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Home-Equity Lines of Credit See Jump in Delinquencies

 
 

June 9, 2015

 
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  NEWS AND ANALYSIS

HOME-EQUITY LINES OF CREDIT SEE JUMP IN DELINQUENCIES

A decade after homeowners used a soaring real estate market to go on a borrowing binge against their own properties, many are now falling behind on payments, threatening to leave banks on the hook for hundreds of millions of dollars, the Wall Street Journal reported today. Borrowers who took out home-equity lines of credit (Helocs) when prices were near their peak are struggling to keep up as principal finally comes due after years of interest-only payments. Borrowers who signed up for Helocs in 2004 were 30 or more days late on $1.8 billion worth of outstanding balances just four months after principal payments started kicking in, according to data provided to the Wall Street Journal by credit-reporting firm Equifax. That represents 4.3 percent of the balance on outstanding 2004 Helocs, according to Equifax -- a sharp rise from the 2.7 percent delinquency rate on those same Helocs one month before borrowers reached the end of the interest-only period, which typically lasts for 10 years. Read more. (Subscription required.)

ANALYSIS: NEW HOUSING HEADWIND LOOMS AS FEWER RENTERS CAN AFFORD TO OWN

Last decade's housing crisis could give way to a new one in which many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing, the Wall Street Journal reported yesterday. The U.S. homeownership rate is below where it stood 20 years ago when President Bill Clinton launched a national campaign to encourage Americans to buy homes. Conventional wisdom says the rate, at 63.7 percent, is leveling off to where it was for decades before the housing-market peak. But this is probably wrong, according to research from the Urban Institute, which predicts homeownership will continue to slip for at least 15 years. The downtrend would push homeownership below 62 percent in 2020, and it would hold the rate near 61 percent in 2030, below the lowest level since records began in 1965. The declines reflect a surge of new renter households, which is boosting rents. Together with tougher mortgage-qualification rules, this will leave households stuck between homes they can't qualify to purchase and rentals they can't afford, says Ron Terwilliger, who spent two decades running Trammell Crow Residential, one of the nation's largest apartment developers. Read more. (Subscription required.)

SENATORS URGE CFPB TO ISSUE STRONG RULES AGAINST PAYDAY LENDING

Thirty-two senators submitted a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray calling for more regulation of the credit products, ACAInternationa.org reported yesterday. As the CFPB considers new rules to rein in practices in payday and similar types of lending, Sen. Jeff Merkley (D-Ore.) and 31 of his Senate colleagues, including 29 Democrats and two from the Independent Party, in the letter expressed their support for the initial steps the Bureau has taken and urged the agency to issue the strongest possible rules for the payday lending industry. The Senators urged the CFPB to focus on ability-to-pay standards for small-dollar loans. Such standards could help crack down on loans with high interest rates and fees that low-income customers are unlikely to be able to repay, according to Merkley. The CFPB will discuss trends and themes in consumer financial markets and recent proposals related to payday loans, auto-title loans and other longer-term credit products at its next Consumer Advisory Board meeting, June 18 in Omaha, Neb. Read more.

ANALYSIS: RULING TRIMS LAW FIRMS' RIGHT TO "UNFINISHED BUSINESS" CLAIMS

A federal judge in California last Wednesday dealt a blow to bankruptcy trustees winding down failed law firms, ruling that the defunct law firm Howrey LLP has no right to profits from unfinished legal work its partners brought to their new firms, Dow Jones Daily Bankruptcy Review reported on Friday. U.S. District Judge James Donato overturned a bankruptcy court ruling and dismissed the trustee's lawsuits against eight firms that took on Howrey partners. In doing so, the judge roundly rejected the "unfinished business" doctrine that bankruptcy trustees have argued gave them authority to claw back money earned on pending legal matters for the benefit of creditors. The question in the Howrey case, Judge Donato said, was if a client fires a law firm and hires a competitor, does the old firm have a right to profit from the new firm's work? For Judge Donato, the answer is "yes" only if the work at issue was done under the original engagement contract. "Those circumstances are not present here," the judge said in his decision. Read more. (Subscription required.)

