The number of new foreclosures initiated by banks fell considerably in the fourth quarter of 2011 due to an emphasis on programs intended to keep borrowers in their houses and the effects of existing and anticipated settlements concerning foreclosure abuses, Reuters reported yesterday. A report by the Office of the Comptroller of the Currency (OCC) said that the amount of new foreclosures initiated in the fourth quarter fell by 16 percent from the previous quarter and by 17.9 percent from a year earlier. In April 2011, several large banks entered into a settlement with the OCC, the Federal Reserve and the now-defunct Office of Thrift Supervision on steps to improve their foreclosure processes, such as providing borrowers with a single point of contact for questions. In February, Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial struck a $25 billion deal with state attorneys general and the Justice Department to settle allegations of foreclosure abuses. Read the full report.
U.S. INVESTORS URGE "GOING CONCERN" WARNING REFORM
Regulators need to crack down on auditors who fail to warn investors and the public before corporations fail, investors told the main watchdog for U.S. auditors yesterday, Reuters reported. Most big companies bailed out by the government in the 2007-09 financial crisis had clean bills of health from their auditors and no auditors have been disciplined over this, investors told the Public Company Accounting Oversight Board at a meeting in Washington, D.C. If auditors "continue on the track they're on, two decades from now, they'll no longer be relevant at all," said Lynn Turner, former chief accountant for the U.S. Securities and Exchange Commission and a member of a PCAOB advisory group. Recently it was analysts, not auditors, who disclosed problems at companies such as Olympus Corp., Diamond Foods Inc. and troubled China-based companies, Turner said. His remarks came at a meeting of a PCAOB investor advisory group that is looking at ways to ensure that investors get earlier warnings before companies collapse. Read more.
MICHIGAN REVIEW TEAM REPORT DETAILS ROOTS OF DETROIT'S CRISIS
The Michigan advisory team sent to examine Detroit's finances blames elected officials for the city's fiscal crisis, saying that the officials failed to curb spending even as residents fled the city, and that they piled up debt that now threatens basic services, Reuters reported yesterday. The 10-member Financial Review Team concluded its 90-day audit of Detroit on Monday, declaring the city to be in a state of "severe financial stress" but stopping short of recommending the appointment of an emergency manager to take over the city of 714,000. Between 2005 and 2011, the city consistently spent between $100 million and $300 million more each year than it took in, the team said, and financed the growing deficits by issuing more debt. However, even as those deficits ballooned, the city's population plunged, eroding the tax base. Between 2000 and 2010, Detroit's population contracted by 25 percent, according to U.S. Census data. Read more.
TARP AUCTION A LOSS FOR TREASURY
The Treasury Department said today that it lost about $50 million in the public offering of its preferred stock in six smaller banks this week, though the department garnered a modest profit when counting dividends and interest paid on the investments over the past three years, the Wall Street Journal reported. In the first auction of preferred stock purchased through the Troubled Asset Relief Program, the bailout vehicle launched during the financial crisis, the Treasury recouped about $362 million of the $410.8 million it invested in the six smaller banks, the Treasury said, a loss of about $50 million. However, the department said that total income to taxpayers—counting dividends and interest along with auction proceeds—was $426.4 million, representing a net profit of about $15.6 million. Read more. (Subscription required.)
ABI JOURNAL HAS A NEW LOOK! CHECK OUT THE NEW LAYOUT IN THE APRIL EDITION
Redesigned from cover-to-cover in time for the Annual Spring Meeting in April, the ABI Journal incorporates a cleaner, more reader-friendly format that invites members to peruse its pages. Containing the in-depth analysis and coverage of current bankruptcy and insolvency issues that ABI members need, the April edition of the ABI Journal will present a new magazine-style cover page and streamlined table of contents for easier browsing. The redesigned format of the ABI Journal will be available in both the print and online April editions. Click here to see the new look of the ABI Journal.
MAKE SURE TO REGISTER FOR THE ABI "HOT TOPICS IN CONFIRMATION" LIVE WEBCAST ON APRIL 3 PROVIDED BY WEST LEGALEDCENTER - 1.5 CLE CREDITS AVAILABLE!
ABI's "Hot Topics in Confirmation" live webcast on April 3 at 11 a.m. ET will discuss applying section 1129(a)(10) to a joint chapter 11 plan for multiple debtors, credit-bidding before the Supreme Court, equitable disallowance of claims and the gifting doctrine after DBSD North America. Presenters are Bruce S. Bennett (Dewey & LeBoeuf), Bankruptcy Judge Kevin Carey (D. Del., Kelley Cornish (Paul, Weiss), Laura Davis Jones (Pachulski Stang) and James Sprayregen (Kirkland & Ellis). The program was the top-rated panel at ABI’s Views from the Bench program in Delaware last fall. Those purchasing the live webcast, provided through West LegalEdCenter, will receive complimentary access to the on-demand version for 180 days once it becomes available. Please note that the on-demand and podcast versions may or may not be accredited in your state. Click here to register.
LATEST CASE SUMMARY ON VOLO: CIPOLLA V. ROBERTS (IN RE CIPOLLA; 5TH CIR.)
Summarized by Aaron Kaufman of Cox Smith Matthews Inc.
The Fifth Circuit ruled on Monday that the debtor's status as an attorney, without more, could not give rise to a presumption that the debtor had knowledge of homestead exemption laws or other bankruptcy rules and requirements. Because the bankruptcy court relied on this presumption, and that presumption may have influenced the court's critical findings—namely, the debtor's credibility—the Fifth Circuit held that the error was not harmless and required remand for "further adjudication without including that erroneous presumption in the matrix." The Fifth Circuit also explained that the bankruptcy court's application of the "badges of fraud" to its section 522(o) analysis was proper. Because section 522(o) uses the familiar language "with the intent to hinder, delay, or defraud a creditor," case law applying either the Texas Uniform Fraudulent Transfer Act or sections 548(a) and 727(a)(2) of the Bankruptcy Code could all be instructive. In dicta, however, the court of appeals addressed the debtor’s contention that at least one of the badges of fraud found by the bankruptcy court was clearly erroneous: the finding that a nine-year period between the acquisition of property and the incurrence of substantial debt could be considered "short" under the badges-of-fraud analysis. The court of appeals noted in a not-so-subtle manner that while the bankruptcy court did not err as a matter of law, the debts incurred closer in time to the 2000 property acquisition were "clearly more relevant to [the debtor's] intentions" than those incurred nine years later in 2009. With those instructions and dicta, the matter was remanded.
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: SEC KICKS STOCK TRADER OUT OF CHAPTER 13 BANKRUPTCY
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines the case of debtor Douglas Frederick, who was found to have violated securities laws and filed for chapter 13 bankruptcy protection to try to mitigate a $956,448.99 tab owed to the SEC partly as a result of a disgorgement order for trading violations.
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 The current model of debtor choice between chapter 7 and chapter 13 should be replaced by a model under which the trustee (or some other public official) routes cases to the appropriate path to relief.Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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