial stability. The Senate yesterday passed the House-approved bill by a vote of 68-30. Puerto Rico's semi-public power utility, known as PREPA, today said that it would make all of a $415 million debt payment due tomorrow. PREPA, which had been on the brink of collapse under $8.3 billion in debt, last year reached an exchange deal with most of its creditors, which is being finalized. The utility said today that it would make its $415 million payment using operational funds and proceeds from new bond sales. Puerto Rico faces $70 billion in total debt, a stalled economy, and high poverty and unemployment. The territory's debt of $1.9 billion due tomorrow - of which PREPA's payment was a portion - includes nearly $800 million in general obligation (GO) debt, the island's highest-ranking debt protected by a constitutional pledge. It was unclear today whether Puerto Rico would make that payment.

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Housing Agency Overhauls Rules to Help Struggling Homeowners

A federal program that sold more than 100,000 soured mortgages to private investors at discounted prices is getting a major overhaul, the New York Times DealBook blog reported today. Changes announced by federal housing officials today follow months of criticism from legislators and housing advocates that the buyers of the loans have not done enough to keep struggling borrowers in their homes. The housing officials said that private investment firms buying delinquent mortgages would have to consider reducing the total amount of money owed on a mortgage as part of potential modification to make a loan more affordable. The requirement that private buyers — mostly private-equity firms and hedge funds — will have to consider things like principal reduction in reworking troubled mortgages represents a significant change in a government program that began in earnest four years ago in the wake of the housing crisis. Edward L. Golding, principal deputy assistant secretary with the Department of Housing and Urban Development, said that the housing agency was “deeply committed to protecting struggling homeowners and making certain they have the greatest opportunities to avoid foreclosure and remain in their homes.” Federal officials also said they would make it more difficult for private buyers to temporarily reduce the interest rate on a mortgage only to have it revert to the original terms after five years, a practice used by some private buyers.

Visa, MasterCard Class-Action Settlement with Retailers Rejected by U.S. Court

A U.S. court of appeals today rejected the 2012 swipe-fee settlement, originally valued at $7.25 billion, between the retail industry and payment companies Visa Inc. and MasterCard Inc., calling the agreement “unreasonable and inadequate,” the Wall Street Journal reported today. “The benefits of litigation peace do not outweigh class members’ due process right to adequate representation,” the ruling said. The court ruled that the settlement violated the rule that requires the representative parties to “fairly and adequately protect the interests of the class” and uncover any conflicts of interest. The 2012 settlement broke the class of plaintiffs into two groups: one that accepted Visa or MasterCard from 2004 through 2012 and another that would accept the cards from 2012 onward. In its ruling, the appeals court noted the conflict between the merchants in the first class, which were pursuing solely monetary relief, and the merchants in the second class, which were seeking only injunctive relief. “The former would want to maximize cash compensation for past harm, and the latter would want to maximize restraints on network rules to prevent harm in the future,” the ruling said. In addition, only the first group was eligible for the $7.25 billion cash settlement and could opt out of the settlement.

Debt Collection Complaints Decline in CFPB’s Monthly Snapshot

Debt collection complaints fell in May, and the three-month average of complaints from March through May also slightly declined, according to the Consumer Financial Protection Bureau’s (CFPB) latest monthly complaint report released on Tuesday, ACAInternational.org reported. There were 6,911 debt collection complaints in May, a 5 percent decrease.  Debt collection represented 29 percent of complaints submitted in May 2016. The three-month average for debt collection complaints from March to May this year is 7,415 compared to 7,442 this time last year, according to the report. Since its inception in July 2011, the CFPB has handled a total of approximately 906,400 complaints as of June 1, including approximately 23,800 in May, according to the report. The CFPB received a total of 241,276 complaints on debt collection.

Analysis: Today’s Renters Really Are Worse Off Than Their Parents

Sharp increases in rents along with stagnant incomes over the past five years have helped create a dire situation for many of the country’s renters, the Wall Street Journal reported yesterday. Inflation-adjusted rents have risen by 64 percent since 1960, but real household incomes only increased by 18 percent during that same time period, according to an analysis of U.S. Census data released by Apartment List, a rental listing website. Renters fared the worst during the decade between 2000 and 2010, when inflation-adjusted household incomes fell by 9 percent while rents rose by 18 percent, according to Apartment List. That is likely because there were two recessions during that time and a housing bust in 2008 that drove millions of homeowners into renting.

