Push for Changes to Dodd-Frank Gains Ground

ABI Bankruptcy Brief | March 27, 2012

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March 27, 2012

NEWS AND ANALYSIS

PUSH FOR CHANGES TO DODD-FRANK GAINS GROUND

Bipartisan momentum is growing in Congress for changes to be made to the Dodd-Frank financial-reform law, CongressDaily reported today. Senate Banking Committee Chairman Tim Johnson (D-S.D.) said during a hearing last week that he was "open to the idea of improving Wall Street reform by making technical corrections [to Dodd-Frank] and fixing unintended consequences." Five bills are on track to make their way through various stages in the House this week that would make modest changes to the law, and financial-industry lobbyists hope that at least a few of them have a fighting chance of advancing in the Senate. Still, many policy analysts, financial-industry lawyers and even Hill aides maintain their skepticism, arguing that it will be extremely difficult to keep changes to Dodd-Frank narrow enough to pass both chambers and have them signed by the president—especially before the November elections. H.R. 4014, passed yesterday by the House, ensures that confidential financial information provided to the Consumer Financial Protection Bureau will be subject to the same set of privacy standards as information submitted to other financial regulators. Johnson and the committee's ranking member, Sen. Richard Shelby (R-Ala.), are cosponsoring a similar measure in the Senate. Another bill, H.R. 2779, looks to exempt inter-affiliate swaps from certain regulatory requirements put in place by Dodd-Frank and also passed the House yesterday. The House Financial Services Committee is expected to take up a package of bills, including two that would curtail the reach of derivatives rules under Dodd-Frank. One would ensure that foreign operations of U.S. institutions would not be bound by a requirement to apply derivatives regulations to foreign transactions; another would ensure that regulators accessing swaps-data repositories agree to keep the information confidential.

HARP 2 PROGRAM GETS UNDERWAY

The government's second Home Affordable Refinance Program (HARP 2) launched last week after Fannie Mae and Freddie Mac updated their automated underwriting systems to handle the government's new refinance program for underwater borrowers, the San Francisco Chronicle reported on Sunday. As a result, more lenders are now offering loans under the expanded HARP 2 program, and qualified borrowers can shop around; they are no longer limited to refinancing with the company servicing their existing loan. The basic eligibility requirements for distressed homeowners are to (a) have a source of income, (b) be current on payments and (c) have a loan that was purchased by Fannie or Freddie before June 1, 2009. The loan balance must be at least 80 percent of the home's value, but there is no upper limit. If a homeowner has already refinanced under HARP, that homeowner is ineligible. Banks are free to add their own requirements, and some have. Wells Fargo said that it will employ minimum credit standards to ensure that customers have capacity to repay the mortgage. Some banks, including Chase and Bank of America, are not refinancing loans under HARP 2 that they do not already service. Read more.

ANALYSIS: GOVERNMENT-CONTRACTED DEBT COLLECTORS PROFITING FROM STUDENT LOAN WOES

With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers, Bloomberg News reported yesterday. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers' incomes make them eligible for leniency. Education Department contracts -- featuring commissions of as much as 20 percent of recoveries -- encourage collectors to insist on high payments. Debt collectors are the subject of more complaints to the Federal Trade Commission than any other industry -- almost 181,000 last year. Within the past 17 months, three companies working for the Education Department -- including one that is majority owned by JPMorgan Chase & Co. (JPM)'s private-equity arm -- settled federal or state allegations of abusive debt collections. The companies did not acknowledge wrongdoing, and Chase declined to comment. The Education Department said that the government investigations did not involve the companies' work for the agency. The U.S. Consumer Financial Protection Bureau has proposed supervising the largest debt collectors to ensure they are complying with laws such as the Fair Debt Collection Practices Act. About 5 million federal education-loan borrowers are in default. Read more.

