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Pimco Defends 8.5 Billion BofA Mortgage Accord

Submitted by webadmin on Fri, 2013-06-07 00:00

Bank of America Corp.’s $8.5 billion mortgage-bond settlement is “outstanding” for investors, said a Pacific Investment Management Co. (Pimco) executive, who defended the deal against opposition, Bloomberg News reported today. The settlement was reached after an investor group that included Pimco and BlackRock Inc. at first demanded $12 billion, eventually coming down to a “take it or leave it” offer of $8.5 billion, Kent Smith, an executive vice president at Pimco who helped negotiate the agreement, testified yesterday. Smith was the first witness to testify in a trial over the agreement, which is being considered by Justice Barbara Kapnick of New York State Supreme Court in Manhattan. The accord resolves claims from Countrywide Financial mortgage-bond investors over loans bundled into securities. American International Group Inc. is fighting the settlement, saying that Bank of America isn’t paying enough to compensate investors.

ABI Tags

Mortgage

Finance and Banking

Real Estate

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Friday, June 7, 2013 - 12:00

Senators Draft Plan to Abolish Fannie Mae and Freddie Mac

Submitted by webadmin on Wed, 2013-06-05 00:00

A bipartisan group of U.S. senators is putting the final touches on a bill that would liquidate Fannie Mae and Freddie Mac and replace them with a government reinsurer of mortgage securities behind private capital, Bloomberg News report yesterday. The legislation, written by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.) with input from other senators, is likely to be the first detailed blueprint reflecting a growing consensus in Washington, D.C., that the U.S. role in mortgage finance should be limited to assuming risk only in catastrophic circumstances. The draft bill would require private financiers to take a first-loss position adequate to cover price declines as steep as those seen during recessions over the past century. According to the draft, Washington, D.C.-based Fannie Mae and McLean, Va.-based Freddie Mac would be liquidated within five years and the U.S. Treasury would assume responsibility for their existing mortgage guarantees.

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Wednesday, June 5, 2013 - 12:00

ResCap Seeks to Pay Down 1.1 Billion Debt to Ally Financial

Submitted by webadmin on Wed, 2013-06-05 00:00

Mortgage lender Residential Capital LLC is seeking bankruptcy court approval to pay back more than $1.1 billion it owes to parent Ally Financial and to send another $800 million to bondholders, Dow Jones Daily Bankruptcy Review reported today. Lawyers for ResCap said in a court filing on Monday that by paying down its entire debt to its parent plus a portion of the $2.1 billion in principal it owes to bondholders now, the mortgage lender can eliminate millions of dollars in future interest payments. Interest payments to bondholders alone could reach $20 million a month and that cash, ResCap said, could instead go to its other creditors.

ABI Tags

Finance and Banking

Real Estate

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Wednesday, June 5, 2013 - 12:00

FHA Losses Could Hit 115 Billion in Extreme Scenario

Submitted by webadmin on Wed, 2013-06-05 00:00

The Federal Housing Administration's projected losses over 30 years could reach as high as $115 billion under a previously undisclosed "stress test" conducted last year to determine how the agency would fare under an extremely severe economic scenario, according to documents reviewed by a congressional committee, the Wall Street Journal reported today. The forecast was significantly worse than the most severe estimate included in the government mortgage-insurance agency's independent actuarial review released last November. The FHA's outside actuaries modeled the analysis along the lines of the annual stress test employed by the Federal Reserve Board, which gauges how the nation's largest financial institutions would fare in the event of a significant economic shock. The FHA isn't required to use the Fed test. The findings are part of an investigation by the House Oversight and Government Reform Committee, headed by Rep. Darrell Issa (R-Calif.).

ABI Tags

Mortgage

Real Estate

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Wednesday, June 5, 2013 - 12:00

HSBC to Be Sued by N.Y. for Foreclosure Law Violations

Submitted by webadmin on Tue, 2013-06-04 00:00

HSBC Holdings Plc broke New York foreclosure law and put homeowners at greater risk of losing their homes, according to New York Attorney General Eric Schneiderman, who said that he is suing the bank today, Bloomberg News reported today. A state investigation found that HSBC has left homeowners languishing in foreclosure by failing to meet requirements for giving them an opportunity to negotiate loan modifications, according to Schneiderman’s office. The lawsuit comes as state attorneys general nationwide have targeted banks over foreclosure practices, last year reaching a $25 billion settlement with five mortgage servicers, including Bank of America Corp. and Wells Fargo & Co. HSBC was not part of that settlement.

