Mortgage

STOCKTON EXPERIENCED YEARS OF UNRAVELING PRIOR TO BANKRUPTCY



Stockton, Calif., recently became the largest city in the country to declare bankruptcy, but evidence of its unraveling has been mounting for years, the New York Times reported today. Housing prices shot up in the early 2000s, when commuters from the San Francisco Bay area bought and built homes in Stockton. After the bubble burst, the median home price plummeted by more than 60 percent in the last five years. In the first half of this year, the city had the highest foreclosure rate of any in the country, according to RealtyTrac. The unemployment rate has hovered around 17 percent for the last few years, nearly double the national average. While Stockton’s bankruptcy troubles can be traced in part to the collapse of the housing market and the subsequent erosion of the city's tax base, for years city leaders also mismanaged and overspent funds, pushing the city into financial peril, analysts and current city officials say. Stockton cannot afford the $417 million it owes for retiree health benefits, city officials say, and this year a bank repossessed city-owned parking garages and a $40 million building the city had bought intended to house an upgraded City Hall. Since 2009, the city has cut 25 percent of its police officers, 30 percent of its Fire Department and over 40 percent of all other city employees. Read more.

CALIFORNIA'S "CHARTER" CITIES ARE UNDER THE MICROSCOPE



The last three large California cities to seek bankruptcy protection are all "charter cities," and now another charter city, Compton, says that it may have to file for bankruptcy by September, the Wall Street Journal reported today. Of California's 482 cities, 121 have their own constitutions, or charters. That gives them more leeway in governing their own affairs, including the freedom to set their own rules about elections, salaries and contracts. But that autonomy may be at the root of some of their fiscal problems, some experts say. Charter cities are exempt from state laws that mandate salary limits for elected officials. These cities also were free during good times to include generous worker pay and staffing agreements in their charters that can be difficult to alter quickly during financial duress. Read more. (Subscription required.)

FORECLOSURE CRISIS HITTING OLDER AMERICANS



A new AARP report says that more than 1.5 million older Americans have already lost their homes, with millions more at risk as the national housing crisis takes its toll on those who are among the worst positioned to weather the storm, the Associated Press reported today. According to AARP:

• Nearly 600,000 people who are 50 years or older are in foreclosure.

• About 625,000 in the same age group are at least three months behind on their mortgages.

• Nearly 3.5 million — 16 percent of older homeowners — are underwater, meaning their home values have gone down and they now owe more than their homes are worth.

AARP said that over the past five years, the proportion of loans held by older Americans that are seriously delinquent jumped by more than 450 percent. Homeowners who are younger than 50 have a higher rate of serious delinquency than their older counterparts. But the rate is increasing at a faster pace for older Americans than for younger ones, according to AARP’s analysis of more than 17 million mortgages. Read more.

Click here to read AARP's press release on the report.

COMMENTARY: THE CFPB’S NEW MORTGAGE DISCLOSURES ARE A BUST



The Consumer Financial Protection Bureau's (CFPB) "Mortgage Disclosure Team" just came out with two proposed forms that are supposed to make things easier for borrowers, but lenders, including nonprofit Habitat for Humanity, are concerned that the new forms will impede their ability to enable low-income families to become homeowners, according to a commentary in today's Wall Street Journal. The CFPB is proposing to replace the old mortgage disclosure forms with a new Loan Estimate Form and Closing Disclosure Form. However, any lender, including organizations such as Habitat, is at legal risk if they try to help low-income borrowers who lack the ability to repay their loans. The new rules would also forbid many borrowers from making smaller payments every month, followed by a single, one-time balloon payment to retire the principal at the end, according to the commentary. Read more. (Registration required.).

STUDENT DEBT HITS THE MIDDLE-AGED



Student debt is rising sharply among all age groups, but middle-aged Americans appear to be struggling the most with payments, according to new data released on Tuesday by the Federal Reserve Bank of New York, the Wall Street Journal reported yesterday. The delinquency rate—or the percentage of debt on which no payment has been made for 90 days—was 11.9 percent for debt held by borrowers aged 40 to 49 as of March. That compares with a rate of 8.7 percent for borrowers of all ages. Two-thirds of the nation's $900 billion in student debt is held by Americans under 40, the Fed estimates. But borrowers over 40 are having a particularly tough time with student debt for several reasons, consumer and higher-education experts say. Many debtors over 40 are still paying balances incurred years ago from college, while their home values and savings have declined sharply in recent years. An Education Department program that provides loans to parents to fund their kids' education is also among the fastest-growing of the government's education loan programs. Read more. (Subscription required.)

REPORT: PENSION UNDERFUNDING ON THE RISE



The amount by which pensions at S&P 500 companies are underfunded grew from $245 billion to $355 billion between 2010 and 2011, according to a new report from Standard & Poor's, CongressDaily reported today. Additionally the transportation bill Congress passed at the end of June included a pension provision that broadened the timeline used to calculate how much companies should stow away to cover pension obligations. The longer timeline reduces the short-term impact of the recession, freeing up cash for companies to spend (and the government to tax). But the benefits are fleeting: "It appears that Congress was willing to permit future payments to obtain tax receipts now, even though the expected net return would turn negative after five years," according to the report. Read more.

COMMENTARY: KEEPING CREDIT BUREAUS IN CHECK



The Consumer Financial Protection Bureau (CFPB) on Sept. 30 will start supervising credit reporting agencies, including the big three: Equifax, TransUnion and Experian, according to a commentary in yesterday's Washington Post. For years, consumer advocates have complained that the information collected often includes errors. Under the Fair Credit Reporting Act, the bureaus and any businesses supplying them with data must correct inaccurate information. The bureaus, in turn, are required to put systems in place that allow consumers to dispute information. However, surveys have shown that getting erroneous information removed from credit files can be an exasperating experience. The credit bureau industry claims that most reports are accurate, but one problem with the system, according to the commentary, is that the bureaus rely on information provided to them by companies seeking to collect debts. The CFPB will supervise credit reporting agencies that have more than $7 million in annual receipts. This means that the agency's authority will cover about 30 companies that account for about 94 percent of the market. The three major credit bureaus issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans, the CFPB said. Read more.

ABI IN-DEPTH

“SUBJECTING BUSINESS PROJECTIONS TO SCRUTINY IN VALUATION DISPUTES” WEBINAR TO BE HELD ON JULY 30!



Reassembling the speakers from the highest-rated panel at the New York City Bankruptcy Conference this year, ABI will be holding a live webinar on July 30 at 11 a.m. ET titled, "Subjecting Business Projections to Scrutiny in Valuation Disputes." Panelists include:

• Moderator David Pauker of Goldin Associates, LLC (New York)
• Martin J. Bienenstock of Proskauer (New York)
• David M. Hillman of Schulte Roth & Zabel LLP (New York)
• Bankruptcy Judge Robert E. Gerber (S.D.N.Y.)

The panel will address:

• How much deference should management projections be accorded?
• How do you determine whether projections are unrealistically optimistic or pessimistic?
• What is the relevance of "market consensus?"
• How do management’s incentives impact projections?

The webinar is available to ABI members for $75 and is approved for 1.0 CLE hours in Calif., Ga., Hawaii, Ill., N.Y. (approved jurisdiction policy) S.C. and Texas. CLE approval is pending in Del., Fla., Pa. and Tenn. To register, please click here.

LATEST CASE SUMMARY ON VOLO: STUDENSKY V. MORGAN (IN RE MORGAN; 5TH CIR.)



Summarized by Aaron Kaufman of Cox Smith Matthews Inc.

The Fifth Circuit reversed the judgment of the district court and held that where a debtor does not claim a homestead exemption and then sells the homestead post-petition, the debtor has the burden of claiming the exemption in the proceeds within the six months allowed under applicable state law. In this case, because the debtor failed to claim an exemption in his homestead and failed to claim an exemption in the proceeds during the six months following the sale (i.e., while the proceeds were exempt under state law), the debtor lost his right to claim an exemption in the sale proceeds. The trustee's objection should have been sustained. The lower courts' decisions were reversed and remanded.

More than 570 appellate opinions are summarized on Volo typically within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: LIBOR SCANDAL UNDERMINES BANKERS' CLAIMS OF OVERREGULATION



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines the issues surrounding the Libor scandal and how it is undermining the push by bankers for looser regulations.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The anti-modification rule for home mortgages in chapter 13 should be repealed, subjecting mortgage debts to bifurcation like any other secured claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

IS YOUR ABI MEMBERSHIP PROFILE CURRENT?



Keeping a current profile will allow you to benefit from one of ABI's most important services - networking. When you update your profile, you are putting your most valuable information in the membership directory. Be sure to include your areas of expertise, firm information, education and join any other committees that are of interest. Click here to update your profile.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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July

- Southeast Bankruptcy Workshop

     July 25-28, 2012 | Amelia Island, Fla.

-Valuation Webinar, July 30 at 11 a.m. ET

August

- Mid-Atlantic Bankruptcy Workshop

     August 2-4, 2012 | Cambridge, Md.

September

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.


- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

REPORT: SHARP DROP IN U.S. HOMES LOST TO FORECLOSURE IN FEBRUARY



Though the nation's foreclosure woes persist, new data from RealtyTrac Inc. show they are easing amid a resurgent housing market, rising home prices and efforts by some states to buy homeowners more time to avoid losing their homes, the Associated Press reported today. The number of U.S. homes repossessed by lenders last month fell 11 percent from January and declined 29 percent from February last year, tumbling to the lowest level since September 2007, RealtyTrac said today. Some states continued to see sharp increases in homes lost to foreclosure last month, including Washington, Wisconsin and Iowa. But home repossessions declined both on an annual and monthly basis in a majority of states, including past foreclosure hotbeds such as California, Georgia and Arizona. All told, 45,038 U.S. homes completed the foreclosure process in February, less than half of the 102,000 homes lost to foreclosure in March 2010, when home repossessions peaked, according to the firm's records, which go back to January 2005. Read more.

COMMENTARY: FANNIE, FREDDIE AND THE GOVERNMENT'S HOUSE OF CARDS



The nascent housing price recovery is restoring health to Fannie Mae and Freddie Mac, the two government-sponsored enterprises that contributed so much to the crash of 2008, according to a commentary in today's Wall Street Journal. Both had earnings in 2012 and thus will not need money from the U.S. Treasury to cover operating losses, which is in contrast to the preceding three years when they cost the taxpayers over $180 billion. When Fannie and Freddie were losing money, Congress had a strong incentive to privatize or liquidate them, according to the commentary. The Obama administration proposed three options, the third of which was to restore them to the public-private status that fueled their rapid expansion in the late 1990s and early 2000s—and contributed to their downfall. Now that these GSEs promise to become cash cows able to palliate the government's budgetary distress, the government's talk about "resolving" them is more subdued, according to the commentary. The latest monthly Federal Reserve survey reported that "home prices rose amid falling inventories across much of the country." The GSEs' business in mortgage-backed securities is thriving, with Fannie having issued $865.5 billion of these instruments in 2012. The disturbing thing about this rosy scenario is that the entire home mortgage industry—not only Fannie and Freddie—has been effectively nationalized, according to the commentary. Read more. (Subscription required.)

