ABI Signs onto Organizational Letter Supporting the Federal Judiciarys 2014 Funding Appeal

ABI Bankruptcy Brief | December 31, 2013

December 31, 2013

NEWS AND ANALYSIS

ABI SIGNS ONTO ORGANIZATIONAL LETTER SUPPORTING THE FEDERAL JUDICIARY'S FY 2014 FUNDING APPEAL

ABI joined four other organizations in a letter to Congress to express its strong support for the Federal Judiciary's FY 2014 funding appeal of $7 billion for mandatory and discretionary appropriations, as requested by the Judicial Conference. ABI joined the Association of Corporate Counsel, the Federal Bar Association, the National Association of Criminal Defense Lawyers and The Constitution Project to support the funding appeal, which was put forward on Dec. 5 by Judge Julia S. Gibbons, chair of the Budget Committee of the Judicial Conference of the U.S., and Judge John D. Bates, secretary. Addressed to Reps. Ander Crenshaw, chair of the House Appropriations Subcommittee on Financial Services and General Government, and Jose Serrano, a ranking member of the subcommittee, the letter states that the requested level of funding will "restore adequate funding to the federal courts and assure adequate access to justice by all citizens of our nation." To view the letter, please click here.

VOLCKER RULE BLOCK REQUEST DROPPED BY ABA

The American Bankers Association (ABA) dropped its request for a federal judge to temporarily block Volcker Rule restrictions on collateralized debt obligations backed by trust-preferred securities, Bloomberg News reported today. The industry group said that the temporary restraining order it had requested is no longer needed after regulators said on Dec. 27 they are reviewing challenged aspects of the rule, according to a filing yesterday in federal court in Washington, D.C. The bankers group isn't withdrawing the lawsuit it filed Dec. 24 and has asked the judge to approve a schedule for it to proceed while it seeks to halt the rule's implementation for the duration of the lawsuit. The ABA alleged in its complaint against the Federal Deposit Insurance Corp. and other regulators that small banks will suffer about $600 million in losses because the final version of the Volcker Rule requires them to divest their holdings in some CDOs. Read more. (Subscription required.)

COMMENTARY: CLAWBACKS ARE STILL A RARE SEC ENFORCEMENT ACTION

Financial executives actually being held to accountable for misdeeds remains a rare action taken by the Securities and Exchange Commission, according to a New York Times editorial yesterday. When the Sarbanes-Oxley Act was passed in the midst of Enron, WorldCom and the other titanic accounting frauds of the early 2000s, its executive-accountability provisions were hailed as tough medicine that could generate a flurry of recoveries. But as a recent case against Fifth Third Bank illustrates, many pieces must fall into place before a case can be brought. The first requirement is a restatement of earnings, which is where a company goes back and adjusts previous results to reflect the accounting errors. The actions must also have been reckless or intentional. Finally, there must be recoverable executive compensation, such as a bonus received or stock sales made within one year. The hurdles limit the number of cases. Since 2007, when the SEC brought its first case, it has demanded forfeiture of compensation from executives at just 31 companies. Of those clawback actions, 13 have come in about the last three years. Executive pay has been returned in just seven of them; the rest of the cases remain in litigation or are stayed pending criminal trials. Read more.

REVAMPED MORTGAGE PROGRAM HELPING HOMEOWNERS

The government's Home Affordable Refinance Program stands out among the alphabet soup of initiatives rolled out over the last few years to stem a wave of foreclosures: It is one that is finally living up to its ambitions, the Wall Street Journal reported today. Nearly 3 million homeowners, including at least 900,000 who owe more than their homes are worth, have been able to refinance their loans under the crisis-era program designed to reach borrowers with little or no equity in their homes. The majority of those loans were refinanced in 2012 and 2013, after the government revamped the program following a disappointing start. Borrowers who refinanced under HARP have saved an average of $328 every month, according to a March study by Fannie Mae. HARP activity dropped after interest rates jumped, rising from around 3.6 percent in May to 4.6 percent by late June. Still, analysts at Goldman Sachs Group Inc. estimate that some 580,000 borrowers who are eligible could save at least $150 per month by refinancing. The program expires at the end of 2015. Read more. (Subscription required.)

ANALYSIS: A HOME LOAN THAT COULD BITE

Regulators are pushing banks to help homeowners refinance a type of loan that was popular during the housing boom, the Wall Street Journal reported today. From 2004 to 2008, borrowers gorged on billions of dollars worth of home-equity lines of credit, known as Helocs. The loans typically allow homeowners to borrow against their home for the first 10 years. Most borrowers make little if any payments beyond interest during that time. The balance must be paid off over the following 20 years, and that repayment period will soon begin for many borrowers. Between 2014 and 2018, $208 billion worth of Helocs will start coming due, compared with a total of $20 billion for 2012 and 2013, according to data from the Office of the Comptroller of the Currency, which oversees banks. Defaults on Helocs jump when the repayment period begins, data from banks show. The problem could get worse if interest rates rise, because the loans generally have adjustable rates. As a result, the OCC is pressing lenders to come up with plans to help homeowners who took out Heloc loans to refinance now, while interest rates remain low. That could include allowing borrowers to refinance their Heloc into a fixed-rate loan or to refinance their mortgage to include the Heloc balance. Read more. (Subscription required.)

NEW ABILIVE WEBINAR SERIES LOOKS AT THE BASICS OF FINANCIAL STATEMENTS, DOCUMENTS AS EVIDENCE AND HEDGE FUNDS

Send your associates to ABI's "Back To Basics" webinar series, hosted by the Young and New Members Committee, next month. The series will cover the fundamentals of financial statements and operating reports (Jan. 14), using financial documents as evidence (Jan. 21), and hedge funds (Jan. 28). Let a trusted CLE provider help get your associates up to speed. Register for the complete series and get the third webinar free!

LAST DAY: RENEW YOUR ABI MEMBERSHIP 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.

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.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: QUICK CAPITAL OF L.I. CORP. V. BAVELIS (IN RE BAVELIS; 6TH CIR.)

Summarized by Dean Langdon of DelCotto Law Group PLLC

Affirming the U.S. Bankruptcy Court for the Southern District of Ohio, the Sixth Circuit Bankruptcy Appellate Panel held that lender claims under a note and loan agreement were properly disallowed where the loan was induced by fraud and there was a failure of consideration. The BAP also affirmed the bankruptcy court ruling that the lender's owner had no claim against the debtor under Florida securities laws. The precedential effect of the ruling is limited to the parties.

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: OPTIONS FOR AN UNDERWATER MORTGAGEE: THE MYSTERIES OF AN 1111(b) ELECTION

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post looked at the case of In re River Canyon Real Estate Investments LLC and the options that may be available to an underwater mortgagee in bankruptcy.

For more on §1111(b), check out the abiLIVE Webinar on the topic!

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

A debtor may strip liens in a "chapter 20" case.

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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