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Tuesday, June 4, 2013 - 12:00

Analysis Subprime Mortgage Investors Discover New Losses

Submitted by webadmin on Mon, 2013-06-03 00:00

Some mortgage investors got an unexpected refresher course on the risks of subprime debt when they received notice of $1 billion of previously undisclosed losses, the Wall Street Journal reported today. The news came with May's monthly statements on dozens of bonds backed by 75,743 home loans made before the financial crisis to borrowers with subprime credit. Many of the losses on the $15.2 billion of loans outstanding likely weren't reported to bondholders for a year or longer. Behind the sudden losses is a standoff between Wells Fargo & Co., the nation's largest mortgage lender, and Ocwen Financial Corp., the largest servicer of subprime loans, over the treatment of loans subject to a type of modification in which the borrower's repayment schedule has been extended to reduce the monthly payment. The losses themselves likely aren't backbreaking for investors in the $1 trillion market for nongovernment mortgage bonds. Like other riskier assets such as high-yield corporate debt, subprime mortgages have rallied since early 2012 as the economic recovery has gained steam and U.S. home prices have begun rising after a sustained decline.

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Monday, June 3, 2013 - 12:00

BofA 8 Billion Mortgage Deal to Receive Consideration This Week

Submitted by webadmin on Mon, 2013-06-03 00:00

Bank of America Corp.'s $8.5 billion settlement with mortgage-bond investors is set to be considered by a New York court two years after the lender struck the deal to resolve claims over home loans bundled into securities, Bloomberg News reported today. The settlement, scheduled to be considered by Justice Barbara Kapnick in State Supreme Court in Manhattan starting today, is part of an effort by Chief Executive Officer Brian Moynihan to clear up liabilities tied to the purchase of home lender Countrywide Financial in 2008. Although the deal has the backing of an investor group that includes BlackRock Inc., it must overcome opposition from investors led by American International Group Inc. who argue that Bank of America is not paying enough.

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Monday, June 3, 2013 - 12:00

Citigroup Settles U.S. Suit over 3.5 Billion in Mortgage Securities

Submitted by webadmin on Wed, 2013-05-29 00:00

Citigroup Inc. has reached a settlement with a federal agency that had accused the bank of misleading Fannie Mae and Freddie Mac into buying $3.5 billion of mortgage-backed securities, Reuters reported yesterday. The settlement with the Federal Housing Finance Agency was disclosed in a filing yesterday in U.S. District Court in Manhattan, where a series of related cases by the agency against Wall Street banks are pending. The filing did not disclose the terms of the deal. FHFA representatives said that the settlement was "satisfactory" but declined to say how much Citi would pay. The accord marks the second so far out of 18 securities fraud cases the FHFA filed against banks in 2011 over more than $200 billion in mortgage-backed securities sold to Fannie and Freddie. The FHFA settled a separate lawsuit in January, in which it had accused General Electric Co. of misleading Freddie Mac into buying $549 million worth of securities. Terms of that deal were also confidential.

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Wednesday, May 29, 2013 - 12:00

N.Y. Attorney General Lays Out Complaints against Wells Fargo Bank of America

Submitted by webadmin on Tue, 2013-05-28 00:00

New York Attorney General Eric Schneiderman said that Bank of America, Wells Fargo and other large banks are dragging their feet in processing homeowners’ requests for lower monthly payments under the $25 billion national mortgage settlement, the Washington Post reported on Saturday. Earlier this month, Schneiderman threatened to sue Wells Fargo and Bank of America for violating the terms of the agreement, which was brokered last year between 49 attorneys general and the nation’s five largest mortgage servicers over foreclosure abuses. New York’s top prosecutor said his office received 339 complaints that the two banks were not complying with the timeline requirements of the agreement. Homeowners said that the banks took more than 30 days to respond to their requests to reduce interest rates or loan balances.

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Tuesday, May 28, 2013 - 12:00

Seven Million Students Brace for Surge in Loan Rates

Submitted by webadmin on Tue, 2013-05-28 00:00

ABI Bankruptcy Brief | May 23 2013

May 28, 2013

NEWS AND ANALYSIS

SEVEN MILLION STUDENTS BRACE FOR SURGE IN LOAN RATES

Interest rates on student loans subsidized by the government will most likely double to 6.8 percent on July 1, CNNMoney.com reported today. Congress and the White House agree that something should be done to prevent that, but they are having a difficult time hammering out an agreement. The Republican-controlled House passed a bill last week that would stop the rates – lowered by Congress six years ago – from doubling now, but through a mechanism that might allow them to rise later. President Obama vowed to veto it, calling it the "wrong approach." Chances are that about 7 million students taking out subsidized loans for the next school year will face bigger balances when they start paying off their loans after graduation. The rate hike will only affect a third of all undergraduate students who have subsidized loans, in which the federal government absorbs some of the interest rate. The president and House Republicans disagree on how to let students "lock in" their rates from year to year. They also disagree on how to spend any extra revenue that they might make through student loans. Senate Democrats have an entirely different approach that would charge students only what it costs the federal government to make the loans. To pay for the program, Democrats say that Congress could get rid of tax breaks for the oil and gas industry. Read more.