ANALYSIS: AFTER FINANCIAL CRISIS, PROSECUTORS NAVIGATE TRICKY WATERS



Despite the recent political finger-pointing, the fact remains that few executives have been held responsible for when their companies engaged in misconduct, the New York Times DealBook blog reported yesterday. Despite the fear of charging a large bank with a crime, the Justice Department has tried to show its mettle recently in cases involving the manipulation of the London interbank offered rate (Libor). Its solution to the problem has involved having foreign subsidiaries of global banks plead guilty to a charge, rather than the whole entity. At a Senate Banking Committee hearing, Treasury Undersecretary David S. Cohen acknowledged that regulators had not aggressively pursued the individuals "who are responsible for the conduct that has resulted in fines and penalties against the institution itself." Although a few lower-level traders have been charged, the settlements involving large banks over Libor manipulation have not involved any real costs to senior executives, and HSBC’s money-laundering case involved neither a corporate guilty plea nor any direct action against the individuals responsible for long-running practices. Read more.

JOBLESS CLAIMS AT FIVE-YEAR LOW



A measure of jobless claims widely followed by economists fell to a five-year low, the latest sign that the labor market is slowly improving, the Wall Street Journal reported today. The four-week moving average of jobless claims, which smooths out weekly volatility in new unemployment claims, sank to 346,750, the lowest level since March 2008, the Labor Department said today. Meanwhile, the weekly number of U.S. workers filing new applications for benefits fell more than economists forecast, declining by 10,000 to a seasonally adjusted 332,000 for the week ended March 9. The Labor Department reported last week that employers added 236,000 jobs in February while the unemployment rate moved down to a four-year low of 7.7 percent. Read more. (Subscription required.)

CONSUMER SPENDING INCREASED IN FEBRUARY



The Commerce Department reported yesterday that retail sales rose 1.1 percent in February from the prior month, seasonally adjusted, thanks in large part to robust gains for cars and building materials and at Internet stores, the Los Angeles Times reported today. Consumers did feel the pinch from higher fuel prices; sales at gasoline stations jumped 5 percent last month from January. After excluding consumer spending for gas and cars, so-called core retail sales increased 0.4 percent in February, and this measure was revised up to 0.3 percent for January from the previously estimated 0.1 percent. Car and home sales are benefiting from pent-up demand as well as low interest rates, and that is supporting business at other retailers. Sales at building material and garden supply stores rose 1.1 percent in February from the prior month. Read more.

For more on consumer spending, be sure to visit yesterday’s post on ABI’s Chart of the Day.

IPHONE AND IPAD USERS: THE ABI JOURNAL APP IS AVAILABLE NOW!



The wait is over! With the new ABI Journal iPad app, sponsored by KCC, each new issue will be sent automatically to your device, ready to read at your convenience. Download the app for free from the Apple iTunes store (link below) to your iPad and/or iPhone. Once it's installed, open the app and you will be prompted to log in (see below). (You only have to provide this information once, then the app will recognize you each time you open it.)

Each available issue will show up automatically in the onscreen library. Simply download the issue you wish to read and access it anytime, even when you're not connected to the Internet. With the app, you can:



• take notes or leave comments

• share individual pages to social media

• bookmark favorite pages

• search for key phrases in all online issues

Unlock the power of this terrific new app* today. Download the app here.

USERNAME: Your email address (it must be the one that ABI has on file for you)

PASSWORD: abijournal

*The app is not available for Android devices at this time.

Go to journal.abi.org to access ABI Journal archives, submission guidelines and more!

LATEST BLOOMBERG "BILL ON BANKRUPTCY" VIDEO: HOW PURCHASERS OF AMR STOCK MADE A KILLING



Someone who bought stock in American Airlines last year already made a killing. Stock that could have been bought in November for less than 40 cents a share is now trading above $4, for reasons explained on the video with Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle. Click here to watch.

DON'T MISS ABC'S FREE EVENT, "THE AUTO BANKRUPTCIES: CHECKING THE REARVIEW MIRROR," ON MARCH 22!



ABI members are encouraged to register for the American College of Bankruptcy's "The Auto Bankruptcies: Checking the Rearview Mirror" on March 22 at Boston College Law School in Newton, Mass. The afternoon event will feature key players looking back at the events that led to GM and Chrysler being placed into bankruptcy and the lessons that have been learned from the cases. Panelists include:

• Corinne Ball of Jones Day (New York), who served as lead bankruptcy counsel to Chrysler.

• Matthew A. Feldman of Willkie Farr and Gallagher LLP (New York), who served as chief legal advisor to the Obama administration's Task Force on the Auto Industry.

• Hon. Arthur J. Gonzalez, a Senior Fellow at New York University School of Law and formerly the Chief Bankruptcy Judge for the U.S. Bankruptcy Court for the Southern District of New York, who presided over the Chrysler chapter 11 proceedings.

• Harvey R. Miller of Weil, Gotshal & Manges LLP (New York), who served as lead bankruptcy counsel to GM.

The moderator will be Mark N. Berman of Nixon Peabody LLP (New York).

Registration for the afternoon event is free, so be sure to sign up today before it reaches capacity!

HOTEL BLOCK FOR ABI'S ANNUAL SPRING MEETING ALMOST SOLD OUT! REGISTER TODAY!



The hotel block at the Gaylord National Resort and Convention Center in National Harbor, Md., is almost sold out for ABI’s 2013 Annual Spring Meeting! Held April 18-21, 2013, ASM features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:

• 17th Annual Great Debates

• Mediation: An Irrational Approach to a Rational Result

• Creditors’ Committees and the Role of Indenture Trustees and Related Issues

• Current Issues for Financial Advisors in Bankruptcy Cases

• The Individual Conundrum: Chapter 7, 11 or 13?

• The Power to Veto Bankruptcy Sales

• Real Estate Issues in Health Care Restructurings

• How to Be a Successful Expert

• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors

• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes

• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Make sure to register today!

ABI IN-DEPTH

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!



An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: VASSALLE V. MIDLAND FUNDING LLC (6TH CIR.)



Summarized by Jim Morgan of the Enterprise Law Group



The Sixth Circuit Court of Appeals reversed the decision of the U.S. District Court for the Northern District of Ohio approving a class action settlement and certifying a nationwide class. The Sixth Circuit found that the settlement was not fair or reasonable because it provided preferential treatment to the class representatives and only perfunctory relief to the unnamed class members. The Sixth Circuit further held that class certification was inappropriate because the class representatives were inadequate and that a class action was not a superior method of resolving the controversy.

There are more than 800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: BIG BANKS SHOULD BREAK UP VOLUNTARILY

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post said that megabanks may be able to fight off regulatory forces demanding their corporate downsizing, but a voluntary break up may be the only way to sway public opinion their way.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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2013

March

- Bankruptcy Battleground West

     March 22, 2013 | Los Angeles, Calif.

April

- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"

     April 5, 2013

- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"

     April 10, 2013

- "Nuts and Bolts" Program at ASM

     April 18, 2013 | National Harbor, Md.

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- ABI Endowment Cocktail Reception

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 11-14, 2013 | Newport, R.I.

- Southeast Bankruptcy Workshop

     July 18-21, 2013 | Amelia Island, Fla.

OBAMA TO PUSH CONGRESS ON MORTGAGE RELIEF



President Obama yesterday called on Congress to act on home mortgage relief when it returns for a brief legislative session in September, The Hill reported today. The housing market is widely believed to be the most significant drag on the economy, and Obama was under fire in a recent New York Times front-page story for the inability of his administration to address the burden of homeowner debt. "We are going to be pushing Congress to see if it can pass a refinancing bill that puts $3,000 in the pocket of the average family that has not yet refinanced their mortgage," he said. The White House is supporting a trio of Senate Democratic bills that streamline refinancing:

• Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) in May introduced the “Responsible Homeowners Refinancing Act of 2012.” The bill would streamline refinancing for Fannie Mae and Freddie Mac borrowers by eliminating upfront fees and appraisal costs, among other changes.

• Sen. Jeff Merkley (D-Ore.) has a bill called the “Rebuilding Equity Act” for loans of 20 years or less. It would require Fannie Mae or Freddie Mac to pay all closing costs.

• Sen. Dianne Feinstein (D-Calif.) has a bill to aid underwater homeowners by allowing them to receive Federal Housing Administration mortgage insurance.

While significant, the White House-backed legislation falls short of the extensive housing action urged by some. Liberal groups and unions want Obama to replace Edward DeMarco — acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac — to force the agency to approve principal mortgage reductions. Others want legislation to allow bankruptcy judges to approve principal reductions in chapter 13. Read more.

CASE AGAINST FORMER FREDDIE MAC EXECUTIVES HINGES ON DEFINITION OF "SUBPRIME"



Figuring out the definition of a "subprime mortgage" by a U.S. judge could determine whether three former Freddie Mac executives misled investors about loans backed by the mortgage giant before it sank, the Wall Street Journal reported today. Lawyers for the former executives, including Chief Executive Richard Syron, sparred at a hearing with the Securities and Exchange Commission over the definition of "subprime" and "subprime-like." The fight came as lawyers for the former Freddie Mac executives urged U.S. District Judge Richard Sullivan to throw out an eight-month-old fraud lawsuit by the SEC alleging that the former executives made "materially false and misleading public disclosures" about the company's housing-market exposure in 2007 and 2008. Lawyers for Syron, Patricia Cook, a former Freddie Mac executive vice president, and Donald Bisenius, a former senior vice president, asked the judge to dismiss the suit because Freddie Mac told investors it did not classify single-family loans using the words "prime" or "subprime." Instead, Freddie Mac provided investors with tables outlining the characteristics of loans, allowing investors to draw their own inferences about loan quality, the lawyers said. The lawyers cited an investor document that said the amount of loans that would have been subprime if the term that Freddie Mac used was "not significant." Suzanne Romajas, a lawyer for the SEC, agreed that there is no universally accepted definition of "subprime," but she said Freddie Mac used a combination of factors to decide whether a certain loan was high-risk, and the former executives should have disclosed all of the mortgages that were vulnerable to potential default. For example, including mortgages with "subprime-like" characteristics would have increased Freddie Mac's overall high-risk loan exposure to 10 percent of its portfolio, not the 0.1 percent claimed by the company, she added. Read more. (Subscription required.)

SUPREME COURT CASE COULD CURB DEBT-COLLECTION LAWSUITS



Fearing that the legal playing field could be tilted against consumers, a group of federal and private consumer agencies have filed briefs in a U.S. Supreme Court case that threatens to shift the cost of a lawsuit to consumers in debt-collection cases, CreditCards.com reported today. In the past, collectors have absorbed court costs in "good faith" suits by consumers, even if the consumer loses, unless the consumers sued in bad faith or for purposes of harassment. Without this protection from fee shifting, people would be discouraged from suing debt collectors, say the Federal Trade Commission, the Consumer Financial Protection Board and a group of private consumer advocacy groups in legal briefs filed this month. There has been a surge in the number of cases filed against debt collectors under the Fair Debt Collection Practices Act, the 1977 federal law that regulates the activities of third-party debt collectors. The case that made it to the Supreme Court, though, could discourage such suits, the agencies say. The case, known as Marx v. General Revenue Corp., revolves around the experience of Olivea Marx, a Colorado woman who racked up student debt and failed to pay it, then was contacted by a debt collector. Marx, a single mother with two young children and a low-paying job, claimed that the collector's vigor went beyond the limits of the law. The collector called her several times a day, she said, and illegally threatened to garnish half her wages and sent a collection-related fax to her employer. She sued, but the lower court disagreed, finding that the debt collector's contact with the woman's employer did not violate the law because it did not specifically mention her debt. The court ordered her to pay $4,543 in costs -- nearly all of which compensated the debt collector for hiring a court reporter and bringing in witnesses. Read more.

