NEWS AND ANALYSIS
PERCENTAGE OF HOMES IN FORECLOSURE DROPS NATIONWIDE
The percentage of homes in foreclosure dropped nationwide last month, although the percentage of borrowers behind on their payments increased slightly, the Los Angeles Times reported today. In a sign of continued recovery in the housing market, about 3.44 percent of mortgages were in some stage of the foreclosure process in December, according to Lender Processing Services Inc., a mortgage and consumer loan processing firm. That represents a nearly 2 percent decline from November and a roughly 18 percent drop-off from a year earlier. The percentage of mortgages that are 30 days or more past due stood at 7.17 percent last month, a 0.74 percent increase from November, LPS reported. Still, that rate declined 9 percent when compared with the same month in 2011. Read more.
COMMENTARY: BANK REFORM TAKES ONE FLAWED STEP FORWARD
While the Financial Accounting Standards Board (FASB) issued a draft of a new rule to change the way banks build reserves against losses on loans, the proposed rule is flawed conceptually and in its application, according to a Wall Street Journal commentary by Eugene A. Ludwig, CEO of the Promontory Financial Group and former Comptroller of the Currencey, and Paul Volcker, former chairman of the Federal Reserve System and namesake of the Volcker Rule included in the Dodd-Frank Act. It is a positive sign, according to the commentary, that the FASB recognizes that its existing rules on the Allocation for Loan and Lease Losses may have worsened the 2008 financial crisis. These rules limited bank reserves to those that are already "incurred." This all but ensures that banks' rainy day funds will be too skinny, particularly in periods when credit markets are under stress. The FASB's draft proposal to reform these rules incorporates what is known as the "Current Expected Credit Loss Model." It is meant to expand reserves to reflect losses that are expected over the life of the loan, and it is a big improvement over the existing regime. But as it stands, the proposal could create risks for the financial system as it could hurt small banks and their customers, according to the commentary. In an effort to ensure that everything is "auditable," the proposal ties the loan-loss reserve to what the accounting profession will decide is an acceptable "model." While the proposal is well-intentioned and makes clear that various models can be used, this model-driven approach is dangerous. Click here to read the full commentary. (Subscription required.)
FINANCIAL CRISIS SUIT SUGGESTS MORGAN STANLEY KNEW OF BAD INVESTMENTS
Hundreds of pages of internal Morgan Stanley documents, released publicly last week in a case against Morgan Stanley brought by a Taiwanese bank, shed much new light on what bankers knew at the height of the housing bubble and what they did with that knowledge, the New York Times DealBook blog reported today. The lawsuit concerns a $500 million collateralized debt obligation called Stack 2006-1, created in the first half of 2006. The documents suggest a pattern of behavior larger than this one deal: People across the bank understood that the American housing market was in trouble. They took advantage of that knowledge to create and then bet against securities and then also to unload garbage investments on unsuspecting buyers. Morgan Stanley is fighting the lawsuit, contending that the buyers were sophisticated clients and could have known what was going on in the subprime market. Read more.
LIBOR SUIT LIST SHOWS BARCLAYS PROBE SPANNED NY TO TOKYO
Barclays Plc senior executives, dozens of traders and the bank’s chief economist were all identified by regulators in a probe into interest-rate rigging that spanned continents, according to documents released in the U.K.’s first Libor-manipulation lawsuit, Bloomberg News reported today. Barclays is being sued by affiliates of Guardian Care Homes Ltd. that claim that an interest-rate swap should be annulled because it is linked to Libor, which Barclays tried to rig. Judge Julian Flaux in London rejected a bid by a group of employees identified in the Libor documents to prevent their names from being published ahead of a trial later this year. Among those identified in connection with the case were former Chief Executive Officers Robert Diamond and John Varley, and Jerry Del Missier, the bank’s former chief operating officer. The list of names, which Judge Flaux in London said had to be turned over to Guardian, was compiled from evidence that Barclays provided in the regulatory probes that led a 290 million-pound fine ($457.5 million) in June. Read more.
BLOOMBERG'S LATEST "BILL ON BANKRUPTCY" VIDEO: AMR MAKE-WHOLE OPINION VULNERABLE ON APPEAL
The case of the week on the Bloomberg bankruptcy video is the decision by Bankruptcy Judge Sean Lane who concluded that American Airlines is not obliged to pay several hundred million dollars in make-whole premiums even though debt would be repaid before maturity. Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle discuss how Lane's adverse ruling evidently was expected by the debt holders who believe the result may be better on appeal, if the dispute does not become moot in the meantime. Click here to watch.
NEW BANKRUPTCY PROFESSIONALS: DON'T MISS THE NUTS AND BOLTS PROGRAM AT ABI'S ANNUAL SPRING MEETING! SPECIAL PRICING IF YOU ARE AN ASM REGISTRANT!