REPORT: HOME PRICES POST LARGEST ANNUAL GAIN IN 7 YEARS

Home prices in March rose by 10.9 percent from a year earlier, the largest such gain in seven years, according to an index tracking home prices in 20 U.S. cities, the Wall Street Journal reported today. Standard & Poor's Case-Shiller index, released today, shows that all 20 cities have posted year-over-year growth for a third straight month, the latest sign of how tight inventories and growing housing demand have led to a surge in home prices after several years of declines. Prices increased in March by 1.4 percent from February and by 0.3 percent in February from January, a period in which sales volumes—and, consequently, home-price growth—are typically muted because of winter weather. Home prices during the first quarter of the year have not increased since 2006, and the first quarter gain of 1.8 percent this year has been the largest first quarter jump since 2005. Read more. (Subscription required.)

FANNIE MAE PROFITING AS MARKET MIDDLEMAN ANGERS LENDERS

Fannie Mae is snatching potential profits away from mortgage lenders and posting record earnings that are fueling industry concerns about the government-backed company, Bloomberg News reported yesterday. The company has ramped up its purchases of home loans from lenders for cash, in the process cutting out originators from the more profitable business of creating and selling bonds backed by the debt. About 31 percent of the $305 billion in new Fannie Mae-guaranteed securities in the first four months of this year were tied to so-called cash-window purchases, almost triple the shares from early 2011, according to data compiled by Bloomberg and JPMorgan Chase & Co. analyst estimates. The shift is morphing Fannie Mae into more of a middleman between homeowners and the bond market, a role typically played by originators or the larger banks that buy their loans, such as JPMorgan and Wells Fargo & Co. Read more.

VISA, MASTERCARD SUE INTERCHANGE-FEE SETTLEMENT DROP-OUTS

Visa Inc. and MasterCard Inc. sued trade groups and retailers that rejected a $7.25 billion settlement in a price-fixing suit and asked a court to rule that the card companies’ fee practices were not illegal, Bloomberg News reported on Saturday. The settlement, described by plaintiffs in that case as the largest in an antitrust lawsuit, would end an eight-year legal battle over the swipe, or interchange, fees charged to merchants when customers use credit cards to pay. The plaintiffs accused Visa and MasterCard, the two largest U.S. payment-card firms, of illegally fixing the fees. Visa, MasterCard and several banks said in a complaint filed on Friday in a federal court that their suit is “necessary to prevent the continuation of endless, wasteful litigation.” They seek to bar the trade groups and retailers from seeking antitrust damages for the fee practices. Read more.

TOMORROW’S ABI LIVE WEBINAR WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES

Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will highlight the case law and explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!

Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

ABI GOLF TOUR UNDERWAY; NEXT STOP IS CENTRAL STATES BANKRUPTCY WORKSHOP IN JUNE

Rob Schwartz and Scott Gautier are tied at 34 Stableford Points atop the closely bunched leaderboard after the ABI's Golf Tour's first stop at Lake Presidential Golf Club. Next up for the Tour is the famed Bear course at the Grand Traverse Resort at the Central States Bankruptcy Workshop on June 14. Final scoring to win the Great American Cupsponsored by Great American Groupis based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. 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! There's no charge to register or participate in the Tour, and women are most welcome.

ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO

ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: SMITH V. SA CHALLENGER INC. (IN RE WEST COAST REAL ESTATE & MORTGAGE INC.; 9TH CIR.)

Summarized by Laury Macauley of Lewis and Roca LLP

In an unpublished decision, the Bankruptcy Appellate Panel for the Ninth Circuit vacated and remanded orders of the bankruptcy court granting sanctions against the chapter 11 debtor and certain related individuals for reimbursement of a secured creditor's attorneys' fees, because the court had not indicated on the record how it had determined the sanction amount of $20,000 under the "lodestar approach." The BAP affirmed the bankruptcy court's denial of a request for sanctions to the extent that they were based on "missing rents" that were allegedly never received by the secured creditor after a bad-faith transfer of the subject property by the sanctioned parties. The BAP determined that the bankruptcy court had not abused its discretion and could have reasonably concluded that the secured creditor had not made a strong enough showing to justify the larger sanction award based on the "missing rents."

There are nearly 900 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: MANDATING CEO-CHAIRMAN DIVISION AT TOO-BIG-TO FAIL BANKS

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post suggests that regulatory proposals to ensure good governance at too-big-to-fail banks include the division of the CEO and chairman positions.

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 implement constructive trusts in any case where applicable state law would recognize them.

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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