TRANSUNION: U.S. AUTO LOAN DELINQUENCY RATE IN SECOND QUARTER AT LOWEST LEVEL



Credit-information company TransUnion Corp. said that the national delinquency rate of auto loans in the U.S. hit its lowest level for the second consecutive quarter since the firm began tracking the data in 1999, Dow Jones Newswires reported today. Auto loan delinquency rates in the second quarter dropped to 0.33 percent, down from 0.36 percent in the first quarter and 0.44 percent in the period a year ago. In addition to increased demand in new and used autos, bank auto debt per borrower rose to $13,427 in the second quarter from $12,689 in the previous year. TransUnion said that despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates. Read more.

REGIONAL AIRLINES FACE CLOSINGS, BANKRUPTCY



Regional airlines operate half the nation's scheduled flights, but several of those carriers are being closed or are in bankruptcy court protection, USA Today reported today. They face significant challenges, as the big airlines they often fly for are phasing out smaller and costlier regional jets and cutting some low-traffic regional routes to focus on those that are more lucrative. Delta, the largest operator of 50-seat aircraft among U.S. airlines, will shutter regional carrier Comair after Sept. 29. Pinnacle Airlines, with subsidiaries such as Colgan that have flown for United, US Airways and Delta, filed for bankruptcy protection in April. AMR, the parent company of American Airlines and regional carrier American Eagle, filed for bankruptcy protection in November. "Airlines are finding these smaller jets just don't make them any money," says industry analyst Mike Boyd. "That's why they're shutting down Comair. That's why Pinnacle is in bankruptcy. It's a sector of (the) industry that provides a type of aircraft that's rapidly becoming obsolete." Read more.

ORCHESTRAS FIGHT HARD TIMES THROUGH BANKRUPTCY SEEKING NEW MODEL



Orchestras across the country continue to struggle financially, and some are following the lead of the Philadelphia Orchestra, Bloomberg News reported today. The Philadelphia Orchestra was the biggest among at least five U.S. symphonies to seek court protection in the wake of the 2008 economic collapse. Others include music organizations in Louisville, Ky., Syracuse, N.Y., Albuquerque, N.M., and Honolulu. Though subject to the same harsh realities of bankruptcy as corporations, the recent reorganization in Philadelphia -- and the decreased debt and expenses the group emerged with -- may serve as a model for other symphonies struggling with fewer donors and lower ticket sales. With its turnaround plan approved, the Philadelphia Orchestra Association exited court protection on July 30 after 15 months, having resolved $100 million in claims with a $5.5 million settlement, shrinking its payroll and winning a release from its pension obligations. Read more.

Click here to listen to an ABI podcast that focuses on orchestra bankruptcies.

DON'T MISS THE "WHEN IS AN INDIVIDUAL CHAPTER 11 THE BEST FIT?" WEBINAR ON SEPT. 27!



Chapter 11 can offer significant relief for certain individuals who need a restructuring of their finances. Learn when and how to use this tool in a 75-minute live webinar on Sept. 27 at noon ET. An expert panel will guide you through a successful individual chapter 11 and discuss key issues such as plan confirmation, modification and treatment of future income and secured debt.

Panelists on the webinar include:

• James F. Molleur of the Molleur Law Office (Biddeford, Maine)

• John P. Fitzgerald, III, of the Office of the U.S. Trustee (Boston)

• Raymond J. Obuchowski of Obuchowski & Emens-Butler, PC (Bethel, Vt.)

• Jennifer Rood of Bernstein Shur (Manchester, N.H.)

This panel was the highest rated at ABI's Northeast Bankruptcy Conference in July. The webinar is available to ABI members for $75. To register, please click here.

ABI IN-DEPTH

ABI MEMBERS WELCOME TO ATTEND ACB'S FREE HALF-DAY "BANKRUPTCY: BACK TO THE FUTURE" PROGRAM IN SEPTEMBER



The American College of Bankruptcy invites you to attend a free half-day program on Sept. 28 in Chicago for a discussion of many of the challenging topics facing current bankruptcy and reorganization professionals. Topics to be addressed include recent decisions of the U.S. Supreme Court and Court of Appeals, important work of the Advisory Committee on Bankruptcy Rules, and developments in the field of bankruptcy ethics. The nation’s leading judges, academics and bankruptcy professionals are among the speakers for the program. While there is no cost to attend, seating is limited, so early reservation is suggested. For more information and to register, please click here.

LATEST CASE SUMMARY ON VOLO: NUVEEN MUNICIPAL TRUST V. WITHUMSMITH BROWN, P.C. (3D CIR.)



Summarized by Matthew Heimann of Porzio, Bromberg & Newman, PC

Affirming the district court, the Third Circuit held that the district court did have "related to" jurisdiction under 28 U.S.C. § 1334(b) to adjudicate Appellant's action against the debtor’s accounting firm and counsel regarding an audit report and opinion letter that was prepared for the pre-petition transaction. The Third Circuit enunciated the principles of "related to" jurisdiction and its "conceivability" inquiry that applies to such analyses.

There are more than 600 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FURTHER EXAMINATION OF THE FIFTH CIRCUIT’S RULING IN THE PILGRIM’S PRIDE CASE



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the Fifth Circuit's ruling in the Pilgrim's Pride case. The court ruled in the case that a $1 million “enhancement fee" is OK after the company's reorganization plan paid a 100 percent dividend to unsecured creditors.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The Twombly/Iqbal rule for pleading ‘plausible’ claims has been applied too stringently in dismissing avoidance actions for failure to state a claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

September

- 7th Annual Golf and Tennis Outing

     September 11, 2012 | Maplewood, N.J.

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.

- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar

     September 27, 2012

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

     October 15, 2012

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

HOUSING COMMENTARY #1: WHY HAS CONGRESS LEFT HOUSING TO FANNIE MAE AND FREDDIE MAC?



Fannie Mae and Freddie Mac, along with their regulator, are doing more to dismantle themselves than Congress can be bothered to do, according to a commentary in the Washington Post Tuesday. On Monday, their regulator, Ed DeMarco of the Federal Housing Finance Agency, said that a new company will be formed that will do much of the back-office work of both firms, setting the stage for whatever Congress decides to do next to overhaul the mortgage sector. The two government-sponsored mortgage finance companies are nearing the five-year anniversary of when the feds took them over, a bailout that has cost taxpayers $131 billion so far. They have been vilified, particularly by conservatives, as representing the worst of crony capitalism (fairly) and as being major drivers of the financial crisis (unfairly). For many Republicans, their stated objection to the Dodd-Frank financial reform act was that it didn't do anything to reform Fannie and Freddie. No legislation to overhaul the nation's mortgage finance has passed either the Republican-led House or the Democratic-led Senate. The White House unveiled a plan for what to do—more than two years ago—that was less a plan than a menu of options from which Congress might choose in sculpting its own approach to reforming the government-sponsored enterprises, or GSEs. So what is going on here? How is this an area where seemingly everybody agrees there needs to be an overhaul, yet no actual legislative action has taken place? The answer boils down to this: Too many people benefit from the current system, and too many people have something to lose in any overhaul, according to the commentary. But something will have to change in order to give the U.S. a system of housing finance that doesn't leave taxpayers on the hook for everyone who wants a place to live. Click here to read the full commentary.

HOUSING COMMENTARY #2: HOW TO REPEAT THE MORTGAGE MESS



In September 2008, amid the financial panic and collapse of the housing market, the federal government bailed out and took control of Fannie Mae and Freddie Mac—two government-sponsored enterprises that dominated the mortgage market. After four years and $180 billion of taxpayer funds to keep them afloat, they are beginning to make profits from their near monopoly. This week, the head of the federal agency that supervises Fannie and Freddie, Edward DeMarco, outlined a sensible plan that would prepare the companies—which remain the dominant players in housing finance—for either full privatization or government ownership. These are the obvious alternatives, but there is a third idea in the mix, one that is as seductive as it is dangerous: a private system with an explicit government mechanism for future bailouts when they prove necessary, according to a commentary in the Wall Street Journal yesterday. The rationale? If there's a problem in housing finance, the government will inevitably step in as it did in 2008. So why not create a government insurance program now, compensating taxpayers for the burdens they will have to shoulder eventually anyway? This argument has been advanced many times since Fannie and Freddie went under, most recently by the Bipartisan Policy Center, a Washington think tank. A system for private housing finance with a government insurance backstop may sound reasonable, even sophisticated. But it is seriously flawed. At the end of this road is bailout nation: a government insurance backstop for every industry. Also, taxpayers never get compensated from insurance funds, and federal insurance encourages careless behavior by those who know that if things go bad, someone will be there with a bailout. Once a fund of any size is created to back a particular industry, the arguments against a bailout virtually disappear. The reality is that sufficient funds are not going to be there. The only way to ensure a stable mortgage market is to get the government out, and keep it out. Click here to read the full commentary (subscription required).

ANALYSIS: STUDENT DEBT IS A DRAG ON ECONOMIC RECOVERY



Roughly 39 million Americans have a total of $966 billion in educational debt—a sum that has tripled since 2004, the Federal Reserve Bank of New York finds, according to an analysis in the Financial Times Tuesday. It was the only type of borrowing that expanded through the Great Recession, and in 2010 it jumped ahead of car loans, credit card debt and home equity credit to become the largest source of indebtedness behind mortgages. Faced with tighter scrutiny from banks and their own cautious behavior about running up balances, this new generation of borrowers has cut back on spending. They keep their credit cards in their wallets, put off purchasing houses and cars, and delay starting savings accounts for their own children's education. Experts warn that this trend raises the possibility that the explosion in student debt will sap economic growth in the U.S., where consumer spending accounts for around 70 percent of gross domestic product. "Consumers with large student debt burdens may spend less and are more likely to have difficulty securing a mortgage," the U.S. Treasury's Office of Financial Research said in its 2012 annual report. "These factors could significantly depress demand for mortgage credit and dampen consumption." Those fears have been supported by recent studies, such as a Pew Research Center report last month showing that young adults are less likely to own homes, cars and other "big-ticket consumer durables," such as refrigerators and washing machines, than their peers were in 2001. Simply put, more people are paying more money for school. Click here to read the full analysis (subscription required).

