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Lehman Brothers Holdings Inc. dodged, for now, a bankruptcy court ruling that could have effectively barred the defunct investment bank from making further distributions to creditors, Bloomberg News reported yesterday. The estimated value of more than 209,000 residential mortgage-backed securities claims should remain capped at $5 billion, instead of being raised to $12.1 billion as requested by a group of trustees, Bankruptcy Judge Shelley Chapman ruled yesterday. There’s “pretty clear case law on this point,” she said. The ruling doesn’t resolve the issue as Judge Chapman will continue to hear arguments and expert testimony over the trustee group’s bid to value the loans using statistical sampling instead of one-by-one, as Lehman advocates. The trustees argue Lehman’s method will cost $110 million and take 41 years to complete. The streamlined process can be done in a year, they argue.

Thirteen U.S. Senate Democrats are pushing Education Secretary Arne Duncan to wipe out federal loans given to students who enrolled in a troubled for-profit college that’s being dismantled amid federal and state investigations, the Wall Street Journal reported today. Sen. Elizabeth Warren (D-Mass.) and 12 other Democrats, sent a letter on Tuesday urging Duncan to “immediately discharge” federal student loans for students at schools owned by Corinthian Colleges Inc., which reached an agreement with the federal government over the summer to dissolve itself. By taking out student loans, borrowers “are making a serious financial decision that will affect them for years to come,” the lawmakers wrote. “If colleges fail to hold up their end of the bargain — if they break the law in ways that bear on their students’ educational experience or finances — students should not literally be stuck paying the price.”

The biggest U.S. private mortgage insurer, Radian Group Inc., is close to a sale of its financial guaranty business to Assured Guaranty Ltd. for around $800 million, Reuters reported yesterday. Radian's financial guaranty business provides insurance and reinsurance of municipal bonds, structured finance transactions and other credit-based risks. Radian has stopped underwriting new business in the unit, and has been working with investment bank Goldman Sachs Group Inc. to explore its sale since last summer. Bermuda-based Assured Guaranty, a direct competitor in the financial guarantee business, has long been a favorite to win the business.

The remnants of First Mariner Bancorp won bankruptcy court approval of a liquidation plan that promises to pay investors in bank-holding company's debt about 21 cents on the dollar, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge David E. Rice yesterday signed off on the liquidation plan for Capital Trust Holdings, the name for what's left of the company following the sale of its stake in the 1st Mariner bank chain. The debt investors had purchased about $63 million in trust-preferred securities from First Mariner.

Eight of the largest U.S. banks will need fatter capital cushions as part of U.S. regulators’ latest efforts to make the financial system less risky, the Wall Street Journal reported today. The biggest impact will be felt by JPMorgan Chase & Co., the nation’s largest bank by assets, which is $21 billion short of the requirement, according to Fed officials. Fed Vice Chairman Stanley Fischer — in an apparent misstep — disclosed during an open meeting that J.P. Morgan is the only one of the eight banks to face a shortfall under the proposed rule. Fed staff had closely guarded details of the proposal’s impact on specific firms. The proposal, which will be phased in starting in 2016 and take full effect in 2019, is aimed squarely at pushing big banks to shrink, an outcome regulators were explicit in saying they hope to encourage to reduce the likelihood a firm’s failure could require bailouts or damage the broader economy.

Federal Reserve officials are seriously considering an important shift in tone at their policy meeting next week: dropping an assurance that short-term interest rates will stay near zero for a “considerable time” as they look more confidently toward rate increases around the middle of next year, the Wall Street Journal reported today. Senior officials have hinted lately that they’re looking at dropping this closely watched interest-rate signal, which many market participants take as a sign rates won’t go up for at least six months. “It’s clearer that we’re closer to getting rid of that than we were a few months ago,” Fed Vice Chairman Stanley Fischer said. New York Fed President William Dudley has avoided using the “considerable time” phrase in recent speeches and instead said the Fed should be “patient” before raising rates.

Mortgage-finance companies Fannie Mae and Freddie Mac yesterday provided details of new low-down-payment mortgage programs that could reduce costs for first-time and lower-income home buyers, providing a boost to a segment largely absent from the housing market for the last few years, the Wall Street Journal reported today. The mortgage-finance companies and their regulator, the Federal Housing Finance Agency, said that the companies would start to back mortgages with down payments of as little as 3 percent, and that the loans would be available to first-time home buyers, borrowers who haven’t owned a home for at least a few years and to those who have lower incomes. The new loans could be most popular among high-credit-score borrowers who might have otherwise had to resort to pricey mortgages backed by the Federal Housing Administration.

Banks are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits, The Wall Street Journal reported yesterday. The banks, including J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America Corp., have spoken privately with clients in recent months to tell them that the new regulations are making some deposits less profitable. In some cases, the banks have told clients, which range from large companies to hedge funds, insurers and smaller banks, that they will begin charging fees on accounts that have been free for big customers. Bank officials are also working with these firms to find alternatives for some of their deposits. The change upends one of the cornerstones of banking, in which deposits have been seen as one of the industry’s most attractive forms of funding. The new rule driving the action is part of a broader effort by U.S. regulators and policymakers to make the financial system safer. But the move could inconvenience corporations that now have to pay new fees or look for alternatives to their current bank.

Banks aren't going to be able to hide behind the Fair Debt Collection Practices Act anymore, as the regulatory crackdown shifts to a larger scope, according to an analysis today in Credit&CollectionsRisk.com. In the latest development, New York state approved tougher new rules for debt collectors, including an extended period for consumers to dispute cases. The scope seems almost certain to widen to include in-house collection departments. If that happens, it will change a legal landscape that has been in place since 1977, when the fair practices act took effect. Only outside debt-collection firms, known in the industry parlance as third-party collectors, are subject to that law. Banks oppose the possibility that original creditors will become subject to the same rules, and the industry has tried to lobby to prevent the inclusion of so-called first-party collectors.

New York State’s Department of Financial Services yesterday announced the formal adoption of new debt-collection regulations that place new specific disclosure and written communication requirements on third-party debt collectors and debt buyers, InsideARM.com reported yesterday. In addition to new requirements, the rules also create a structure for the use of email in debt-collection efforts. Many of the rules, initially proposed in mid-2013, will go into effect in March 2015, while some debt verification, disclosure and communication requirements will go into force in August 2015. The rules impact only third-party debt collectors and debt buyers for now; attorneys are specifically exempted as long as they are acting in a legal capacity. In addition, creditors, process servers and government officials are exempt from the new rules.