An outstanding faculty of judges and practitioners explains the fundamentals of bankruptcy in a one-day Nuts and Bolts program on April 18 being held in conjunction with ABI's Annual Spring Meeting. Ideal training for junior professionals or those new to this practice area!
The morning session covers concepts all bankruptcy practitioners need to know, and the afternoon session splits into concurrent tracks, focusing on consumer and business issues. The session will include written materials, practice tip sessions with bankruptcy judges, continental breakfast and a reception after the program. Click here to register!
CURRENT ISSUES FOR FINANCIAL ADVISORS IN BANKRUPTCY CASES AT ABI'S 31ST ANNUAL SPRING MEETING
The 2013 Annual Spring Meeting, to be held April 18-21, 2013, at the Gaylord National Resort and Convention Center in National Harbor, Md., features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various “tracks,” including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. More than 16 hours of CLE/CPE is offered in some states, along with ethics credit totaling 3 hours, making the cost only about $50 per credit. In addition, committee sessions will drill down on other topics to provide you with the most practical and varied CLE/CPE experience ever. Sessions include:
• 17th Annual Great Debates
• Mediation: An Irrational Approach to a Rational Result
• Creditors’ Committees and the Role of Indenture Trustees and Related Issues
• The Individual Conundrum: Chapter 7, 11 or 13?
• The Power to Veto Bankruptcy Sales
• Real Estate Issues in Health Care Restructurings
• Law Firm Bankruptcies
• How to Be a Successful Expert
• The Ethical Compass: Multiple Ethical Schemes Applicable to Financial Advisors
• Chapter 9s, Nonprofits and Other Nontraditional Restructuring Processes
• And much more!
The Spring Meeting will also feature a field hearing of the ABI Commission to Study the Reform of Chapter 11, a report from the ABI Ethics Task Force, a luncheon panel discussion moderated by Bill Rochelle of Bloomberg News, and a Final Night Gala Dinner featuring a concert by Joan Jett and the Blackhearts!
ABI LIVE WEBINAR: REVISITING RADLAX AND HALL – NEW LEGAL AND PRACTICAL IMPACT OF THE DECISIONS
See why this was the top-rated panel at the ABI Winter Leadership Conference last month! Join the expert panel on Feb. 19 from 12:00-1:15pm EST as the summarize and discuss the legal impact and practical implications of the Supreme Court’s 2012 decisions in Radlax and Hall. Participants include:
• Susan M. Freeman of Lewis and Roca LLP (Phoenix)
• Adam A. Lewis of Morrison & Foerster LLP (San Francisco)
• Prof. Charles J. Tabb of the University of Illinois College of Law (Champaign, Ill.)
• Eric E. Walker of Perkins Coie LLP (Chicago)
Click here to register!
LATEST CASE SUMMARY ON VOLO: MASSACHUSETTS DEPT. OF UNEMPLOYMENT ASSISTANCE V. OPK BIOTECH LLC (IN RE PBBPC INC.; 1ST CIR.)
Summarized by Hale Yazicioglu, Bartlett Hackett Feinberg P.C.
The First Circuit BAP, adopting the expansive definition of “interest” in § 363(f) of the Bankruptcy Code, held that “interest” in § 363(f) includes all obligations that may flow from ownership of property, including the right to tax the purchaser of the debtor’s assets at the same high rate imposed on the debtor. The First Circuit BAP first evaluated its jurisdiction on appeal and found that the bankruptcy court order approving the stipulation entered into between the parties effectively terminated the litigation, and therefore was a final judgment from which the parties could appeal to the BAP.
There are more than 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: THIRD CIRCUIT REJECTS WAIT-AND-SEE VALUATION APPROACH AND ACCEPTS LIENSTRIPPING IN § 506(a)
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post examines In re Heritage Highgate, Inc., in which the Third Circuit held that the fair market value of property as of the confirmation date controls whether or not a lien is fully secured. Additionally, the court held that lienstripping is permissible in a chapter 11 reorganization.
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'S INDUBITABLE EQUIVALENTS: TELL US A TUNE AND WE'LL SING YOU THAT SONG!
ABI's Indubitable Equivalents need your help: Tell us your favorite Rock and Roll tune - that elusive classic that takes you back, makes your feet tap, your head bang, and your horns come out! If we pick your song, you get widespread promotion by the band and you'll receive a free CD of IE’s greatest hits!
To enter, log onto www.abiband.com or “like” the Band’s Facebook page.
The fine print: No purchase necessary. You can enter as many times as you want. Multiple winners will be selected. Winners will be announced on the IE website and on Facebook. Entry deadline: January 31.
ABI Quick Poll
After Stern, bankruptcy courts do not have the constitutional authority to enter final judgments on fraudulent conveyance claims.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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