HOMEOWNERS ARE INCREASINGLY TURNING TO SHORT SALES OVER FORECLOSURES



The number of American homes that end up in foreclosure has started to decline, a welcome development that partly reflects an improving housing market. But a look at data that tracks distressed home sales reveals another reason why foreclosures are becoming less prevalent: More homeowners are turning to so-called short sales—where they sell their homes for less than what they owe in mortgage debt and the bank typically eats the difference, the Wall Street Journal reported Tuesday. In the past, short sales were rare. Now they are becoming increasingly common in part because lenders, homeowners and real estate agents have become more experienced at marketing and pricing the properties, and because short sales are considered a more efficient way than foreclosure to sell underwater properties. The shift is helping the housing market pare the backlog of distressed mortgages while cutting the amount of time that vacant homes sit empty. That in turn has helped keep home prices firm at a time when the real estate industry is still recovering from its multiyear slump. Foreclosures accounted for 11.5 percent of total home sales in October, down from 17.3 percent in October 2011 and close to 30 percent during the depths of the recession, according to CoreLogic, a real estate research firm that tracks foreclosure and home-sales data. Over the same period, short sales have climbed to 10.4 percent from 8.1 percent. From an economic perspective, short sales leave everyone better off: Banks and investors see narrower losses, homeowners incur less damage to their credit, and neighboring homes are less likely to be dragged down in value because of the typically higher sale prices and reduced vacancy times. But despite the progress being made in the housing market in general, there are still millions of homeowners who are in some form of pre-foreclosure distress—a "shadow inventory" that could hit the market and spell trouble for the housing recovery. Click here to read the full article (subscription required).

U.S. HOUSEHOLD WEALTH AT HIGHEST LEVEL SINCE LATE '07



The net worth of U.S. families rose by $1.17 trillion at the end of 2012 to the highest level since late 2007, as rising home values and gains in stock holdings boosted household balance sheets, the Wall Street Journal reported today. The net worth of U.S. households—the value of homes, stocks and other investments minus debts and other liabilities—rose 1.8 percent to $66.07 trillion from October through December, the highest level since the fourth quarter of 2007, according to a Federal Reserve report released Thursday. The recession began in December 2007 and ended in June 2009.
Household net worth was up 9 percent at the end of 2012 compared with the fourth quarter of 2011, the latest sign that Americans are repairing their balance sheets in the wake of the financial crisis. Stocks have recovered from their sluggish performance in the fourth quarter. Americans also have much more equity in their homes. A measure of owners' equity in household real estate as a percentage of household real estate hit 46.6 percent, the highest since the first quarter of 2008. The Fed report also showed that household debt grew at an annual rate of 2.4 percent in the fourth quarter after contracting in the third quarter. Click here to read the full article (subscription required).

DON’T MISS THE ABI LIVE WEBINAR ON APRIL 5 - "LEGACY LIABILITIES: DEALING WITH ENVIRONMENTAL, PENSION, UNION AND SIMILAR TYPES OF CLAIMS"



A panel of experts has been assembled for a webinar on April 5 from 1-2:15 p.m. ET to discuss environmental and pension liabilities, the statutory schemes under which these liabilities arise and the key players involved. Are non-monetary environmental claims dischargeable? Do post-petition expenditures for environmental cleanup constitute administrative expenses? When can an employer terminate a pension plan in bankruptcy, what is the process and what are the consequences? Learn the answer to these questions and more from the comfort of your own office. Special ABI member rate is available! Register here as this webinar is sure to sell out.

ABI'S ANNUAL SPRING MEETING: CONSUMER PROGRAMMING WITH CROSS-OVER APPEAL



With four session tracks looking at issues geared toward chapter 11 restructurings, financial advisors, professional development and consumer bankruptcy, a number of sessions at ABI's Annual Spring Meeting have cross-over appeal for both consumer and business practitioners. Sessions include:



• The Appellate Process: This distinguished panel will explore recent issues in appellate practice that are of interest to both consumer and business practitioners, including the ability to bypass intermediary appellate courts and take appeals directly to the circuit courts.

• Consumer Class Actions: This panel will explore the potential benefits and pitfalls of class actions by debtors/trustees against creditors in chapter 13 cases, which are highlighted by two recent decisions of the Fifth Circuit. Many of the issues discussed during this panel will be useful in business cases as well.

• The Individual Conundrum - Chapter 7, 11 or 13?: Deciding on the appropriate chapter for a high net worth individual contemplating a bankruptcy filing can be a daunting task. This panel will explore the considerations that guide the practitioner in advising individual clients in making this decision.

To register for the Annual Spring Meeting and to see the full schedule of program tracks and events, please click here.

ABI IN-DEPTH

MARK YOUR CALENDARS FOR APRIL 10 TO TAKE PART IN ABI’S LIVE WEBINAR "STUDENT LOANS: BANKRUPTCY MAY NOT HAVE THE ANSWERS – BUT DOES CONGRESS?"



Do not miss the "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?" webinar presented by ABI's Consumer Bankruptcy Committee on April 10 from noon-1:15 ET. ABI's panel of experts will provide an overview of the student loan industry, examine the numbers behind and causes of student loan debt, and discuss federal loan programs as well as federal consolidation and forgiveness programs. Faculty on the webinar includes:

• Prof. Daniel A. Austin of Northeastern University School of Law (Boston)
  
  
  
• Edward "Ted" M. King of Frost Brown Todd LLC (Louisville, Ky.)
  
  
  
• Craig Zimmerman of the Law Offices of Craig Zimmerman (Santa Ana, Calif.)

CLE credit will be available for the webinar. This webinar is sure to sell out; register now for the special ABI member rate of $75!

NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!



An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!

The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!

LATEST CASE SUMMARY ON VOLO: IN RE ALABAMA AIRCRAFT INDUSTRIES INC. (3D CIR.)



Summarized by John Eggum of Foran Glennon Palandech Ponzi & Rudloff

A transfer of a cause of action to a litigation trust, in accordance with the terms of an asset purchase agreement, can be insulated from attack on appeal pursuant to § 363(m). In this case, the Third Circuit found that invalidating the transfer of the cause of action would invalidate the related sale, since the value of the assets sold would be altered if the cause of action was not transferred in accordance with the terms of the applicable asset purchase agreement. Accordingly, the Third Circuit dismissed the appeal as moot.

There are more than 750 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: WHEN CAN AUTOMATIC STAY BE EXTENDED TO NONDEBTOR THIRD PARTY?

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post discusses whether the automatic stay can be extended to protect nondebtor third parties by examining the case of In re Brier Creek Corp. Center Assocs. LP (Bankr. E.D.N.C.).

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

As a result of the RadLAX decision, the right to credit-bid will likely chill bidding at auctions, as potential purchasers may be dissuaded from participating in the bidding process.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2013

March

- Bankruptcy Battleground West

     March 22, 2013 | Los Angeles, Calif.

April

- ABI Live Webinar: "Legacy Liabilities : Dealing with Environmental, Pension, Union and Similar Types of Claims"

     April 5, 2013

- ABI Live Webinar: "Student Loans: Bankruptcy May Not Have the Answers - But Does Congress?"

     April 10, 2013

- "Nuts and Bolts" Program at ASM

     April 18, 2013 | National Harbor, Md.

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

May

- "Nuts and Bolts" Program at NYCBC

     May 15, 2013 | New York, N.Y.

- ABI Endowment Cocktail Reception

     May 15, 2013 | New York, N.Y.

- New York City Bankruptcy Conference

     May 16, 2013 | New York, N.Y.

- Litigation Skills Symposium

     May 21-24, 2013 | Dallas, Texas

June

- Memphis Consumer Bankruptcy Conference

     June 7, 2013 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 13-16, 2013 | Grand Traverse, Mich.

JUDGE'S RULING ON DODD-FRANK ACT BEEFS UP PROTECTION FOR WHISTLEBLOWERS



U.S. District Judge J. Paul Oetken bolstered protection for corporate whistleblowers yesterday by ruling the Dodd-Frank law gave retroactive protection to employees of subsidiaries, not just people who work directly for the parent companies, Reuters reported yesterday. The decision concerned the Sarbanes-Oxley Act of 2002, adopted in the wake of Enron Corp's collapse the prior year, which helped protect employees of publicly-traded companies against retaliation for whistleblowing. Dodd-Frank amended that law in July 2010, as part of a series of financial reforms, to show that employees of subsidiaries should also be protected from any reprisals by their companies. Judge Oetken yesterday said that the Dodd-Frank amendments should apply retroactively to cases that predated Dodd-Frank, being "a clarification of Congress's intent" concerning whistleblowers. Read more.

In related news, the House Financial Services Capital Markets and Government Sponsored Enterprises held a hearing today titled "The Impact of Dodd-Frank on Customers, Credit, and Job Creators." To view the witness list and prepared witness testimony, please click here.

The House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing tomorrow at 10 a.m. ET titled "The Impact of Dodd-Frank’s Home Mortgage Reforms: Consumer and Market Perspectives." Click here for more information.

CONSUMER BORROWING INCREASED IN MAY, PROPELLED BY CREDIT CARD BORROWING



Consumer borrowing rose by $17.1 billion in May from April, the Federal Reserve said yesterday, according to the Associated Press. The gain drove total borrowing to a seasonally adjusted $2.57 trillion, nearly matching the all-time high reached in July 2008. Borrowing has increased steadily over the past two years, but most of the gains have been driven by auto and student loans, which rose to a record level of $1.7 trillion in May. Consumers cut back sharply on credit card debt during the recession and immediately after, but that changed in May when the measure of credit card debt jumped by $8 billion. Still, the level of debt for that category increased to only $870 billion, or 2.2 percent above the post-recession low hit in April 2011. The category had totaled more than $1 trillion before and shortly after the recession began. Read more.

ANALYSIS: PRICE OF USING CREDIT CARDS MAY RISE



Merchants may soon begin imposing a surcharge each time a customer pays with a credit card, a practice Visa Inc. and MasterCard Inc. currently prohibit, the Wall Street Journal reported today. Retailers have long pushed for the right to charge extra to customers who pay with plastic versus cash, saying that the practice would help defray their costs for accepting credit and debit cards. Merchants pay transaction fees on each card swipe. But Visa and MasterCard, which operate the world's largest card-payment networks, ban the practice in the U.S. as part of rules they require retailers to follow to accept their cards. That ban is expected to be eliminated or altered, though, under a potential settlement of long-standing lawsuits retailers have brought against the card networks and numerous banks that issue their cards. Read more. (Subscription required.)

COMMENTARY: COMMERCIAL MORTGAGES SHOW DEPTH OF BAD LOAN SECURITIZATIONS



The first of the commercial real estate mortgages that were securitized in 2007 have started to come due, and it is becoming clear just how bad many of the loans were, according to a commentary in Friday's New York Times. The time when investors were most eager to buy, according to the commentary, turns out to have been the worst time to do so. Commercial mortgages — unlike residential ones — are seldom issued for periods of longer than 10 years, and often for as little as five. Many require no principal repayments during that period but call for the entire amount to be repaid in a balloon payment at the end of the loan. "Only 28 percent of the loans from 2007 due to mature in 2012 managed to pay off in full," said Manus Clancy, the senior managing director at Trepp L.L.C., which monitors the commercial mortgage market. Other loans in those securitizations were for seven or 10 years, so new waves of losses may arrive in 2014 and again in 2017. Read more.

CFTC SUES PEREGRINE FINANCIAL GROUP



Federal regulators sued Peregrine Financial Group Inc. and CEO Russell Wasendorf Sr. today, alleging fraud, customer funds violations and making false statements, and the FBI began an investigation of the brokerage, the Wall Street Journal reported today. The complaint from the Commodity Futures Trading Commission comes a day after the National Futures Association, the futures industry's self-regulatory body, said that it had taken an emergency enforcement action against broker PFGBest's parent company, Peregrine Financial Group. Regulators have shut down almost all operations of futures broker PFGBest after the firm froze client accounts yesterday. Read more. (Subscription required.)