 

 

UMW CHIEF WARNS OF TOUGH TIMES FOR COAL

United Mine Workers President Cecil Roberts warned his union's members Wednesday the coal industry's ongoing troubles represent "fundamental changes" in world energy markets, not just the downward part of the type of boom-and-bust cycle mining communities have experienced many times before, the Charleston (W.Va.) Gazette reported on Thursday. "In the past, we always knew that the demand for coal would rebound and the jobs would come back," Roberts said. "This time, there is no such certainty." Roberts urged UMW members to work in their communities to oppose any government incentives for new gas-fired power plants, encourage their local congressional representatives to fight new air pollution regulations and support lifting the ban on natural gas exports, a move Roberts said would help coal by raising gas prices. Also, Roberts called for more government spending to improve the nation's roads, bridges and other infrastructure, saying such investments would help improve steel markets and protect the jobs of miners who produce metallurgical coal. Read more.

EXPLORE THE CAPABILITIES OF THE NEW ABI "COMMITTEES" PAGE!

Make sure to peruse the new "Committees" page on the ABI website! The page is home to ABI's 18 active committees that focus on specific areas of insolvency. Each committee has its own page containing committee newsletter articles, archived recordings of informative committee webinars, calls and conference sessions, details about committee leaders and an archive of committee listserv e-mails. Serving on a committee provides the opportunity to expand your professional network, strengthen ties with the industry, and develop a leadership role within your peer community. Find out how through the new ABI Committees page!

 

 

NEXT TUESDAY: ABI LIVE WEBINAR EXAMINES ASSET SALES ISSUES IN OIL AND GAS BANKRUPTCIES

Join the latest abiLIVE Webinar next Tuesday to explore the unique challenges that can arise in a § 363 sale of the assets of a business involved in the energy industry, with a particular emphasis on oil and gas bankruptcies. Presented by ABI's Asset Sales Committee, the webinar features experts discussing the interplay in energy company bankruptcy cases among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance on national, regional and local levels. Speakers on the program are Bryan M. Gaston of Conway MacKenzie (Houston), Ira L. Herman of Thompson & Knight LLP (New York) and Shari L. Heyen of Greenberg Traurig, LLP (Houston). Click here for the ABI member price.

For additional information on oil and gas company bankruptcies, be sure to pick up a copy of ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy.

REGISTER FOR FREE: JUNE 25 ABI LIVE WEBINAR EXAMINES PRACTICAL IMPACT OF CHAPTER 11 REFORM COMMISSION RECOMMENDATIONS ON PREFERENCE ACTIONS

The ABI Young and New Members and Bankruptcy Litigation Committees present a free abiLIVE webinar on June 25 to explore the ABI Chapter 11 Reform Commission Report recommendations regarding the preferential transfer statute in Section 547. This webinar will examine the rationale behind the recommendations, such as the good faith belief for filing a demand letter or preference complaint, the increase in the statutory minimum to bring a preference action, and more. Most importantly, the panel will assess the practical effects and foreseeable impact of implementing these recommendations. This webinar is a must-attend for attorneys who regularly represent creditors, liquidating trustees, and panel trustees in preference actions. Click here for more information and to register for free!

 

 

NEXT ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS

The next ABI Workshop, the 2015 Bankruptcy Judges Roundtable, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. Networking reception to follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.

 

 

NEW CASE SUMMARY ON VOLO: NORTHBAY WELLNESS GROUP INC. V. BEYRIES (9TH CIR.)

