NEWS AND ANALYSIS
PRELIMINARY HEARING ON DETROIT'S CHAPTER 9 ELIGIBILITY MOVES CASE TO CRITICAL PHASE
In an exchange with an attorney representing Detroit's two pension funds, Bankruptcy Judge Steven Rhodes discussed whether protections for the city's pension funds could violate federal bankruptcy law. The exchange occurred during the closing session yesterday of a three-day preliminary hearing on Detroit's chapter 9 eligibility. Robert Gordon, the pension funds' attorney, argued that the city should not be eligible for bankruptcy protection because Michigan's constitution protects pensions from impairment, and because the retiree unions believe that the city will pursue pension cuts. While a Reuters story yesterday suggested that a decision was made on the pension issue, Judge Rhodes did not issue an opinion on the matter during the exchange, but he did pose tough questions to attorneys representing Detroit's unions, retirees and pension funds as they disputed the legal arguments the city's attorneys made last week. Even if Judge Rhodes believes that the Constitution prevents impairment, that is not an issue to be decided during the eligibility trial. The trial on Detroit's chapter 9 eligibility is scheduled to begin tomorrow. Read more.
CORDRAY DOESN'T EXPECT WAVE OF LITIGATION OVER CFPB'S QM RULE
U.S. Consumer Financial Protection Bureau Director Richard Cordray said that he doesn't anticipate an outburst of litigation after his agency's qualified mortgage rule takes effect next year, Bloomberg News reported yesterday. Regulators understand that banks will need time for implementation of the rule, which will require that lenders take certain steps to confirm a borrower's ability to repay, Cordray said yesterday. "Let me also assure you that our oversight of the new mortgage rules in the early months will be sensitive to the progress made by institutions that have been squarely focused on making good-faith efforts to come into substantial compliance on time -- a point that we have also been discussing with our fellow regulators," he said. The consumer bureau will have no data initially and will need to wait a few months after the rule takes effect in January to judge its impact, Cordray said. Read more.
For more on the CFPB's new mortgage servicing rules, be sure to attend the inaugural abiWorkshop program, "Risky Times for Secured Lenders and Servicers," on Nov. 6. One of the program sessions is devoted to the CFPB's new mortgage servicing rules scheduled to take effect next year. To register to attend in person or via live webstream, please click here.
DOJ SEES $13 BILLION JPMORGAN DEAL AS A TEMPLATE FOR FUTURE BANK SETTLEMENTS
The Justice Department plans to use its tentative $13 billion settlement with JPMorgan Chase as a blueprint for reaching similar deals with other banks in probes related to bad mortgages and the 2008 financial crisis, the Washington Post reported today. Justice Department officials plan to expand the use of a 1980s law that carries a relatively low burden of proof and gives prosecutors 10 years to pursue such cases, twice as long as under standard securities law. Under this model, the department would also require that some of the settlement money be directed to consumers; in JPMorgan's case, $4 billion would be set aside for struggling homeowners. The department would also refuse to allow banks to avoid criminal prosecution by paying higher civil penalties. The strategy will give the Justice Department several more years to extract multibillion-dollar fines from banks eager to rid themselves of crushing legal burdens. The strategy also includes requiring that any future deals include help for homeowners devastated by the housing market's collapse. Justice Department officials want JPMorgan to agree to aggressive forms of mortgage relief, including lowering the balances of borrowers who owe significantly more than their homes are worth. The agency wants that help directed to the areas most affected by the troubled housing market, including Detroit. Read more.