LATEST ABI PODCAST FEATURES EXPERT DISCUSSING WHAT TO EXPECT FROM STOCKTON'S CHAPTER 9 FILING



The latest podcast features ABI Executive Director Samuel J. Gerdano speaking with Lynnette R. Warman, a partner at Hunton & Williams LLP (Dallas) and ABI Vice President—Publications, about Stockton, Calif.'s recent chapter 9 filing. Warman has been following Stockton's financial distress and she discusses what can be expected for the city and its creditors in the first year of the chapter 9 filing. Click here to listen.

ABI IN-DEPTH

“SUBJECTING BUSINESS PROJECTIONS TO SCRUTINY IN VALUATION DISPUTES” WEBINAR TO BE HELD ON JULY 30!



Reassembling the speakers from the highest-rated panel at the New York City Bankruptcy Conference this year, ABI will be holding a live webinar on July 30 at 11 a.m. ET titled, "Subjecting Business Projections to Scrutiny in Valuation Disputes." Panelists include:

• Moderator David Pauker of Goldin Associates, LLC (New York)
• Martin J. Bienenstock of Proskauer (New York)
• David M. Hillman of Schulte Roth & Zabel LLP (New York)
• Bankruptcy Judge Robert E. Gerber (S.D.N.Y.)

The panel will address:

• How much deference should management projections be accorded?
• How do you determine whether projections are unrealistically optimistic or pessimistic?
• What is the relevance of "market consensus?"
• How do management’s incentives impact projections?

The webinar is available to ABI members for $75 and is approved for 1.0 CLE hours in Calif., Ga., Hawaii, Ill., N.Y. (approved jurisdiction policy) S.C. and Texas. CLE approval is pending in Del., Fla., Pa. and Tenn. To register, please click here.

LATEST CASE SUMMARY ON VOLO: SUNBEAM PRODUCTS, INC. V. CHICAGO AMERICAN MANUFACTURING, LLC (7TH CIR.)



Summarized by Jonathan Brand of Lakelaw

The Seventh Circuit was not persuaded by Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), holding that when an intellectual-property license is rejected in bankruptcy, the licensee does not lose the ability to use any licensed copyrights, trademarks and patents. The court reasoned that, outside of bankruptcy, a licensor's breach does not terminate a licensee's right to use intellectual property. The same is true under §365(g). When a contract is rejected in the context of a bankruptcy, a breach is established, but the other party's rights remain in place. Therefore, Chicago American Manufacturing had the right to continue to perform under the pre-petition contract for the production of fans with the trademark of Lakewood Engineering & Manufacturing Co.

More than 550 appellate opinions are summarized on Volo typically within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: DREIER BANKRUPTCY DEMONSTRATES THE ENDLESS SCOPE OF CLAWBACK CLAIMS



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines the Dreier, LLP bankruptcy and the important role that clawback claims are playing in the case.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The full-payment rule in section 1325's "hanging paragraph" for new car PMSIs should be repealed to level the playing field between car lenders and other partially and fully unsecured creditors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

IS YOUR ABI MEMBERSHIP PROFILE CURRENT?



Keeping a current profile will allow you to benefit from one of ABI's most important services - networking. When you update your profile, you are putting your most valuable information in the membership directory. Be sure to include your areas of expertise, firm information, education and join any other committees that are of interest. Click here to update your profile.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 12-15, 2012 | Bretton Woods, N.H.

- Southeast Bankruptcy Workshop

     July 25-28, 2012 | Amelia Island, Fla.

-Valuation Webinar, July 30 at 11 a.m. ET

August

- Mid-Atlantic Bankruptcy Workshop

     August 2-4, 2012 | Cambridge, Md.

September

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.


- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

ABI'S CHAPTER 11 COMMISSION EYES UPDATES TO BANKRUPTCY CODE



With the Bankruptcy Code now 35 years old, 2013 looks to be a key year in developing a replacement as ABI's Chapter 11 Commission continues its study of chapter 11 with a "top to bottom look" at the Code, The Deal reported yesterday. No specific changes have been recommended to date, and the Commission will not be close to specifics until it gets reports from all 13 of its advisory committees, according to Commission Co-Chair Al Togut of Togut, Segal & Segal LLP (New York). The commission, which is just looking at corporate chapter 11 and the parts of the code that affect business bankruptcies, expects to complete its report in the spring of 2014, said fellow Co-Chair Bob Keach of Bernstein Shur (Portland, Maine), adding that by the end of 2013 the commission should have a good idea of what the report will look like. The report will have two components: ideas for change where there is a consensus and proposals that lack a consensus. Since the ABI does not lobby Congress for legislation, an organization or a combination of organizations will likely work to convert the report into legislation, said Keach. "The idea is to develop a statute for the next 40 years that will get us through as well as this one did," Keach says. Read more.

PENSION FUNDING GAP WIDENS FOR BIG CITIES



A study released on Tuesday by the the Pew Center on the States found that major U.S. cities emerged from the financial crisis with increasingly underfunded pension and retiree health care plans, the Wall Street Journal reported today. Cities employing nearly half of U.S. municipal workers saw their pension and retiree health care funding levels fall from 79 percent in fiscal year 2007 to 74 percent in fiscal year 2009, according to the latest available data, the Pew report stated. The growing funding gulf, which the study estimated at more than $217 billion for the 61 cities in the study, raises worries about local finances at a time when states are also struggling to recover from the recession. More than half, or some $118 billion, of the projected pension shortfall stems from unfunded retiree health care costs, according to the Pew report. Read more. (Subscription required.)

ABI will be holding a media teleconference on Tuesday, Jan. 22, at 11 a.m. ET with experts examining municipal distress in 2013. There are limited spots available to ABI members that would like to join the call next week. Contact John Hartgen, ABI's Public Affairs Manager, at jhartgen@abiworld.org if you would like to participate in the teleconference.

CFPB'S NEW MORTGAGE RULES AID HOMEOWNERS



U.S. banks will have to do more to help struggling mortgage borrowers keep their homes under final rules released today by the Consumer Financial Protection Bureau (CFPB), the Wall Street Journal reported today. Mortgage-loan servicers, which collect borrowers' loan payments, will have to evaluate troubled borrowers for all loan-assistance options permitted by mortgage investors such as Fannie Mae and Freddie Mac, as well as private investors, according to the CFPB rules that will take effect in a year. Currently, no national standard exists for how mortgage servicers must treat defaulting borrowers. The lending industry "must consider all options available from the mortgage owners or investors to help the borrower retain the home," said CFPB director Richard Cordray. The industry "can no longer steer borrowers to those options that are most financially favorable for the servicer." The agency's move follows numerous federal and state efforts to regulate the industry, which came under fire after reports in 2010 found that banks were foreclosing on borrowers without properly reviewing documents and other paperwork, a practice dubbed "robo-signing." In 2011, regulators found abuses of foreclosure processes at 14 lenders. Ten of those lenders agreed to an $8.5 billion settlement of regulators' allegations. Read more. (Subscription required.)

ANALYSIS: "ODD COUPLE" IN U.S. HOUSE TO TACKLE MORTGAGE FINANCE



The will of the new Congress to begin rebuilding the U.S. mortgage finance system rests largely in the hands of Reps. Jeb Hensarling (R-Texas) and Maxine Waters (D-Calif.), known to be partisan fighters from opposite ends of the ideological spectrum, Bloomberg News reported yesterday. Hensarling is the new chairman of the House Financial Services Committee, while Waters is the highest-ranking Democrat. "While we clearly have profound philosophical differences – some might call us Capitol Hill’s newest odd couple – we are exploring areas of common concern where we hopefully can work together," Hensarling said. In addition to grappling with proposals to tweak and amend the Dodd-Frank regulatory law, they will be seeking common ground on what may be the panel's biggest issue this year: The future of Fannie Mae and Freddie Mac. For Hensarling, the solution is to abolish the government-owned mortgage companies and completely privatize the mortgage market. Waters argues that some government involvement is needed to preserve the 30-year fixed home loan. It is likely that the two lawmakers eventually will support a plan that would shrink the role of Fannie Mae and Freddie Mac without threatening to choke off the flow of money into home loans. Read more.

FLORIDA DEFIES HOUSING REBOUND AS FORECLOSURES SOAR



More than six years after subprime lending and overbuilding led to the recent U.S. real estate slump, RealtyTrac Inc. reported that Florida had the biggest increase in home seizures last year, and the highest foreclosure rate, Bloomberg News reported today. One in every 32 Florida households received a notice of default, auction or repossession in 2012, more than double the average U.S. rate of one in every 72, according to RealtyTrac Inc.'s report. Home repossessions increased by 16,276 during the year to 84,456, the biggest gain nationwide. Adding to the state’s woes is a backlog of foreclosures caused by a required court review of each case. Judicial supervision of repossessions is slowing Florida’s rebound, in contrast to California and Arizona, so-called nonjudicial states, where lenders send notices to delinquent borrowers and record defaults at the county level without court intervention, said Lawrence Yun, chief economist of the National Association of Realtors. It took 853 days on average in Florida to complete a foreclosure in the fourth quarter, the third-longest behind New York and New Jersey, RealtyTrac said in today’s report. The U.S. average rose to 414 days from 348 days a year earlier, the most since the data firm began tracking the metric in 2007. Texas had the shortest period at 113 days. Almost 20 percent of outstanding Florida loans were more than 30 days delinquent or in foreclosure in November, the largest share of non-current mortgages in the nation, according to data provider Lender Processing Services. Read more.

ANALYSIS: REWRITING U.S. TAX LAW HAS CONSENSUS WHILE FIX PROVES ELUSIVE



Maintaining a bipartisan consensus in Congress to rewrite the U.S. tax code will be difficult as there is little agreement on what a tax overhaul means and what it is supposed to achieve, according to a Bloomberg News analysis yesterday. Republicans, who control the U.S. House, want lower tax rates and fewer breaks in a simpler system that raises no additional revenue. The Obama administration and many Democrats endorse some of those goals – particularly corporate rate reduction – while viewing a tax rewrite as a way to guarantee more revenue from top earners. That split will challenge lawmakers as they decide whether to rewrite the code as part of budget talks or work on a major tax bill without a fiscal agreement. Compromise remains elusive, though the code is more convoluted -- and therefore, ripe for change -- following passage of a law Jan. 1 that raised marginal rates and reinstated limits on personal exemptions and deductions. Read more.

BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: MF GLOBAL CREDITORS UNDETERRED BY LOW VALUE



The low valuation creditors of MF Global Holding Ltd. put on their liquidating chapter 11 plan is not deterring the bond market where debt is being sold for roughly twice the predicted recovery for unsecured creditors of the liquidating commodity broker's holding company. Bloomberg Law's Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle explore this and other current cases in their latest video. Click here to view.

TAKE AN IN-DEPTH LOOK AT CREDITORS' COMMITTEES AND THE ROLE OF THE INDENTURE TRUSTEES AT ABI'S 31ST ANNUAL SPRING MEETING



The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:



• 17th Annual Great Debates

• Mediation: An Irrational Approach to a Rational Result

• Current Issues for Financial Advisors in Bankruptcy Cases

• The Individual Conundrum: Chapter 7, 11 or 13?

