Although federal banking regulators last year ordered 14 mortgage servicers to send a letter to every borrower whose primary residence was in any stage of the foreclosure process in 2009 or 2010, giving them the opportunity to have their case reviewed by an independent auditor at no charge, only 3 percent have requested such a review, the San Francisco Chronicle reported today. The response was so low that regulators extended the application deadline by three months, to July 31. They also ordered servicers to send a second mailing in June and mount another public-awareness campaign. To receive the free review, borrowers are required to submit a five-page form. If the reviewer determines that the borrower suffered "financial injury" resulting from "errors, misrepresentations or other deficiencies" during the foreclosure process, the servicers must provide "compensation or other remedy" to the borrower, according to the Office of the Comptroller of the Currency and the Federal Reserve, which ordered the review process. Borrowers do not have have lost their homes to be eligible. Read more.
MOODY'S: U.S. CORPORATE DEFAULTS RISE OVER PAST TWO QUARTERS, BUT LONG-TERM OUTLOOK IS FAVORABLE
Moody's Investors Services reported yesterday that U.S. corporate defaults have been unusually high for two consecutive quarters but that the uptick is unlikely to signal a worsening trend, according to a Reuters report. There were 15 defaults by non-financial companies in the first quarter, representing about $7 billion of debt, and 16 defaults in the fourth quarter equal to about $10 billion of debt, according to Moody's. That compares with a total of 29 defaults in all of 2011. Moody's is expecting the speculative-grade default rate to rise to 3.3 percent by the end of 2012 from 2.8 percent at the end of the first quarter. That remains well below the peak of more than 14 percent that was seen in late 2009 and the average 4.6 percent recorded from 1992 to the present. Read more.
CHASING FEES, BANKS COURT LOW-INCOME CUSTOMERS
An increasing number of the nation's large banks — U.S. Bank, Regions Financial and Wells Fargo among them — are aggressively courting low-income customers with alternative products that can carry high fees, the New York Times reported today. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees. Banks say that they are offering a valuable service for customers who might not otherwise have access to traditional banking and that they can offer these products at competitive prices. The Consumer Financial Protection Bureau, a new federal agency, said that it was examining whether banks ran afoul of consumer protection laws in the marketing of these products. Read more.
DEBT COLLECTOR IS FAULTED FOR TOUGH TACTICS IN HOSPITALS
Aggressive tactics by one of the nation's largest collectors of medical debts, Accretive Health, were revealed on Tuesday by the Minnesota attorney general, raising concerns that such practices have become common at hospitals across the country, the New York Times reported yesterday. The tactics, such as embedding debt collectors as employees in emergency rooms and demanding that patients pay before receiving treatment, were outlined in hundreds of company documents released by the attorney general. In some cases, the company's workers had access to health information while persuading patients to pay overdue bills, possibly in violation of federal privacy laws, the documents indicate. Minnesota Attorney General Lori Swanson also said that Accretive employees may have broken the law by not clearly identifying themselves as debt collectors. Read more.
U.S. TRUSTEE PROGRAM RE-OPENS COMMENT PERIOD ON PROPOSED GUIDELINES FOR ATTORNEY COMPENSATION IN LARGE CHAPTER 11 CASES
The U.S. Trustee Program has re-opened the comment period until May 21, 2012, on proposed guidelines for reviewing applications for attorney compensation in large chapter 11 cases ("fee guidelines"). The USTP also scheduled a public meeting for June 4, 2012, at the U.S. Department of Justice in Washington, D.C. on the proposed fee guidelines. Click here for more information on submitting comments or attending the public hearing.
REGISTER FOR THE LABOR & EMPLOYMENT COMMITTEE'S "EVOLVING LABOR ISSUES IN CHAPTER 11" WEBINAR
Make sure to mark your calendars for May 23 from 2-3 p.m. ET for the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar. A panel of experts will be discussing recent developments in several large complex bankruptcy cases, including Hostess, Kodak, Nortel and American Airlines. The expert panel includes Babette A. Ceccotti of Cohen, Weiss & Simon LLP (New York), Jeffrey B. Cohen of Bailey & Ehrenberg PLLC (Washington, D.C.), Marc Kieselstein of Kirkland & Ellis LLP (New York) and Ron E. Meisler of Skadden, Arps, Slate, Meagher & Flom LLP.
Issues to be discussed include:
• Hostess' efforts to eliminate their multi-employer pension plan contribution liability through motions to reject their labor agreements under Section 1113.
• Kodak's attempt to terminate retiree health benefits.
• The effect of the automatic stay upon efforts by the U.K. Pension Protection Fund and the U.K. Nortel Pension Plan to enforce its powers under the U.K. Pensions Act.
• American Airlines' efforts to reduce legacy costs in bankruptcy.
LATEST CASE SUMMARY ON VOLO: AKANTHOS CAPITAL MANAGEMENT, LLC V. COMPUCREDIT HOLDINGS CORP. (11th CIR.)
Summarized by Kathleen DiSanto of Jennis & Bowen, P.L.
The Eleventh Circuit determined that a standard “no-action clause” in a trust indenture prevents noteholders who are not within a stated exception to the clause from asserting fraudulent-transfer claims against the issuer of the securities and its directors and officers.
Nearly 500 appellate opinions are summarized on Volo typically 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: ELIMINATE ALL INCENTIVE COMPENSATION
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post makes the case that it is time to reconsider compensation for banking executives by eliminating the incentive model and replacing it with a system rooted entirely in base pay.
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 Section 363 sales should be possible only for a limited percentage of assets; sales of a greater percentage of assets should be subject to creditor voting in the plan confirmation process.Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
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