As financial institutions recover from the losses on loans made to troubled borrowers, some of the largest lenders to the less-than-creditworthy, including Capital One and GM Financial, are trying to woo them back, while HSBC and JPMorgan Chase are among those tiptoeing again into subprime lending, the New York Times reported yesterday. Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3 percent from the same month a year earlier, according to Equifax's credit trends report released in March. These borrowers accounted for 23 percent of new auto loans in the fourth quarter of 2011, up from 17 percent in the same period of 2009, reported credit-scoring firm Experian. Consumer advocates and lawyers worry that the financial institutions are again preying on the most vulnerable and least financially sophisticated borrowers, who are often willing to take out credit at any cost. Click here to read the full article.
TREASURY FAULTED IN EFFORTS TO RELIEVE HOMEOWNERS
A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office, the New York Times reported today. The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has "experienced significant delay" because of "a lack of comprehensive planning" by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program (TARP). According to the report, as of the end of 2011, the Hardest Hit Fund had spent $217.4 million out of its $7.6 billion budget. The report is just the latest to criticize the Obama administration's efforts to relieve homeowners battered by the nationwide drop in housing prices and the broader recession. The Treasury Department had estimated that the program would reach three million to four million homeowners, but it has aided fewer than a million. The report cited a lack of planning and leadership by the Treasury Department as the reason so little money has been spent. The Treasury Department sought to rebut the criticism of its management of the Hardest Hit Fund, saying that states' programs had taken considerable time to set up and that the programs had started reaching more homeowners in recent months. Click here to read the full article.
ANALYSIS: WEIGHING THE SEC'S CRACKDOWN ON FRAUD
More than 100 people and firms have now been charged with fraud by the Securities and Exchange Commission, but criticism persists that the agency has not cracked down hard enough, the Wall Street Journal reported yesterday. The SEC passed that milestone on Friday when the regulator filed civil fraud charges against two former Texas bank executives accused of using a loan-modification scheme to make bad real estate loans look good. SEC enforcement chief Robert Khuzami said that the current total of 101 cases shows that the agency is "highly effective in tackling financial-crisis wrongdoing." Of the 74 cases filed against individuals so far, the SEC went after 55 chief executives, finance chiefs or other top officers. However, Sen. Charles Grassley (R-Iowa) sees within those same numbers signs that the SEC is not tough enough even when it amasses strong evidence of crisis-related law-breaking. Since the start of 2009, the SEC has reached settlements with 24 of the 74 people charged by the agency, averting court trials. Executives who settled civil charges by U.S. securities regulators include former Countrywide Financial Corp. Chief Executive Angelo Mozilo, who agreed in October 2010 to pay $67.5 million. Mozilo did not admit or deny wrongdoing. Click here to read the full article (subscription required).
FED MAY EXTEND ECONOMIC SUPPORT PAST 2014
Janet L. Yellen, vice chairwoman of the Federal Reserve, said yesterday in a speech in Manhattan that the lackluster trajectory of the economic recovery might require the Fed to continue its efforts to bolster growth even beyond the end of 2014, the New York Times reported yesterday. Ms. Yellen offered a rejoinder to recent remarks by other Fed officials and investors warning that the Fed would need to raise interest rates well before the end of 2014 to prevent an increase in the rate of inflation. She indicated that the Fed's leadership, including the chairman, Ben S. Bernanke, remained firmly committed to the central bank's efforts to suppress interest rates and reduce the cost of borrowing for businesses and consumers, but she said that by some measures the Fed was not doing enough. She did not call for a new round of stimulus, however, arguing instead that the shortfall might provide justification for extending current efforts. The Fed has held short-term interest rates near zero since late 2008, and it has sought to further reduce long-term interest rates through the purchase of more than $2 trillion in mortgage-backed and Treasury securities. It said last fall that it planned to maintain both of those policies until at least late 2014. As the economy has shown signs of faster growth in recent months, however, some have warned that the Fed was in danger of pushing growth past a sustainable level. Click here to read the full article.
FORECLOSURES REACH LOWEST QUARTERLY LEVEL SINCE LATE 2007
Foreclosure filings fell during the first quarter of 2012 to their lowest levels since the housing market began its collapse nearly five years ago, according to new data from the firm RealtyTrac, the Washington Post reported today. The number of foreclosures during the first three months of this year was the lowest quarterly total since the final quarter of 2007. The numbers show that in March, foreclosures were filed on just fewer than 199,000 properties, a 17 percent decrease from a year earlier and the first time the monthly total has dipped below 200,000 since July 2007. While there have been recent signs of renewed life in the nation's housing market, the declining number of foreclosure filings might not be as encouraging as the data might suggest. "The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated," RealtyTrac chief executive Brandon Moore said in a statement. "The dam may not burst in the next 30 to 45 days, but it will eventually burst." A coming flood of foreclosures is expected in part because some states—such as Florida, California and New York—have a long backlog, and it can take up to three years to complete the foreclosure process. A new wave of foreclosures could further drive down home prices in the short term—even while helping heal the housing market over the long term by clearing backlogged inventories and getting distressed properties into the hands of new owners. Click here to read the full article.
WHAT'S NEXT FOR UNDERWATER HOMEOWNERS? FIND OUT AT NEXT WEEK'S ANNUAL SPRING MEETING!