• The Power to Veto Bankruptcy Sales

• Real Estate Issues in Health Care Restructurings

• Law Firm Bankruptcies

• How to Be a Successful Expert

• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors

• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes

• And much more!

The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!

Register today!

ABI IN-DEPTH

ABI LIVE WEBINAR: REVISITING RADLAX AND HALL – NEW LEGAL AND PRACTICAL IMPACT OF THE DECISIONS



See why this was the top-rated panel at the ABI Winter Leadership Conference last month! Join the expert panel on Feb. 19 from 12:00-1:15pm EST as the summarize and discuss the legal impact and practical implications of the Supreme Court’s 2012 decisions in Radlax and Hall. Participants include:

• Susan M. Freeman of Lewis and Roca LLP (Phoenix)

• Adam A. Lewis of Morrison & Foerster LLP (San Francisco)

• Prof. Charles J. Tabb of the University of Illinois College of Law (Champaign, Ill.)

• Eric E. Walker of Perkins Coie LLP (Chicago)

Click here to register!

LATEST CASE SUMMARY ON VOLO: TIMCO LLC V. T AND M SALES AGENCY INC. (IN RE TIMCO LLC; 6TH CIR.)



Summarized by James E. Bailey III of Butler Snow O'Mara Stevens & Cannada PLLC

The Sixth Circuit ruled that the appeal of the bankruptcy court's decision to remand a case removed by state court action to confirm an arbitration award that was affirmed by a district court was not reviewable by the court of appeals under 28 U.S.C. § 1334(d). The appeal of the order granting relief from the automatic stay to allow the state court action to proceed was moot where the debtor failed to obtain stay pending appeal and the state court had entered a valid order confirming an arbitration award.

There are more than 700 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: HIGH-INCOME EARNERS NOT BARRED FROM PASSING BANKRUPTCY'S MEANS TEST



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new post discusses the misconception that bankruptcy's means test bars high-income earners from qualifying for chapter 7 relief.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI'S INDUBITABLE EQUIVALENTS: TELL US A TUNE AND WE'LL SING YOU THAT SONG!



ABI's Indubitable Equivalents need your help: Tell us your favorite Rock and Roll tune - that elusive classic that takes you back, makes your feet tap, your head bang, and your horns come out! If we pick your song, you get widespread promotion by the band and you'll receive a free CD of IE’s greatest hits!

To enter, log onto www.abiband.com or “like” the Band’s Facebook page.

The fine print: No purchase necessary. You can enter as many times as you want. Multiple winners will be selected. Winners will be announced on the IE website and on Facebook. Entry deadline: January 31.

ABI Quick Poll

After Stern, bankruptcy courts do not have the constitutional authority to enter final judgments on fraudulent conveyance claims.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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2013

January

- Western Consumer Bankruptcy Conference

     January 21, 2013 | Las Vegas, Nev.

- Rocky Mountain Bankruptcy Conference

     January 24-25, 2013 | Denver, Colo.

February

- Caribbean Insolvency Symposium

     February 7-9, 2013 | Miami, Fla.

- ABI Live Webinar: Revisiting RadLAX and Hall- New Legal and Practical Impact of the Decisions

     February 19, 2013

- VALCON 2013

     February 20-22, 2013 | Las Vegas, Nev.

March

- 37th Annual Alexander L. Paskay Seminar on Bankruptcy Law and Practice

     March 7-9, 2013 | St. Petersburg, Fla.

- Bankruptcy Battleground West

     March 22, 2013 | Los Angeles, Calif.

April

- Annual Spring Meeting

     April 18-21, 2013 | National Harbor, Md.

REGULATORS TO GIVE MORE GUIDANCE ON LEVERAGED LOANS

U.S. regulators are preparing to offer more public guidance for banks that provide loans for private-equity deals, as officials and financiers have tussled for months over acceptable practices, the Wall Street Journal reported today. The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. reportedly plan to publish a list of frequently asked questions about their guidance governing so-called leveraged loans. The document, which could be made public as soon as next week, is the latest by regulators to cajole banks into compliance with March 2013 guidance that urged them to avoid providing companies with what the agencies deem as too much debt. The guidance targeted a type of financing tapped by private-equity firms to take over corporations, among other uses. The regulators also told banks to limit borrowing agreements that stretch out payment timelines or don't contain ample lender protections, known as covenants. Some banks have resisted regulators' push — sometimes based on interpretations of what they called unclear guidance, other times concluding that certain deals can move forward as exceptions. About half of U.S. private-equity deals this year have breached a rough limit set by regulators of debt that exceeded six times a company's earnings before interest, taxes, depreciation and amortization, or EBITDA, according to data provider S&P Capital IQ LCD. At 52 percent, that is the same rate as 2007, the peak of the leveraged buyout boom. Read more (subscription required).

ANALYSIS: YEARS AFTER THE MARKET COLLAPSE, SIDELINED BORROWERS RETURN

Four years since foreclosures and short sales peaked during the Great Recession, millions of former borrowers have spent the required amount of time on the sidelines, which means that they have cleared at least one of the major hurdles required to qualify for another government-backed mortgage, the New York Times reported today. "We certainly have heard from a number of lenders that boomerang buyers are coming back," said Michael Fratantoni, chief economist at the Mortgage Bankers Association. He added that the situation varies across the country because the foreclosure process takes longer in certain states. Bank of America, one of the nation's largest lenders, said that of all its approved loans and loan applications from January through September, only about 1 percent came from consumers with short sales or foreclosures. But some mortgage brokers report that more people are calling. In August, Fannie Mae tweaked its rules for borrowers who went through short sales and those who voluntarily signed a home over to a lender (through what is known as a deed in lieu). Fannie said that it would continue to permit loans as soon as two years after those events hit borrowers' credit reports, as long as they could document that something like a job loss or a divorce pushed them over the financial edge. They would also need a down payment of at least 5 percent. Read more.

COMMENTARY: IS THE CFPB COMMITTING REGULATORY OVERREACH?

The Consumer Financial Protection Bureau (CFPB) is touted as one of the crowning achievements of the Dodd-Frank Act, but a new CFPB report on student loans is highly flawed, raising doubts about its regulatory reach over the private student loan market, according to a commentary in The Hill yesterday. The CFPB was created to bring all consumer financial products under one regulatory umbrella. It oversees everything in the financial sector that affects consumers — from credit cards to mortgages to auto and student loans. Last week, the CFPB issued its third annual report on student loan complaints. The agency first created a platform for student loan complaints in 2012 and embarked on a massive solicitation for general comment on private student loans in 2013. Shortly after, CFPB brought private non-bank loan servicers under its oversight authority. Complaints regarding loans and loan servicers are up 38 percent year over year, with many complaints indicating that private lenders and servicers "provided no options [to modify repayment plans], leading the borrower to default." Complaints against student loan giant Navient (formerly Sallie Mae) were up a staggering 48 percent, with the entire rise dubiously occurring in the month of December. But a closer look reveals that the report is fundamentally flawed, according to the commentary. First, the report makes the private student loan market seem entirely to blame for the growing student debt crisis. Second, it offers no analytical evidence that private student lenders are unwilling to work with struggling borrowers. Read the full commentary.

SENATOR WARREN DEMANDS AN INVESTIGATION OF MORTGAGE COMPANIES

Sen. Elizabeth Warren (D-Mass.) on Monday called on the Government Accountability Office to investigate non-bank companies that service Americans' mortgages, noting in a letter co-signed by Rep. Elijah Cummings (D-Md.) that an increasing number of lawsuits have been filed in recent years against these firms — which are not regulated as strictly as banks, MotherJones.com reported yesterday. Mortgage servicers, whether they are owned by banks or not, handle mortgages after they've been sold to a customer. That means that they take care of administrative business that includes collecting mortgage payments and dealing with delinquent borrowers. What Warren and Cummings say they are worried about is that the share of non-banks servicing mortgages has grown astronomically — 300 percent between 2011 and 2013 — and it appears that the increased workload has led to shoddier service. The rise of the industry, which typically services lower-income borrowers, "has been accompanied by consumer complaints, lawsuits, and other regulatory actions as the servicers' workload outstrips their processing capacity," according to a recent report by the Federal Housing Finance Agency. Last December, for instance, the Consumer Financial Protection Bureau — the agency Warren helped create — entered a $2 billion settlement with the nation's largest non-bank servicer over mortgage mismanagement. Financial industry watchdogs and consumer advocates have charged that non-bank home loan servicing companies are often unwilling to work with troubled borrowers to modify mortgages and prevent foreclosures.
Read more.

ANALYSIS: COLLEGES WHERE STUDENT LOAN DEFAULTS ARE SKYROCKETING

While data from the U.S. Department of Education showed that overall default rates fell to 13.7 percent from 14.7 percent two years ago, some schools moved in the opposite direction as default rates rose between two years ago and last year, and again between last year and this year, according to an analysis in QZ.com. Many of the schools on the list that are associated higher default levels are located deep in the heart of the U.S. industrial region known as the Rust Belt, which was particularly hard hit by the recession. "When the latest recession began in 2008, we, like other institutions, saw a significant influx of new students, a number of which were then not able to find jobs commensurate with their additional education, and others utilizing college as a source of loans they could not otherwise get to finance their living circumstances," said Rob Denson, president of Des Moines Area Community College, which saw default rates surge in recent years. "These are the loans we believe are most likely now in default." Denson added that he expects default rates to drop back down to pre-2008 levels in coming years. To see the full list of schools where default rates surged, please click here.

USTP UPDATES MEDIAN FAMILY INCOME DATA FOR CASES FILED ON OR AFTER NOV. 1

The U.S. Trustee Program (USTP) has updated the Census Bureau's Median Family Income Data and will apply the updated data to cases filed on or after Nov. 1. For the latest data required for completing Form 22A and Form 22C, please click here.

NEXT FREE COMMITTEE TELECONFERENCE WILL BE NOV. 4 ON THE BANK SECRECY ACT!

Members are encouraged to dial-in and listen to or participate in upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:

- Unsecured Trade Creditors Committee: Tuesday, Nov. 4; 3 pm ET

Topic: "Bank Secrecy Act and Anti-Money Laundering"

Speakers: Mark Gittelman of PNC Bank and Brent Weisenberg

All committee teleconferences are free to ABI members and registration is not required. Simply utilize the following dial-in information:



Call in: (712) 432-1500

Participant code: 692933

ABI MEMBERS IN SOUTHERN CALIFORNIA- DON'T MISS THE SPECIAL TMA EVENT TO BENEFIT THE WOUNDED WARRIOR PROJECT ON NOV. 12

ABI members are invited to attend TMA Southern California's special fundraiser to support the Wounded Warrior Project and SoCal veteran support groups on Nov. 12 at the Beverly Hilton. Funds raised will benefit the Wounded Warrior Project, Veterans Legal Institute and the Public Law Center. For more information or to attend, please click here.

ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19

ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf

VOLO ECLIPSES 1,500 CIRCUIT COURT SUMMARIES! NEW CASE SUMMARY ON VOLO: DERBABIAN V. BANK OF AMERICA, N.A. (6TH CIR.)