PROPOSAL SUGGESTS PUTTING STATE PENSION FUNDS IN CHARGE OF CORPORATE RETIREMENT PLANS

As growing numbers of baby boomers face retirement with inadequate savings, some state officials are considering a novel proposal to rebuild America’s ailing retirement system: having state pension funds run retirement plans for companies, the New York Times reported today. As more companies are ditching their own pension plans or not offering retirement benefits at all, the idea would be to give companies an easy way to offer a firm pension without having to run the plan themselves. Labor economist Teresa Ghilarducci, who developed the proposal, yesterday held a public forum at the New School for Social Research with New York City's comptroller, John Liu. The forum explored whether companies might want to start offering pensions through a pooled system run by the Bureau of Asset Management, a unit of the comptroller's office. Liu said that he was interested because New York City was in "the early stages of a burgeoning retirement crisis," where more than a third of all retirement-age households had nothing to rely on except Social Security. Read more.

PROFS. BAIRD AND MORRISON WIN SECOND ANNUAL JUDEGE WESLEY STEEN LAW REVIEW PRIZE FOR ARTICLE ON DODD-FRANK

Profs. Douglas G. Baird of the University of Chicago Law School (Chicago) and Edward R. Morrison of Columbia Law School (New York) won ABI's Second Annual Judge Wesley Steen Writing Prize for their lead article “Dodd-Frank for Bankruptcy Lawyers,” which appeared in the 2011 Winter Edition of the ABI Law Review. The prize was established last year in honor of Bankruptcy Judge Wesley Steen, who retired from the bench in January 2011 after 17 years of distinguished service in both the Southern District of Texas and the Middle District of Louisiana. The only judge to ever serve as ABI President (2006-07), he was also a member of the ABI Law Review advisory board.

The Annual Judge Wesley Steen Writing Prize includes a cash award of $5,000 and a plaque presented to each author at ABI's Annual Spring Meeting on April 21 in Washington, D.C. Prof. David Gray Carlson of the Benjamin N. Cardozo School of Law (New York) won the Inaugural Judge Wes Steen ABI Law Review Writing Prize last year for his lead article, "The Role of Valuation in Federal Bankruptcy Exemption Process: The Supreme Court Reads Schedule C," which appeared in the 2010 Winter edition of the ABI Law Review.

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. 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.

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: FIRST NATIONAL BANK OF DURANGO V. WOODS (IN RE WOODS; 10TH CIR.)

Summarized by Andrew Johnson of Onsager, Staelin & Guyerson, LLC

A three-judge panel of the Bankruptcy Appellate Panel for the Tenth Circuit affirmed the confirmation of a chapter 12 plan of reorganization over the objection of an over-secured lender on six issues. The BAP held that: (1) the over-secured lender’s debt, which was secured by the debtors’ principal residence, arose out of the operation of a farming operation because the principal residence was an integral part of the farming operation; (2) the bankruptcy court did not abuse its discretion by admitting, as non-hearsay admissions of a party-opponent, two older appraisals commissioned by the over-secured lender, but which were offered only by the debtors; (3) The Till prime-rate plus risk analysis determines the post-confirmation interest rate on secured claims in a chapter 12 case; (4) a plan proponent is not required to demonstrate that the repayment period in the plan for a secured claim is a repayment period available in the market; (5) the debtors demonstrated that their plan, which had a seven-year repayment term, was feasible with projections that forecasts only three years of revenue and expenses; and (6) an over-secured creditor seeking attorneys’ fees and costs under 11 U.S.C. § 506(b) must comply with Fed. R. Bankr. P. 2016 and provide detailed statements of time, services and expenses for which reimbursement is sought.

More than 450 appellate opinions are summarized on Volo. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: TRUSTEE BRINGS FBI, ACCOUNTING EXPERIENCE TO SOLYNDRA PROBE

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post features an interview with R. Todd Neilson, Solyndra’s liquidation manager and independent investigator, looking into his previous experience as an ex-FBI agent and work on previous bankruptcy cases.

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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