Report: Student Loan Defaults Are Rising Faster Than You Think
A new analysis of federal student loans reveals that the number of people severely behind on repaying their debt has soared in the past year, painting a bleak picture of one of the largest government programs, the Washington Post reported on Tuesday. The Consumer Federation of America (CFA) released a study on Tuesday that found that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. The consumer watchdog used the latest data from the Education Department, which manages $1.3 trillion in federal student debt owed by 42.4 million Americans. Nearly half of the outstanding debt in default comes from the old bank-based federal lending program, known as the Federal Family Education Loan (FFEL) Program. There has been a fairly steady increase in the total amount of past-due debt in the program, even as the number of borrowers has declined, suggesting that interest charges and other fees are being tacked onto balances. Sen. Elizabeth Warren (D-Mass.) and Rep. Suzanne Bonamici (D-Ore.) sent a letter on Monday asking the Education Department to stop imposing double-digit collection fees on people who default on FFEL loans. Those borrowers can be charged up to 16 percent of the principal and accrued interest owed on the loans, unless they enter the government’s loan-rehabilitation program within 60 days of default. Yet companies overseeing the collection of that debt are imposing the fee regardless, lawmakers say.
Commentary: The Latest Craze in Silicon Valley: Bankruptcy
When Avaya Corp. filed for chapter 11 bankruptcy on Jan. 19, it represented a sad end to the $8.2 billion buyout of the Santa Clara, Calif.-based technology company by Silver Lake and TPG almost a decade before, but it was hardly unique in Silicon Valley, according to a Forbes commentary. While most tech startups consist of little more than leased office space, basic equipment and a bunch of promising ideas, their intellectual property can generate hard cash in an auction, according to the commentary. As old-line photography company Kodak demonstrated in 2012 when it sold a portfolio of patents to groups led by Intellectual Ventures for $525 million, even a dead company might have valuable assets hiding in its files. That kind of IP selloff “really exploded after the Kodak bankruptcy,” said Jeffrey Cohen, a partner with Lowenstein Sandler who as a Cooley LLC partner handled the two-year-long bankruptcy of Quirky, a crowdsourcing site for inventors that consumed $175 million in VC money before it failed. “In the tech space now there are some emerging companies that have emerged enough before they fail to have assets to play with.”
Goldman Sachs Goes on Buying Binge for Delinquent Mortgages
Goldman Sachs Group Inc. has become the largest buyer of severely delinquent home loans from mortgage giant Fannie Mae over the past year and a half, acquiring nearly two-thirds of $9.6 billion in loans the agency has auctioned, government records show, the Wall Street Journal reported today. Goldman on Tuesday won the majority of loans at Fannie’s latest auction, its largest to date. The bank bought about 8,000 loans with unpaid balances of $1.4 billion. In ramping up a mortgage-buying operation that had lain low since the meltdown, Goldman is trying to make money even as it looks to fulfill terms of a government settlement that calls for it to help struggling homeowners. Goldman was among the last of the big U.S. banks to agree to pay billions of dollars to federal and state governments for their roles in the packaging and selling of securities that led to the mortgage meltdown. Its $5.1 billion pact, reached in April 2016, included $3.3 billion in fines and $1.8 billion in “consumer relief.” That relief can include forgiving loan balances for struggling homeowners. To count toward Goldman’s $1.8 billion settlement obligation, the bank must make modifications to get the loan’s principal amount owed to be equal to or less than the value of the home itself. Other banks can meet similar obligations by working through their own portfolios of loans or coordinating with their mortgage-servicing arms, which provide access to struggling homeowners.
Analysis: As Retailers Go Silent, Big Data Fills the Void
Retailers are releasing less data about their short-term performances. Into the vacuum have stepped independent data providers, which appear to have added to the volatility of these struggling stocks, the Wall Street Journal reported today. As recently as 2005, nearly 70 retailers reported same-store sales on a monthly basis, according to Thomson Reuters. That number has since dwindled to only six companies, four of which have market capitalizations of below $1 billion. The trend prompted Thomson Reuters to announce last Thursday that it will end its once widely followed monthly same-store sales index. Many companies that stopped reporting said it was because the numbers made investors focus on short-term performance and added to volatility. Some also argued that the shift to online sales made the store data less relevant. Cutting back on data didn’t ease Wall Street’s thirst for information: Investors now buy data on credit- and debit-card transactions from firms such as Earnest Research and 1010data in the hopes that it will help them predict the direction of retailers’ quarterly earnings reports.
ASM Spotlight: How Do You Litigate the Value of a Single-Family Home? ABI President-Elect Eugene Wedoff Provides a Preview of His Must-Attend ASM Panel for Consumer Practitioners
ABI’s President-Elect and former bankruptcy Judge Eugene Wedoff (Chicago), moderator of the “How to Litigate the Value of a Single-Family Home” session at the upcoming Annual Spring Meeting, provides a preview:
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New on ABI’s Bankruptcy Blog Exchange: Banks to Trump: Spare Affordable Housing Programs
Bankers and housing advocates say many low-income housing projects simply won't get built if the White House and Congress move to eliminate two federal block grant programs, according to a recent blog post.
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