Obama Signs Puerto Rico Debt Bill, But Says Tough Work Still Ahead

U.S. President Barack Obama today signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) into law to help Puerto Rico address its $70 billion debt, but said more tough work was ahead to help the U.S. territory regain financial stability. The Senate yesterday passed the House-approved bill by a vote of 68-30. Puerto Rico's semi-public power utility, known as PREPA, today said that it would make all of a $415 million debt payment due tomorrow. PREPA, which had been on the brink of collapse under $8.3 billion in debt, last year reached an exchange deal with most of its creditors, which is being finalized. The utility said today that it would make its $415 million payment using operational funds and proceeds from new bond sales. Puerto Rico faces $70 billion in total debt, a stalled economy, and high poverty and unemployment. The territory's debt of $1.9 billion due tomorrow - of which PREPA's payment was a portion - includes nearly $800 million in general obligation (GO) debt, the island's highest-ranking debt protected by a constitutional pledge. It was unclear today whether Puerto Rico would make that payment.

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Housing Agency Overhauls Rules to Help Struggling Homeowners

A federal program that sold more than 100,000 soured mortgages to private investors at discounted prices is getting a major overhaul, the New York Times DealBook blog reported today. Changes announced by federal housing officials today follow months of criticism from legislators and housing advocates that the buyers of the loans have not done enough to keep struggling borrowers in their homes. The housing officials said that private investment firms buying delinquent mortgages would have to consider reducing the total amount of money owed on a mortgage as part of potential modification to make a loan more affordable. The requirement that private buyers — mostly private-equity firms and hedge funds — will have to consider things like principal reduction in reworking troubled mortgages represents a significant change in a government program that began in earnest four years ago in the wake of the housing crisis. Edward L. Golding, principal deputy assistant secretary with the Department of Housing and Urban Development, said that the housing agency was “deeply committed to protecting struggling homeowners and making certain they have the greatest opportunities to avoid foreclosure and remain in their homes.” Federal officials also said they would make it more difficult for private buyers to temporarily reduce the interest rate on a mortgage only to have it revert to the original terms after five years, a practice used by some private buyers.

Visa, MasterCard Class-Action Settlement with Retailers Rejected by U.S. Court

A U.S. court of appeals today rejected the 2012 swipe-fee settlement, originally valued at $7.25 billion, between the retail industry and payment companies Visa Inc. and MasterCard Inc., calling the agreement “unreasonable and inadequate,” the Wall Street Journal reported today. “The benefits of litigation peace do not outweigh class members’ due process right to adequate representation,” the ruling said. The court ruled that the settlement violated the rule that requires the representative parties to “fairly and adequately protect the interests of the class” and uncover any conflicts of interest. The 2012 settlement broke the class of plaintiffs into two groups: one that accepted Visa or MasterCard from 2004 through 2012 and another that would accept the cards from 2012 onward. In its ruling, the appeals court noted the conflict between the merchants in the first class, which were pursuing solely monetary relief, and the merchants in the second class, which were seeking only injunctive relief. “The former would want to maximize cash compensation for past harm, and the latter would want to maximize restraints on network rules to prevent harm in the future,” the ruling said. In addition, only the first group was eligible for the $7.25 billion cash settlement and could opt out of the settlement.

Debt Collection Complaints Decline in CFPB’s Monthly Snapshot

Debt collection complaints fell in May, and the three-month average of complaints from March through May also slightly declined, according to the Consumer Financial Protection Bureau’s (CFPB) latest monthly complaint report released on Tuesday, ACAInternational.org reported. There were 6,911 debt collection complaints in May, a 5 percent decrease.  Debt collection represented 29 percent of complaints submitted in May 2016. The three-month average for debt collection complaints from March to May this year is 7,415 compared to 7,442 this time last year, according to the report. Since its inception in July 2011, the CFPB has handled a total of approximately 906,400 complaints as of June 1, including approximately 23,800 in May, according to the report. The CFPB received a total of 241,276 complaints on debt collection.

Analysis: Today’s Renters Really Are Worse Off Than Their Parents

Sharp increases in rents along with stagnant incomes over the past five years have helped create a dire situation for many of the country’s renters, the Wall Street Journal reported yesterday. Inflation-adjusted rents have risen by 64 percent since 1960, but real household incomes only increased by 18 percent during that same time period, according to an analysis of U.S. Census data released by Apartment List, a rental listing website. Renters fared the worst during the decade between 2000 and 2010, when inflation-adjusted household incomes fell by 9 percent while rents rose by 18 percent, according to Apartment List. That is likely because there were two recessions during that time and a housing bust in 2008 that drove millions of homeowners into renting.

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