Now Available for Pre-Order in the ABI Bookstore: How Secure Are You? Secured Creditors in Commercial and Consumer Bankruptcies

ABI's newest title, How Secure Are You? Secured Creditors in Commercial and Consumer Bankruptcies, provides practitioners with in-depth analysis of the most common concerns in secured claims disputes, including citation to important case law. This indispensable guide, written by members of ABI’s Secured Credit Committee, is a must-read for anyone whose work involves secured creditor claims. The new book is available for pre-order in the ABI Bookstore (be sure to log-in to obtain the ABI member price!).

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!

Puerto Rico Governor Says Shutdown Won’t Prevent July 1 Default



Eight days before about $2 billion in bond payments come due, Puerto Rico Governor Alejandro García Padilla reiterated today that the commonwealth will default on its general obligations even if he halted services on the island, Bloomberg News. “If I shut down the government, I will not have enough money to pay,” said García Padilla. García Padilla is in the nation’s capital lobbying for Congressional approval of a bill that would set up a framework for the commonwealth to restructure its $70 billion in debt. The Senate is supposed to take up the measure next week. The House passed the bill (H.R. 5278), which also has the support of the Obama administration. Puerto Rico owes $805 million on its general-obligations, which the island’s constitution stipulates must be paid before other expenses, on July 1. Including its agencies, the island faces a $2 billion principal and interest payment. Even limiting government operations won’t free up cash to pay creditors, the governor said.

For a summary of H.R. 5278 from the forthcoming July edition of the ABI Journal, please click here.



For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Editorial: Houston's Pension Tension



Houston's unfunded pension liability now stands at an estimated $5.6 billion, and it's growing, according to a Houston Chronicle editorial today. About 31 cents of each dollar Houston spends on payroll now goes to pension funds. In truth, if the city government did what it should and used actuarially determined rates, that figure would be closer to 35 percent. Houston Mayor Sylvester Turner and union leaders are negotiating, an encouraging sign after years of costly stalemate. Among the options under discussion are lower cost-of-living adjustments and higher retirement ages, according to the editorial. One option off the table for now is a reform that would move new hires to a 401(k)-style plan. Eliminating those defined-benefit pension plans is an important option to consider because pensions as they now work raise plenty of problems, according to the editorial. Read the full editorial.

For more on the looming crisis in public and private pensions, watch the special edition of "Eye on Bankruptcy" taped live at the 2016 Annual Spring Meeting.

Report: Foreclosure Starts Now at Pre-Crisis Levels



Black Knight Financial Services reported that foreclosure inventory continues to decrease, decreasing 3.55 percent from April to May and 29 percent year-over year, HousingWire.com reported. Foreclosure inventory in May hit below 575,000, down from 800,000 last year. That marks the lowest foreclosure inventory since the summer of 2007. May’s 62,100 foreclosure starts were 20 percent less than May 2015, and remain below pre-crisis levels, according to the report. Delinquencies increased slightly in May by just 0.36 percent, however they are still down by almost 13 percent annually.

Latest ABI Podcast Examines Intersection of Consumer Credit and Domestic Violence 



Spring 2016 ABI Resident Scholar Melissa Jacoby talks with Prof. Angela K. Littwin of the University of Texas at Austin School of Law about Littwin's research on the relationship between consumer credit and domestic violence. Littwin interviewed domestic violence victims about “coerced debt,” which occurs when the abuser in a violent relationship obtains credit in the victim's name via fraud or coercion.

Commentary: In Chapter 11 Disclosure, No Firm Is Above the Rules



The retention of a professional firm in a chapter 11 case, while requiring some thoughtful and perhaps tedious work, is incredibly straightforward, according to a commentary by Perry M. Mandarino in yesterday's Wall Street Journal. There are long established standards that are intended to protect the integrity of the proceeding and form the fabric of chapter 11 cases. The successful adjudication of a bankruptcy case requires many building blocks, with process and transparency being two of the most critical. Any proffered rationale to be exempt from disclosure is just a brazen mix of slothfulness and arrogance, according to Mandarino. Claims of “we didn’t think it was relevant” or “we don’t have a database” appear insincere given technology and established regulatory compliance programs. Let the bankruptcy court decide relevance, according to Mandarino, and if systems aren’t in place to unearth potential conflicts, there is always the old-fashioned way of direct inquiry among a firm’s partners and staff.

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!

Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!



Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!