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Homeowners See Benefits of Foreclosure Settlement Plan

ABI Bankruptcy Brief | August 30, 2012
 
  

August 30, 2012

 
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  NEWS AND ANALYSIS   

HOMEOWNERS SEE BENEFITS OF FORECLOSURE SETTLEMENT PLAN

More than 130,000 homeowners have received $10.5 billion in relief under the national settlement over foreclosure abuses, according to a preliminary report issued yesterday by the settlement monitor, the New York Times reported today. Under the settlement in February, reached in response to evidence that the foreclosure process had been riddled with fraud, the country’s five largest mortgage servicers promised $25 billion to help stem the tide of homeowner losses. About $20 billion of that was designated to provide relief to homeowners, primarily through various forms of debt forgiveness. Although it may seem that banks have already satisfied more than half of their commitment, only a portion of the $10.5 billion will count, because of the way the relief is tallied. The banks — Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — reported that the bulk of the help so far had come in the form of short sales, in which lenders allow homeowners to sell for less than what they owe. Many homeowners have been stuck in their homes because they have lost so much value. The banks reported $8.7 billion in debt written off through short sales. But far less progress has been seen under the central provision of the settlement, reducing the principal owed on homes. Banks reported a total of only $750 million in principal reduction, and Bank of America, which has the highest obligations under the settlement, reported none. Read more.

ANALYSIS: U.S. HOUSEHOLDS CONTINUE TO CHIP AWAY AT THE DEBT ON THEIR HOMES

Total U.S. household debt fell by 0.5 percent in the April-to-June period from the previous quarter to $11.38 trillion, the Federal Reserve Bank of New York said yesterday, according to a report in the Wall Street Journal. The drop was due almost entirely to falling mortgage balances, as some households paid down home loans while others erased their debts and lost their homes by completing the foreclosure process. Additionally, the number of homeowners entering foreclosure fell by 12 percent to an estimated 256,000 during the quarter, the lowest level since mid-2007, another sign the housing market may be stabilizing. Read more. (Subscription required.)

STUDENT-LOAN DEBT RISES TO $914 BILLION IN SECOND QUARTER

The Federal Reserve Bank of New York said that debt from educational loans in the U.S. rose 1.1 percent to $914 billion in the second quarter, Bloomberg News reported yesterday. Outstanding student debt increased from $904 billion three months earlier, the New York Fed said yesterday in a report. The loans were taken out by students and their parents, and the majority are backed by the U.S. government. Ninety-day delinquency rates for student loans increased to 8.9 percent from 8.69 percent in the first quarter, the New York Fed said. Since the peak in household debt in the third quarter of 2008, student-loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion. Read more.

SEC PROPOSAL WOULD REMOVE PROHIBITION AGAINST GENERAL SOLICITATION BY HEDGE FUNDS

The Securities and Exchange Commission on Wednesday proposed rules that would remove a longtime prohibition against general solicitation by hedge funds, a huge change for an industry that has ballooned in size and influence in recent decades, the New York Times DealBook blog reported yesterday. Unlike their mutual fund brethren, hedge funds have long been barred from advertising in public forums like newspapers or television. Releasing information as basic as performance and assets has been prohibited, the idea being that such complicated and risky investment opportunities should be promoted only to those deemed financially fit. That threshold has been at least $1 million in liquid assets, or a $200,000 annual income for an individual or $300,000 for a couple. But under the new rules, hedge funds might be able to rent billboards, buy full-page advertisements in newspapers or have Web sites that offer the public a real look inside their operations and performance, as opposed to the password-protected sites most operate today. The proposal –mandated by a new law, the Jump-Start Our Business Start-Ups Act – could go a long way toward demystifying and increasing understanding of hedge funds, which are often accused of being highly secretive. Read more.

CONSUMER SPENDING TICKS UP

The Commerce Department released a report today that U.S. personal spending rose the most in five months in July, the Wall Street Journal reported today. Personal consumption expenditures increased 0.4 percent from the prior month, according to the Commerce Department. Personal consumption fell 0.2 percent in May and was flat in June as Americans saved, rather than spent, their slowly rising incomes. Today's report showed that personal incomes rose 0.3 percent in July, the eighth consecutive month that incomes increased. July's savings rate ticked down to 4.2 percent from 4.3 percent in June, which had been the highest level in a year. Read more. (Subscription required.)

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: CAGE V. HARDY RAWLS ENTERPRISES, LLC (IN RE MOYE; 5TH CIR.)

Summarized by Omid Moezzi of the Office of Chapter 13 Trustee Nancy Curry

Affirming the decision of the U.S. District Court for the Southern District of Texas (Houston) that the trustee had proved that all but one of the payments in question made by the debtors were avoidable preferences and that the creditor failed to successfully establish its affirmative defenses.

There are more than 600 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: EMINENT DOMAIN WILL DRIVE HOMEOWNERSHIP INTO THE SUNSET

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post finds that the proposed plan by San Bernardino County, Calif., to seize underwater mortgages through eminent domain would serve only to damage homeownership, not protect it.

For more on the issue of localities examining the use of eminent domain to seize underwater properties, listen to an ABI podcast featuring Prof. Mark Scarberry discussing the proposal and the potential legal ramifications of using eminent domain to provide relief from the foreclosure crisis. Click here to listen.

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.

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  CALENDAR OF EVENTS
 

September
- 7th Annual Golf and Tennis Outing
     September 11, 2012 | Maplewood, N.J.
- Complex Financial Restructuring Program
     September 13-14, 2012 | Las Vegas, Nev.
- Southwest Bankruptcy Conference
     September 13-15, 2012 | Las Vegas, Nev.
- 38th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
     September 19-20, 2012 | New York, N.Y.
- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar
     September 27, 2012
- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program
     September 28, 2012 | Chicago, Ill.

October
- Nuts & Bolts for Young and New Practitioners - KC
     October 4, 2012 | Kansas City, Mo.
- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum
     October 5, 2012 | Kansas City, Mo.

  


- Bankruptcy 2012: Views from the Bench
     October 5, 2012 | Washington, D.C.
- Chicago Consumer Bankruptcy Conference
     October 8, 2012 | Chicago, Ill.
- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar
     October 15, 2012
- International Insolvency and Restructuring Symposium
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November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Professional Development Program
     November 9, 2012 | New York, N.Y.
- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.
- Winter Leadership Conference
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