Summarized by Ryan Heilman of Wolfson Bolton PLLC

The Sixth Circuit affirmed the district's court's dismissal of the plaintiffs' eight-count complaint relating to the foreclosure-by-advertisement of their home. Specifically, the plaintiffs (1) failed to plead fraud with specificity, (2) failed to state a claim for breach of contract because agreements relating to loans from a financial institution must be in writing to be enforceable, (3) were barred by the statute of limitations from asserting Truth in Lending Act claims, and the recoupment and set-off exceptions do not apply to non-judicial foreclosures, (4) failed to adequately plead fraud, irregularity or prejudice with respect to the foreclosure process, (5) could not maintain an action to quiet title because they made no showing of superior title to the property, and (6) could not maintain an action for slander of title because they failed to plausibly identify any false statements.

There are more than 1,500 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: CREDIT RISK RETENTION RULES AND QUALIFIED RESIDENTIAL MORTGAGES

A recent blog post examines the government's long-awaited credit risk retention rules for securitization.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The §547(c)(2) ordinary course preference defense should be repealed.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2014

October
- Views from the Bench
    Oct. 24, 2014 | Washington, D.C.

- Claims-Trading Program
    Oct. 30, 2014 | New York

- International Insolvency & Restructuring Symposium
    Oct. 30-31, 2014 | London

November
- Complex Financial Restructuring Program
    Nov. 6, 2014 | Philadelphia

- Corporate Restructuring Competition
    Nov. 6-7, 2014 | Philadelphia

- Chicago Consumer Bankruptcy Conference
    Nov. 11, 2014 | Chicago

- Detroit Consumer Bankruptcy Conference
    Nov. 11, 2014 | Troy, Mich.

- Mid-Level Professional Development Program
    Nov. 12, 2014 | Chicago

December
- Winter Leadership Conference
    Dec. 4-6, 2014 | Palm Springs, Calif.

- 40-Hour Mediation Training Program
   Dec. 7-11, 2014 | New York

January
- New Orleans Consumer Bankruptcy Conference
    Jan. 19, 2015 | New Orleans

- Rocky Mountain Bankruptcy Conference
    Jan. 22-23, 2015 | Denver

February
- Caribbean Insolvency Symposium
    Feb. 5-7, 2015 | Grand Cayman, Cayman Islands

- VALCON 2015
    Feb. 25-27, 2015 | Las Vegas

COMMENTARY: DODD-FRANK'S "ORDERLY LIQUIDATION" IS OUT OF ORDER



The Dodd-Frank Act continues to undermine economic growth and the rule of law by injecting immense uncertainty into our economy, according to a Wall Street Journal commentary yesterday by Oklahoma Attorney General Scott Pruitt (R) and South Carolina Attorney General Alan Wilson (R). Oklahoma, South Carolina and Michigan last week joined a federal lawsuit against the Dodd-Frank Act to uphold property rights and checks and balances. Pruitt and Wilson's commentary focused on Title II of the Dodd-Frank Act, which gives the Treasury secretary and the Federal Deposit Insurance Corp. unprecedented authority to "liquidate" financial companies. "This grants immense power to a handful of unelected federal bureaucrats, empowering them to pick winners and losers among a liquidated company's investors. This arrangement destroys rights long protected by bankruptcy law," according to Pruitt and Wilson. Read the full commentary.

CFPB FACING TEST OF "AGGRESSIVE ABILITY TO INVESTIGATE"



Lawyers who follow actions by the Consumer Financial Protection Bureau (CFPB) are closely watching a petition by mortgage lender PHH Corp., which filed the first-ever challenge to a CFPB civil investigative demand, the Legal Times reported yesterday. PHH's petition called the agency's request for information "overly broad and unduly burdensome." Last week, CFPB Director Richard Cordray denied the petition and ordered the company to produce all relevant documents within 21 days. The dispute arose from an investigation to determine whether mortgage lenders and private mortgage insurance providers engaged in "unlawful acts or practices in connection with residential mortgage loans," as the CFPB put it in its "Notification of Purpose" that agency lawyers served on PHH on May 22. In its petition, PHH complained that the CFPB failed to state the nature of the conduct at issue, as required by Dodd-Frank. "The failure of the CFPB to properly apprise PHH of the nature of its investigation prejudices PHH's ability to formulate appropriate objections," PHH counsel Mitchel Kider and David Souders of Weiner Brodsky Sidman Kider wrote. Cordray responded that an initial civil investigative demand may be "crafted broadly because the enforcement team needs to be thorough and comprehensive about its inquiries into possible violations of law that harm consumers." Read more.

GOV. BROWN SIGNS CALIFORNIA FORECLOSURE PREVENTION LEGISLATION



California Gov. Jerry Brown (D) has completed work on a package of foreclosure-prevention bills aimed at preventing future real estate and mortgage foreclosure problems, the Los Angeles Times reported yesterday. The governor on Tuesday signed into law S.B. 1474 by State Sen. Loni Hancock (D-Berkeley), giving the attorney general authority to impanel a statewide grand jury to investigate and issue indictments for alleged financial crimes, including mortgage fraud. Also signed on Tuesday were Assembly Bill 1950 by Assemblyman Mike Davis (D-Los Angeles), which extends from one to three years the legal statute of limitations for prosecuting mortgage-related crimes, and A.B. 2610 by Assemblywoman Nancy Skinner (D-Berkeley), which provides guarantees to renters that they can stay longer in foreclosed properties purchased by new owners. Read more.

ANALYSIS: STUDENT DEBT STRETCHES TO NEARLY 20 PERCENT OF U.S. HOUSEHOLDS



With college enrollment growing, student debt has stretched to a record number of U.S. households — nearly 1 in 5 — according to an analysis by the Pew Research Center, the Associated Press reported today. Pew found that 22.4 million households, or 19 percent, had college debt in 2010. That is double the share in 1989 and up from 15 percent in 2007, just prior to the recession — representing the biggest three-year increase in student debt in more than two decades. The increase was driven by higher tuition costs as well as rising college enrollment during the economic downturn. The biggest jumps occurred in households at the two extremes of the income distribution. More well-off families are digging deeper into their pockets to pay for costly private colleges, while lower-income people in search of higher-wage jobs are enrolling in community colleges, public universities and other schools as a way to boost their resumes. Read more.

MERGERS & ACQUISITIONS ACTIVITY SLUMPS TO LOWEST LEVEL SINCE HEIGHT OF FINANCIAL CRISIS



Global mergers and acquisitions slumped this quarter to a level not seen since the aftermath of the financial crisis amid increasing concern that the economic recovery is deteriorating, Bloomberg News reported today. Companies have announced $446 billion of takeovers since June 30, the smallest amount since the third quarter of 2009, according to data compiled by Bloomberg. Acquisitions are now on pace to drop 15 percent in 2012 to $2 trillion, the lowest in three years. Cross-border takeovers have accounted for about half of all announced deals this year. This quarter’s slowdown has been most pronounced in Europe, where takeovers accounted for about $92 billion, or 21 percent, of global activity, the continent's lowest share since 2010. The Americas accounted for $248 billion of transactions, and there were $104.5 billion of transactions in the Asia-Pacific region. Read more.

LATEST ABI PODCAST EXAMINES RESEARCH ON THE USE OF KERPS IN BANKRUPT FIRMS



ABI Resident Scholar Susan Hauser talks with Profs. Vidhan K. Goyal of the Hong Kong University of Science & Technology (HKUST) and Wei Wang of the Queen's School of Business about their controversial paper, "Provision of Management Incentives in Bankrupt Firms." Profs. Goyal and Wang examine the use of key employee retention plans (KERPs) in bankrupt firms and discuss how the results of their empirical research do not support the common view that retention bonus plans enrich managers at the expense of creditors. Click here to listen.

NEW ABI PUBLICATION EXAMINES BANKRUPTCY'S EFFECTS ON MANUFACTURING SUPPLY CHAINS



Now available for pre-order in the ABI Bookstore, Interrupted! Understanding Bankruptcy's Effects on Manufacturing Supply Chains explores the issues that arise when suppliers are unable to make deliveries of promised parts due to financial problems. When the authors of this manual set out to update ABI's Auto Supplier Insolvencies & Bankruptcies manual (ABI, 2006), they realized that supply chain issues had moved far beyond the scope of just financially troubled auto suppliers. This comprehensive manual unravels the sometimes-knotty intersection of the Uniform Commercial Code and the Bankruptcy Code, and includes special sections on cross-border matters in Canada, Germany and Mexico. Also included is a detailed discussion of relevant case law such as Delphi Corp. and Plastech Engineered Products, as well as sample agreements that outline common protections against supply chain disruptions. Click here to pre-order your copy today!

SHOW YOUR SUPPORT FOR STEVEN GOLICK, A COLLEAGUE AND ABI LEADER



Our friend Steven Golick (Osler Hoskin & Harcourt LLP, Toronto) is facing a medical crisis. He has been diagnosed with a serious brain tumor, requiring complex surgery and treatment. Steven’s spirits are very strong and he and his family remain optimistic, but he can use our support. A prominent international restructuring attorney and an ABI member since 1994, Steven is also a founding member of the ABI house band, the Indubitable Equivalents. Because the band is important to Steven, his fellow band-mates have organized a new Blog site for Steven's friends and colleagues to show their love and support at this critical time. Please click on this link to share your thoughts with many others, and post as often as you'd like.

ABI IN-DEPTH

FREE REGISTRATION, LIMITED SPOTS FOR THE ABI/BLOOMBERG DISTRESSED LENDING CONFERENCE ON OCT. 16!



The ABI Secured Credit Committee and Bloomberg Law are co-hosting a Distressed Lending Conference on October 16 at Bloomberg Headquarters in New York. Leading experts in the industry will discuss recent developments in distressed lending, the future of the European distressed market and the state of the U.S. credit markets, including prospects for corporate defaults and whether and how the European financial crisis will affect the U.S. credit markets. If you are a leader in the distressed lending industry, you do not want to miss this conference! Registration is free. Spaces are limited and seats are filling fast. Click here to register.

MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26



Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.



ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at sgerdano@abiworld.org.

LATEST CASE SUMMARY ON VOLO: LEWIS BROTHERS BAKERIES INC. V. INTERSTATE BRANDS CORP. (IN RE INTERSTATE BAKERIES CORP.; 8TH CIR.)



Summarized by William Joanis of JoanisLaw

Following the Countryman test for an executory contract (whether obligations remain on both sides so underperformed that the failure of either party to complete performance of those obligations would constitute a material breach excusing the performance of the other), the Eighth Circuit ruled that the obligations remaining on a license agreement entered into as part of the sale of a business was an executory contract. The Eighth Circuit distinguished the Third Circuit decision In Re Exide Technologies, 607 F.3d 957 (3rd Cir. 2010) on the basis of the obligation of the non-debtor to maintain quality standards. The dissent argued that the license agreement was but a part of a sale that had occurred years previously and the remaining obligations were not material, as the sale had been substantially consummated.

There are more than 600 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: THE CURE FOR THE BANKING INDUSTRY: WHY DODD-FRANK IS NO HELP



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post describes how the law radically expands the power of the Fed and banking regulators, and gives the institutions that created the crisis more ability to cause bigger problems in the future.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?



Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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September

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar

October 15, 2012

- ABI/Bloomberg Distressed Lending Conference

October 16, 2012 | New York, N.Y..

