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Bankrupt Residential Capital LLC should be barred from selling its mortgage servicing unit to Ocwen Financial Corp. unless Ocwen agrees to honor ResCap’s portion of a $25 billion legal settlement with the U.S. and 49 states, government lawyers said in court papers, Bloomberg News reported yesterday. Ocwen and its partner in the proposed $3 billion purchase must take over ResCap's part in the settlement, which ended a lawsuit against banks accused of helping cause the housing crisis, the U.S. Justice Department said in an objection filed yesterday. ResCap filed for bankruptcy in May with plans to sell its servicing unit, the fifth-biggest in the U.S. ResCap is a unit of Ally, a Detroit-based auto lender that is majority-owned by U.S. taxpayers. Ocwen and Walter Investment Management Corp. won an auction for the unit last month with a bid worth about $3 billion.

Federal Reserve Bank of Boston President Eric Rosengren said that the Fed should buy mortgage bonds until the jobless rate falls to 7.25 percent and hold the target interest rate near zero until hitting 6.5 percent unemployment, Bloomberg News reported yesterday. "As long as inflation and inflation expectations are expected to remain well-behaved in the medium term, we should continue to forcefully pursue asset purchases," Rosengren said. The Boston Fed chief’s proposal would set "a threshold, not a trigger," he said. Once achieved, "the assessment of continued asset purchases would commence."

Chasing down money owed in a 14-year-old legal dispute, Michigan real estate investor David Clapper is trying to eject American Realty Trust Inc. from bankruptcy court, arguing that the trust company's chapter 11 filing in August was another attempt to delay paying Clapper and his businesses a $73 million judgment, Dow Jones DBR Small Cap reported today. In the court papers filed on Tuesday, Clapper accused the controller of American Realty Trust of trying to avoid payment by gradually transferring assets and ownership to its successor company, Dallas-based American Realty Investors Inc., which is not in bankruptcy.

Hurricane Sandy caused massive disruptions to U.S. businesses and threatened billions of dollars in damage to a region packed with corporate headquarters, retail stores and transportation hubs, the Wall Street Journal reported today. Estimates for the financial consequences of the storm in the U.S. run to the billions of dollars. Disaster-modeling company Eqecat said the storm could cost the insurers between $5 billion and $10 billion. The Global Business Travel Association last year estimated that a large hurricane costs airlines, Amtrak, rental car companies and hotels nearly $700 million in lost or deferred business-travel spending. The broader impacts on the U.S. economy should be "noticeable but temporary," said economists at Moody's Analytics.

Fannie Mae and Freddie Mac, the home mortgage-finance companies now under government control, were accused by Miami-Dade County, Florida, of failing to pay transfer taxes when they took ownership and sold thousands of foreclosed properties, Bloomberg News reported today. Harvey Ruvin, clerk of the courts for Miami-Dade County, sued the mortgage finance companies in federal court in Miami Oct. 29 alleging that Fannie Mae and Freddie Mac improperly claimed they are exempt from paying the tax, which amounts to 60 cents per $100 of the value of single-family residences. "Fannie Mae and Freddie Mac are parties to thousands of real estate transactions, particularly here in South Florida, and they are shirking their responsibility to pay their fair share of transfer taxes," said Adam M. Schachter, a lawyer for the county.

Fannie Mae and Freddie Mac are expected to begin repaying taxpayers for their bailout faster than initially projected, in part because of an improving housing market, the Wall Street Journal reported on Saturday. The Federal Housing Finance Agency, the companies' federal regulator, released a report on Friday that estimated they will pay between $32 billion and $78 billion to the U.S. Treasury through 2015. The baseline forecast assumes that the companies would end up costing taxpayers $76 billion by the end of 2015, down from the current tab of $142 billion. Since the companies were placed into conservatorship by the government in 2008, they have drawn nearly $188 billion from the Treasury and paid back $46 billion in dividends.

ABI's Commission to Study the Reform of Chapter 11, whose 22 members constitute a venerable bankruptcy industry Hall of Fame, held a hearing yesterday to gather feedback on what is right and wrong with the statutory scheme that has governed chapter 11 bankruptcy since 1978, Reuters reported. The commission's charge includes "literally considering starting from scratch and re-inventing the statute," said Robert Keach, attorney and commission co-chairman. The commission plans to eventually submit a report to Congress, targeted for April, 2014, that could serve as "part blueprint, part outline" for new legislation, Keach said. The commission will study 13 areas of bankruptcy law, including labor & benefits issues, financing rules and government supervision. It is collecting feedback from several groups through a series of hearings, with upcoming dates at the National Conference of Bankruptcy Judges in San Diego on Oct. 26, and a convention of trade group the Turnaround Management Association in Boston on Nov. 3. Read more:
http://www.reuters.com/article/2012/10/18/bankruptcy-reform-idUSL1E8LHP…

To obtain the prepared witness testimony from yesterday's hearing, view background information on the Commission members or to see upcoming dates of activity, please click here: http://commission.abi.org/

Strapped for cash and eager to renegotiate its real-estate leases, Seattle coffee-shop chain Tully's Coffee filed for bankruptcy protection Wednesday in the U.S. Bankruptcy Court for the Western District of Washington, The Seattle Times reported yesterday."We're at a point where we need to position Tully's for the future," said CEO Scott Pearson. "We need to be able to keep this company operating, and this is the best option for us." Although Tully’s is no longer burdened by the enormous debt that plagued it for years, it is low on cash. The company had $1.8 million in cash on Jan. 1, the most recent date for which information is available, down from $2.8 million a year earlier. The bankruptcy filing shows assets of $5.9 million and liabilities of $3.7 million. The company said it hopes to renegotiate terms on its real estate leases, including on cafes it is closing.

Ally Financial Inc. is worried that the proposed sale of Residential Capital LLC's mortgage-servicing platform might hamstring ResCap's promise to abide by the terms of a landmark national mortgage settlement, Dow Jones Daily Bankruptcy Review reported today. Ally, ResCap's government-controlled parent, on Friday expressed concerns about whether Nationstar Mortgage LLC would fulfill ResCap's obligations under the settlement if it wins a coming auction for the bankrupt company's mortgage-servicing portfolio. Nationstar, a subsidiary of Fortress Investment Group, has been named the lead bidder in that contest, with a $2.5 billion bid. According to Ally, the tentative sale deal with Nationstar does not spell out that the prospective purchaser will "honor and perform all of the debtors' obligations" under a settlement the nation's largest mortgage lenders struck with the Department of Justice and scores of state attorneys general over alleged violations in mortgage origination and foreclosure practices. Ally said that it will not back the transaction unless ResCap's settlement responsibilities are preserved.

As Miami home builder Lennar Corp. tries to get Medford Village East Associate's chapter 11 case thrown out, the stalled New Jersey development owner filed a plan of reorganization on Friday that would maintain its ownership of the properties, Dow Jones DBR Small Cap reported today. The plan would pay Lennar $6.3 million, which includes some interest and the full return of a $6 million deposit, with yearly installments until March 2017. Lennar also would receive 2.5 percent interest until it has been repaid.