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Caesars Unit Reaches Deal with Holdout Creditor Trilogy

A court filing showed yesterday that hedge fund Trilogy Capital Management, the last holdout bondholder of Caesars Entertainment Corp.’s bankrupt operating unit, has agreed to support the casino group's restructuring and halt litigation, Reuters reported. The agreement removes the threat of a judgment against Caesars, which was facing lawsuits by hedge funds (including Trilogy) over guarantees on its operating unit's bonds. While Trilogy's claim was small at $9.4 million, a judgment could have blown up a crucial $5 billion restructuring deal that Caesars reached last month with creditors to resolve billions of dollars of potential lawsuits. In a filing with the U.S. district court in Chicago, Trilogy and the Caesars parties said that they had reached a consensual resolution of their dispute and asked the court to strike a hearing on the matter that had been scheduled for December. Trilogy and Caesars declined to provide details of the agreement.

Cordray: Mortgage Servicers Need to Improve Compliance with CFPB Rule

The mortgage-servicing industry is still struggling to adopt technology that will help them comply with a 2014 Consumer Financial Protection Bureau regulation that placed new rules on the sector, reported yesterday. “While we applaud the investments made in compliance by certain servicers, others have not yet made satisfactory progress,” CFPB Director Richard Cordray told this year’s annual conference of the Mortgage Bankers Association in Boston, according to prepared remarks. “Outdated and deficient servicing technology continues to put many consumers at risk. This problem is made worse by a lack of training to use their technology effectively.” The 2014 CFPB rule required mortgage servicers to quickly correct errors reported by consumers and gave extra protection to borrowers in distress or facing foreclosure. Cordray said that the CFPB will try to address the problems he listed by demanding the firms having trouble with compliance work with the agency on “specific and credible plans” listing changes to information technology systems that will help firms with implementation. He also said the bureau will work more closely with the industry when crafting updates to the mortgage-servicing rule that are slated to go into effect in 2017.

Commentary: Ratings Inflation Is Back, Subprime Style

A decade after the triple-A failures of the subprime era, grade inflation is back on Wall Street, according to a Bloomberg News commentary yesterday. This time, Moody’s Investors Service and S&P Global Ratings Inc. are cutting companies slack on mergers and acquisitions, an analysis of credit-ratings data by Bloomberg News found. Over the past year and a half, both have bumped up their ratings levels on a majority of the biggest deals, the analysis found. Moody’s and S&P don’t dispute those findings, which are based on ratings guidelines posted on their websites. But the firms say that a by-the-numbers approach overlooks one of their most valuable assets — human judgment. Both make it clear that their analysts have leeway to nudge ratings up or down, based on a company’s track record and their confidence in management’s commitment to reduce indebtedness. “We want our analysts and committees to get behind the story and make their judgments about what they think the organization will look like in the next couple of years,” says Mark Puccia, a chief credit officer at S&P. 

Wall Street Banks to Face On-Site Reviews of Sales Practices

To ensure that Wells Fargo & Co.’s scandal over unauthorized customer accounts isn’t being repeated at other lenders, regulators are poised to start reviewing data and talking to employees inside the biggest U.S. banks, Bloomberg News reported yesterday. Wells Fargo’s largest competitors have received regulators’ formal requests for information and have been preparing for their practices to be scrutinized by examiners in the coming days. The reviews come on the heels of Wells Fargo agreeing to pay $185 million to authorities, including the Consumer Financial Protection Bureau last month, lawmakers grilling the bank’s officials and Chief Executive Officer John Stumpf stepping down. Banks, including JPMorgan Chase & Co. and Bank of America Corp., have already been looking internally for any activities similar to those at Wells Fargo. The Office of the Comptroller of the Currency is working with other agencies — including the Federal Reserve, Federal Deposit Insurance Corp. and CFPB — to ensure that no other lenders have maintained sales practices that encourage the opening of accounts without authorization by customers.

Wells Fargo CEO Lays Out Post-Scandal Overhauls

Wells Fargo & Co. Chief Executive Tim Sloan, who replaced John Stumpf in the wake of the lender’s consumer fraud scandal, outlined his vision to repair the bank’s brand and customer relationships, reported today. In a speech to employees in Charlotte, N.C., where the San Francisco-based bank has a large foothold, Sloan acknowledged that the company’s sales goals “sometimes resulted in behaviors and practices that did not serve our customers’ or our team members’ interests.” He also said executives failed to address problems or catch them early enough. Echoing a point from Stumpf’s congressional testimony, Sloan, who previously served as chief operating officer, maintained that “the vast majority of our colleagues — tellers, platform and phone bankers and branch managers — did the right thing, and do the right thing every day on behalf of our customers and company.” He also discussed the failures of the bank’s top echelon to root out the fraud.

Jury Finds Wisconsin Man Guilty of Bankruptcy Fraud

John W. Vaudreuil, U.S. Attorney for the Western District of Wisconsin, announced that Leon Fadden of Madison, Wis., has been convicted of three counts related to bankruptcy fraud, according to a Department of Justice press release.  The jury reached its verdict after 90 minutes of deliberation following a two-day trial in federal court in Madison. Fadden was convicted of fraudulently concealing property in connection with a bankruptcy case. In October 2013, he concealed from his creditors and the U.S. Trustee his interest in two life-insurance policies and his interest in the estate of a deceased relative. He was also convicted of making false declarations under penalty of perjury by submitting false Schedules of Assets and Liabilities, and a false Statement of Financial Affairs. Finally, Fadden was convicted of making false statements to an attorney of the U.S. Trustee’s Office in December 2013.