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium

     October 19, 2012 | Queens, N.Y.

- ABI Program at NCBJ's Annual Conference

     October 26, 2012 | San Diego, Calif.

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Professional Development Program

     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.

- Winter Leadership Conference

     November 29 - December 1, 2012 | Tucson, Ariz.

December

- Forty-Hour Bankruptcy Mediation Training

     December 4-8, 2012 | New York, N.Y.

2013

February

- Kansas City Advanced Consumer Bankruptcy Practice Institute

     February 17-19, 2013 | Kansas City, Mo.

FORECLOSURES GROW AGAIN AS FUNDING FOR HELP WANES



With millions of homes still in the foreclosure pipeline, mortgage counselors across the country say they are handling increasingly complex cases for homeowners who are unemployed, underwater or redefaulting -- and sometimes, all three, Bloomberg News reported today. Even as borrowers’ problems become more intractable, federal support is waning. Counseling programs are funded largely through the U.S. Department of Housing and Urban Development, which has allocated about $620 million to advise approximately 1.36 million homeowners since December 2007, according to a NeighborWorks America June 11 report to Congress. Last November, Congress appropriated $45 million for housing counseling in fiscal year 2012 after slashing all counseling funding during April budget negotiations. HUD had requested $88 million. The House passed a 2013 HUD appropriations bill in June allocating $45 million to housing counseling, $10 million less than HUD requested. The bill is now stalled in the Senate, and the White House has said President Barack Obama plans to veto the bill if passed in its current form. Administration officials are urging states to compensate for declining funds with money from a recent court settlement with mortgage servicers. Counselors, who act as neutral third parties between homeowners and lenders, say their services will be needed as long as unemployment remains high, scammers target struggling homeowners and states change their foreclosure policies, as happens frequently. Read more.

LAWSUIT COULD UNDO SALE THAT CREATED NEW GM, COMPANY SAYS



The new General Motors Co. could be undone by a $3 billion lawsuit that pits general creditors against hedge funds including Appaloosa Management LP, Elliott Management Corp. and Fortress Investment Group LLC, Bloomberg News reported today. A trust for creditors of the old, bankrupt part of the automaker now known as Motors Liquidation Co. sued the hedge funds in bankruptcy court in March, alleging that while GM was preparing its bankruptcy filing on June 1, 2009, the funds, which held notes in a Canadian unit of GM, "saw an eleventh-hour opportunity for profit and pounced." The trust seeks to have a $2.67 billion claim and a $367 million payment negotiated for holders of notes in GM's Nova Scotia unit disallowed or reduced, saying that the hedge funds seek more than three times what General Motors actually owed them. General Motors, the currently operating automaker that split off from the bankrupt unit through a purchase of its assets July 10, said that the trust's objections "threaten to disturb" the sale that saved the U.S. automaker, allowing it to prosper. Read more.

FEDERAL RESERVE SAYS U.S. BANK LENDING CONDITIONS EASING



The Federal Reserve said yesterday that banks continued to ease lending standards for larger firms in the last three months but that small businesses are still having a hard time accessing credit, Reuters reported today. The results from the central bank's quarterly senior loan officer survey suggest that the ability of firms to borrow has continued to improve despite recent signs of weakness in the economic recovery. A number of banks eased loan standards on auto and credit card loans, the Fed said. Strong demand for prime mortgage loans offered further evidence that a nascent housing rebound is finally beginning to take hold, according to the survey. U.S. banks are benefiting from new business due to a decrease in lending from European institutions, the survey found. Read more.

FEARING AN IMPASSE IN CONGRESS, INDUSTRY CUTS SPENDING



A rising number of manufacturers are canceling new investments and putting off new hires because they fear that paralysis in Washington, D.C., will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months, the New York Times reported on Sunday. Democrats and Republicans in Congress are far apart on how to extend the Bush-era tax breaks beyond January — the same month automatic spending reductions are set to take effect — unless there is a deal to trim the deficit. The combination of tax increases and spending cuts is creating an economic threat that Federal Reserve Chairman Ben S. Bernanke calls "the fiscal cliff." The worries come amid broader fears that the economy is losing momentum; the annual rate of economic growth in the second quarter fell to 1.5 percent from 2 percent in the first quarter, and 4.1 percent in the last quarter of 2011. On Thursday, the Commerce Department reported that factory orders unexpectedly fell 0.5 percent in June from the previous month, while data on the labor market released on Friday showed job creation still falling short of the level needed to bring down the unemployment rate. Read more.

STATE REGULATORS URGE CONGRESS TO EXTEND DEPOSIT INSURANCE



State regulators on Friday sent a letter to Congress urging for the extension of a special program that provides government insurance on bank accounts known as the Transaction Account Guarantee (TAG), the Wall Street Journal reported on Saturday. It is clear that "the stability provided by the TAG program is still necessary," wrote John Ryan, president of the Conference of State Bank Supervisors. The guarantee program insures all bank deposits above the traditional $250,000 limit for guaranteed deposits provided by the Federal Deposit Insurance Corp. The result is a sense of safety for companies and municipalities that want to deposit large sums of cash at banks for use in managing payroll, for instance. The program covers more than a trillion dollars worth of zero-interest deposits at large and small banks. The program was created in 2008 in the midst of market chaos stemming from the financial crisis. Four years later, the program faces a Dec. 31 expiration date, absent congressional action. Read more. (Subscription required.)

SMALL BANKS CRITICIZE PROPOSED BANK CAPITAL RULES



Executives at many small banks complain that the forthcoming bank capital rules proposed by the OCC, Federal Reserve and Federal Deposit Insurance Corp. to implement an international agreement known as Basel III could force the banks to cut back on loans to small businesses or homeowners, the Wall Street Journal reported today. The current economic malaise has heightened concern about the health of smaller lenders. Smaller banks say they are a bigger driver of growth in their communities—particularly for small businesses—than their bigger, multinational rivals. Lenders with less than $1 billion in assets made up about 10 percent of industry assets as of the first quarter but made 37 percent of small loans to businesses and farms, according to research by the FDIC, which has launched an initiative to better understand the challenges facing community banks. At a vote to send the draft rules out for comment, Federal Reserve governor Elizabeth Duke raised concerns that new treatment of mortgages and other assets under the new capital rules could hamper legitimate lending by smaller lenders. Small lenders say that the elaborate Basel III system was designed to rein in the large, internationally active banks that brought the financial system to its knees, not small community institutions. Read more. (Subscription required.)

LATEST ABI PUBLICATION EXPLORES OIL AND GAS BANKRUPTCIES



The U.S. oil and gas industry is especially vulnerable to the effects of myriad internal and external factors, ranging from global credit markets to domestic and foreign geopolitical events, and from technological developments and limitations to population growth and even the weather. These factors have contributed to a dramatic increase in restructurings and bankruptcy filings over the last decade. Bankruptcy cases involving exploration and production companies raise unique issues, resulting from the interplay among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance. When Gushers Go Dry: The Essentials of Oil and Gas Bankruptcy provides a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt. For more information about ordering the book, please visit the ABI Bookstore.

ABI IN-DEPTH

ABI MEMBERS WELCOME TO ATTEND ABC'S FREE HALF-DAY "BANKRUPTCY: BACK TO THE FUTURE" PROGRAM IN SEPTEMBER



The American College of Bankruptcy invites you to attend a free half-day program on Sept. 28 at the IIT Chicago-Kent College of Law for a discussion of many of the challenging topics facing current bankruptcy and reorganization professionals. Topics to be addressed include recent decisions of the U.S. Supreme Court and Court of Appeals, important work of the Advisory Committee on Bankruptcy Rules, and developments in the field of bankruptcy ethics. The speakers for the program are among the nation’s leading judges, academics and bankruptcy professionals. While there is no cost to attend, seating is limited, so early reservation is suggested. For more information and to register, please click here.

LATEST CASE SUMMARY ON VOLO: TERRY V. STANDARD INSURANCE CO. (IN RE TERRY; 8TH CIR.)



Summarized by Sarah Smegal of Bartlett Hackett Feinberg P.C.

The Eighth Circuit BAP reversed the bankruptcy court and remanded the case for a determination of whether the equities favored allowing the creditor to recoup the debtor's pre-petition overpayment of disability insurance benefits from post-petition benefits. Reviewing the bankruptcy court's decision de novo, the BAP held that the debtor's debt to Standard was revived when Standard turned over the $45,316.54 to the trustee in response to the preference demand letter. Standard's right to reimbursement was a claim entitled to be paid as a general unsecured claim as allowed under Section 502(h). Standard did not file a proof of claim, so its claim was not allowed and it was not entitled to any distribution in the case. Its claim was also discharged under Section 727(b). The BAP found that although the debt was discharged and Standard could not collect the overpayment affirmatively, Standard's equitable defense of recoupment survived and could be exercised under the policy. For recoupment to apply, the creditor must have a claim against the debtor that arose from the same transaction as the debtor's claim against the creditor. The BAP ruled that both parties' rights and obligations arose out of a single contract, i.e. the long-term disability insurance policy. Recoupment is only allowed where it would be inequitable for the debtor to enjoy the benefits of the transaction without also meeting his obligations, and is also narrowly construed in bankruptcy. Accordingly, as the equities must be weighed and the question was not reached by the bankruptcy court, the BAP remanded the case.

Nearly 600 appellate opinions are summarized on Volo typically within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: THIRD CIRCUIT REVISITS EQUITABLE MOOTNESS IN PHILADELPHIA NEWSPAPERS CASE



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examined how the U.S. Court of Appeals for the Third Circuit recently held in In re Philadelphia Newspapers LLC, No. 11-3257 (3d Cir. July 26, 2012) that an appeal cannot be dismissed as equitably moot solely on the basis that a chapter 11 plan has been substantially consummated.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

The Twombly/Iqbal rule for pleading ‘plausible’ claims has been applied too stringently in dismissing avoidance actions for failure to state a claim.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

IS YOUR ABI MEMBERSHIP PROFILE CURRENT?



Keeping a current profile will allow you to benefit from one of ABI's most important services - networking. When you update your profile, you are putting your most valuable information in the membership directory. Be sure to include your areas of expertise, firm information, education and join any other committees that are of interest. Click here to update your profile.

INSOL INTERNATIONAL



INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

September

- Complex Financial Restructuring Program

     September 13-14, 2012 | Las Vegas, Nev.

- Southwest Bankruptcy Conference

     September 13-15, 2012 | Las Vegas, Nev.

- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization

     September 19-20, 2012 | New York, N.Y.

- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program

     September 28, 2012 | Chicago, Ill.

October

- Nuts & Bolts for Young and New Practitioners - KC

     October 4, 2012 | Kansas City, Mo.

- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum

     October 5, 2012 | Kansas City, Mo.

- Bankruptcy 2012: Views from the Bench

     October 5, 2012 | Washington, D.C.

- Chicago Consumer Bankruptcy Conference

     October 8, 2012 | Chicago, Ill.

- International Insolvency and Restructuring Symposium

     October 18, 2012 | Rome, Italy

November

- U.S./Mexico Restructuring Symposium

     November 7, 2012 | Mexico City, Mexico

- Detroit Consumer Bankruptcy Conference

     November 12, 2012 | Detroit, Mich.