BIG U.S. BANKS SAY PROPOSAL TO LIMIT LEVERAGE ARBITRARY, HARMFUL
Some of the largest U.S. banks said a proposed rule to increase the capital they hold against potential losses is arbitrary and would put them at a disadvantage against non-U.S. banks facing easier requirements, Bloomberg News reported yesterday. The so-called leverage ratio -- proposed by banking regulators at 5 percent for holding companies and 6 percent for their banking units -- targeted banks with the most assets. In comment letters yesterday, New York-based Citigroup Inc., the third-biggest U.S. bank, said the idea could worsen an uneven global playing field for U.S. banks, and State Street Corp. said that the regulators showed "no evidence" they based the numbers on an impact study. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. proposed a tougher limit on U.S. firms than those agreed to in Basel III international accords. The leverage cap -- also affecting JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of America Corp., Wells Fargo & Co. and Bank of New York Mellon Corp. -- is meant to limit vulnerabilities in the financial system that were seen in the lead-up to the 2008 credit crisis. Read more.
ANALYSIS: PRIVATE-EQUITY FIRMS TARGETING RENTAL MARKET IN HOUSING'S HARDEST-HIT AREAS
Private-equity firms and hedge funds have bought as many as 200,000 homes across the U.S., typically in areas hardest hit by the housing crash, to profit from soaring demand for rentals, Bloomberg News reported yesterday. Demand for rental accommodations in the U.S. has grown as almost 8 million homes have been repossessed through foreclosure or sold for a loss since 2007, according to RealtyTrac. The homeownership rate dropped to 65 percent in the first half of this year, its lowest level since 1998, Census data show, and may keep falling as more owners lose their homes and slow income growth and tight credit limit people's ability to buy. Last year, U.S. home prices dropped to a low of 35 percent below their 2006 peak, triggering a wave of acquisitions from investors trying to turn a business that's been dominated by mom and pop landlords into an institutional asset class resembling the apartment industry. Blackstone Group LP has led the stampede, spending more than $7.5 billion on almost 40,000 properties, followed by American Homes 4 Rent with more than 20,000. Investors have largely targeted Phoenix, Atlanta, Dallas, Charlotte, N.C. and Tampa, Fla., where growth in jobs and population is expected to drive up rents and home values. Read more.
RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!
Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.
NEW "BANKRUPTCY IN DEPTH" VIDEO PREVIEWS UPCOMING SUPREME COURT BANKRUPTCY CASES
ABI's next "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce talking with Eric Brunstad of Dechert LLP (Hartford, Conn.) to preview the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under §105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. He also provides a candid view of what it is like to argue a case before the Court and an in-depth analysis of the issues involved with the upcoming cases. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.
ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!
You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 6 program include:
- Living with the New CFPB Mortgage Servicing Rules
-
Business Lending: Navigating What Lies Ahead
- Business Lending: Recent Legal Developments
For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.
EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15
Experts will tackle the hot topic of student lending issues in bankruptcy on the abiWorkshops series' new program, "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" The program will be held on Nov. 15 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 15 program include:
- Student Lending Today: Who Borrows, How Much, Delinquency & Default Trends
- Repayment Options: Income Based Repayment and New Lender/Servicer Programs
- Litigation under Sect. 523(a)(8): What Proofs Are Needed? Evidence Demonstration
For more information or to register for the "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" abiWorkshop on Nov. 15, please click here.
ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER
The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup sponsored by Great American Group is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: PENNINGTON-THURMAN V. BANK OF AMERICA N.A. (IN RE PENNINGTON-THURMAN; 8TH CIR.)
Summarized by Michael Tamburini of the Commercial Law Group P.A.
The BAP affirmed the bankruptcy court's conclusion that the debtor's allegations against her mortgage lender were without merit and, therefore, it did not abuse its discretion in denying the debtor's motion to reopen her case to bring an adversary proceeding.
There are more than 1,000 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: HOW MORTGAGE MARKETS CAN PRICE RISK EFFICIENTLY
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post suggested that higher capital requirements for federal mortgage lenders, more stringent qualified mortgage and qualified residential mortgage requirements for borrowers and a heightened reliance on private markets will help keep taxpayers from paying for future bailouts.
The abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers," on Nov. 6 will cover potential legal issues associated with the CFPB's new qualified mortgage lending rules set to take effect in 2014. Attend in person or via live webstream.
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
Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?
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.
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