Summarized by Emil Khatchatourian of Foley & Lardner LLP

Reversing the district court's affirmance of the bankruptcy court's conclusion that a judgment debt was non-dischargeable under Sect. 523(a)(4), the Ninth Circuit Court of Appeals held that application of the unclean hands doctrine to absolve an attorney of responsibility for stealing from his client (who operated a medical marijuana dispensary) would be contrary to the public interest. The panel emphasized that the bankruptcy court failed to balance the alleged wrongdoing of the plaintiff against that of the defendant or weigh the substance of the right asserted by the plaintiff against the transgression which, it is contended, serves to foreclose the right.

There are more than 1,700 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: FURTHER ANALYSIS OF SUPREME COURT'S DECISION IN HARRIS

A recent blog post further examines the Supreme Court's May 18 unanimous ruling in Harris v. Viegelahn that upon conversion of a chapter 13 case to a chapter 7, the chapter 13 trustee is required to return to the debtor any post-petition wages not yet distributed.

For further analysis of this and other Supreme Court decisions from the October 2014 term, be sure to visit ABI's Supreme Court page. The page features each case, including a media teleconference with experts presenting their perspectives of the decision.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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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THURSDAY:

22nd Annual Central States Bankruptcy Workshop
June 11-14, 2015
Register Today!

UPCOMING EVENTS:

abiLIVE Webinar:
"Asset Sales Issues in Oil and Gas Bankruptcies"

June 16, 2015
Register Today!

FREE abiLIVE Webinar:
"The ABI Commission and Preference Actions: The Practical Impact on your Practice"

June 25, 2015
Register Today!

Cross-Border Insolvency Symposium
June 18, 2015
Register Today!

22nd Annual Northeast Bankruptcy Conference
July 9-12, 2015
Register Today!

10th Annual Northeast Consumer Forum
July 9-11, 2015
Register Today!

20th Annual Southeast Bankruptcy Workshop
July 23-26, 2015
Register Today!

ABI Workshop: 2015 Bankruptcy Judges Roundtable
Aug. 4, 2015
Register Today!

11th Annual Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015
Register Today!

23rd Annual Southwest Bankruptcy Conference
Sept. 10-12, 2015
Register Today!

41st Lawrence P. King & Charles Seligson Workshop on Bankruptcy and Business Reorganization
Register Today!

20th Annual Views from the Bench Conference
Oct. 9, 2015
Register Today!

7th Circuit Consumer Bankruptcy Conference
Oct. 12, 2015
Register Today!

35th Annual Midwestern Bankruptcy Institute
Oct. 15-16, 2015
Register Today!

 
   
  CALENDAR OF EVENTS
 

2015

June
- Central States Bankruptcy Workshop
June 11-14, 2015 | Traverse City, Mich.
- abiLIVE Webinar: "Asset Sales Issues in Oil and Gas Bankruptcies"
June 16, 2015
- Cross-Border Insolvency Program
June 18, 2015 | New York
- abiLIVE Webinar: "The ABI Commission and Preference Actions: The Practical Impact on your Practice"
June 25, 2015

July
- Northeast Bankruptcy Conference
July 9-12, 2015 | North Falmouth, Mass.
- Northeast Consumer Bankruptcy Forum
July 9-11, 2015 | North Falmouth, Mass.
- Southeast Bankruptcy Workshop
July 23-26, 2015 | Amelia Island, Fla.

 

 

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.
- ABI Workshop: Bankruptcy Judges Roundtable
Aug. 4, 2015 | Alexandria, Va.

September
- Southwest Bankruptcy Conference
Sept. 10-12, 2015 | Las Vegas, Nev.
- Lawrence P. King & Charles Seligson Workshop on Bankruptcy and Business Reorganization
Sept. 16-17, 2015 | New York, N.Y.

October
- Views from the Bench Conference
Oct. 9, 2015 | Washington, D.C.
- 7th Circuit Consumer Bankruptcy Conference
Oct. 12, 2015 | Chicago, Ill.
- Midwestern Bankruptcy Institute
Oct. 15-16, 2015 | Kansas City, Mo.

 

 
 
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