Listen to a discussion on the latest proposals to ease housing market distress and help underwater homeowners at ABI’s 30th Annual Spring Meeting, scheduled for April 19-22, 2012, at the Gaylord National Resort and Convention Center at National Harbor, Md. The conference will feature the 16th Annual Great Debates, 20 committee educational sessions and up to 17 hours of CLE, including 6 hours of ethics! Nearly 1,000 are already registered. The Friday luncheon will feature a keynote by New York Times Business Editor and Columnist Gretchen Morgenson.
Concurrent sessions include:
• What Do Clients Want from Their Professionals?
• TMA Panel: Effective Presentation of Financial Analysis
• Circuit Splits and Supreme Court Preview
• 21st Century Ethics
Chapter 11 Track
• Mock Chapter 11 Confirmation Hearing
• Is the Chapter 11 Industry Distressed?
• Bankruptcy Court Jurisdiction and Beyond: Stern v. Marshall and Other Sticky Jurisdiction Issues
• Tee Up the Lawsuits! What’s Left for Unsecured Creditors after the Sale?
Financial Advisor Track
• Demystifying Financial Methodology in the Bankruptcy Case
• Bankruptcy Court Jurisdiction and Beyond
• Preparing a Company for Sale: Practical Insight into How to Sell a Distressed Company
Consumer Track
• Consumer Ethics: Balancing Business and Practice, and the Multiple Roles of Consumer Debtor’s Counsel
• Beyond HAMP and HARP: What's Next for Underwater Homeowners
• Section 524(i) and Beyond: The Use of Non-Standard Chapter 13 Plan Terms
• Who Should Police the Mortgage Servicers? Should This Be Up to the States, the New CFPB or Debtor Class-Actions?
Professional Development Track
• Evidentiary Privileges in Bankruptcy: Traps for the Unwary
• Navigating Ethical Responsibility in a Complex World
• Expert Testimony Can Make or Break a Bankruptcy Case
• Dos and Don’ts of Effective Oral and Written Advocacy
Optional events range from a golf tournament at Lake Presidential Golf Club, a "suite experience" baseball game at Nationals Park and the always-popular musical troupe, The Capitol Steps. There will also be a special 30th anniversary luncheon on Saturday, April 21, featuring a panel of ABI past presidents, moderated by William J. Rochelle, Editor-at-Large at Bloomberg News (New York), to reflect on changes in practice over the last 30 years and the emerging challenges for professionals. Click here to register.
ABI IN-DEPTH
FREE WEBINAR ON APRIL 24 TO EXAMINE ORAL ARGUMENTS MADE BEFORE THE SUPREME COURT IN THE RADLAX CASE
Join ABI for a free webinar on April 24 at 3:30 p.m. ET featuring experts examining the Supreme Court oral arguments made the day before in the RadLAX case. The Court is examining whether a debtor may pursue a chapter 11 plan that proposes to sell assets free of liens without allowing the secured creditor to credit-bid, but instead providing it with the indubitable equivalent of its claim under § 1129(b)(2)(A)(iii) of the Bankruptcy Code. The webinar will be an hour long and will feature:
Jason S. Brookner of Andrews Kurth LLP (New York), who was cited in the brief for the respondent.
David Neff (invited) of Perkins Coie LLP (Chicago), the counsel of record for RadLAX Gateway Hotel LLC.
Prof. Charles Tabb, the Alice Curtis Campbell Professor of Law at the University of Illinois College of Law.
Prof. Tabb recently published a paper titled "Credit Bidding, Security, and the Obsolescence of Chapter 11."
The moderator for the session will be ABI Resident Scholar Prof. David Epstein. To RSVP for the free webinar, please click here.
LATEST CASE SUMMARY ON VOLO: COCKHREN V. MIDWESTONE BANK (IN RE COCKHREN; 8TH CIR.)
Summarized by Sarah Smegal of Bartlett Hackett Feinberg
The U.S. Bankruptcy Appellate Panel (BAP) for the Eighth Circuit affirmed the decision of the U.S. Bankruptcy Court for the Northern District of Iowa approving the chapter 7 trustee's motion for approval of compromise or settlement of controversy. The chapter 7 trustee entered into a settlement with MidWestOne Bank in connection with lender liability and discrimination claims asserted by James Arthur Cockhren and Margaret Louise Cockhren (the debtors). In affirming the decision and responding to the four issues raised by the debtors on appeal, the Eighth Circuit BAP ruled that: (1) the bank had standing to file a brief on appeal and did not file a brief on behalf of the chapter 7 trustee; (2) the debtors had no absolute right to dismiss their chapter 7 case and nothing obligated the bankruptcy court to dismiss the case based on the debtors' intentional filing deficiencies; (3) the bankruptcy court did not abuse its discretion in denying the debtors' motion for a continuance and holding the hearing in the debtors' absence where the debtors' motion failed to comply with local rules and, further, offered no detail as to the "unforeseen health concerns" upon which the request for a continuance was based; and (4) the bankruptcy court did not abuse its discretion in approving the chapter 7 trustee's settlement with the bank where it found the debtors' claims against the bank to be speculative at best. Finally, the debtors sought oral argument on appeal, which the BAP denied.
More than 450 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: FIRST-QUARTER REPORTS WILL FORCE BANKS TO FACE THE MUSIC
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post discusses the probability that many banks' 1st Q performance numbers will reflect that without significant changes, they cannot attain the level of profitability that they need to remain viable.
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.
SAVE THE DATE 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.
A registration link is forthcoming, but make sure to mark your calendars for May 23 for a webinar you will not want to miss!
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
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.
May
- New York City Bankruptcy Conference
May 9, 2012 | New York, N.Y.
- Save the Date: ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar
May 23, 2012
