U.S. RETIREES RETURNING TO REVERSE MORTGAGES, BIG BANKS STAYING AWAY
U.S. baby boomers desperate for retirement income are increasingly turning back to a financial product that, after the housing bust, had been left for dead: the reverse mortgage, Reuters reported yesterday. Borrowers took out $15.3 billion of the loans in 2013, an increase of 20 percent from the year before, according to industry publication Inside Mortgage Finance. The record year was 2009, when there were $30.21 billion of reverse mortgage loans made. Brokers and bankers say that the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining. But at this stage, most bigger lenders are uncomfortable with the loans; for example, in 2011, Wells Fargo and Bank of America backed out of the business. Wells Fargo cites factors including unpredictable home values and the level of delinquencies as reasons for it to stay away from reverse mortgages. The government agency that guarantees these loans, the U.S. Federal Housing Administration, found them to be risky, too. Losses on reverse mortgages were a big reason for the agency's $1.7 billion taxpayer bailout last year -- and some experts worry they could lead to similar trouble again. Read more.
Credit availability for mortgage purchases has been very tight over the post-crisis period as the number of mortgages originated to purchase a home over the past decade has declined dramatically, according to an Urban Institute commentary published Friday. Experts estimate that the number of "missing loans" that would have been made if credit availability were at normal levels could be as high as 1.2 million units annually, according to the commentary. Limited credit availability has severe consequences, the commentary said, because it means fewer individuals will become homeowners, the housing market will recover more slowly and it will hinder the economy through fewer new home sales and consumer home purchases. Read the full commentary.
LAWMAKERS TAKE DOJ TO TASK OVER MORTGAGE FRAUD REPORT
Three congressional Democrats want to meet with Attorney General Eric Holder about a watchdog report that suggests Department of Justice mortgage fraud investigations are a lower priority than publicly stated and that DOJ statistics on fraud cases are inaccurate, American Banker reported today. "This report calls into question the Department's commitment to investigate and prosecute crimes such as predatory lending, loan modification scams and abusive mortgage servicing practices," Reps. Elijah Cummings (D-Md.) and Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) wrote in a letter to Holder yesterday. The March 13 report by the DOJ's inspector general says that despite its statements about federal law enforcement's raised focus on mortgage fraud, "DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements." The report adds that the criminal investigative division within the Federal Bureau of Investigation ranks mortgage fraud as a low criminal threat, and mortgage fraud at FBI field offices in Baltimore, Los Angeles, Miami and New York is "a low priority, or not listed as a priority." Read more. (Subscription required.)
GAO REPORT: FEDERAL OVERSIGHT OF STUDENT DEBT MANAGEMENT SYSTEM IS WEAK
The Government Accountability Office found that the Department of Education was unable to process some student loan rehabilitations for eight months, and its monitoring of collection agency performance is weak, ACAInternational.org reported today. For more than a year after it upgraded its defaulted loan information system, the Department of Education was unable to provide most borrowers who completed rehabilitation with timely benefits, such as removing defaults from their credit reports, according to a report on federal student loans from the Government Accountability Office. In March 12, 2014, testimony before the House of Representatives Subcommittee on Higher Education and Workforce Training, the Government Accountability Office Director of Education, Workforce and Income Security Melissa Emrey-Arras addressed problems with the system upgrade, as well as how the Department of Education oversees collection agencies in implementing loan rehabilitation. As a result of the system upgrade problems, no loan rehabilitations were processed until April 2012, and officials said they needed until January 2013 to clear the resulting backlog, according to the GAO. Read more.
For more on the student loan debt crisis, be sure to attend ABI's Student Loan Debt Crisis Symposium on May 30 at the Georgetown University Law center. To register or for more information, please click here.
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NEW ABILIVE WEBINAR ON THURSDAY EXAMINES HOW TO DRAFT LOAN WORKOUT AGREEMENTS
The next abiLIVE webinar will take place on March 20 from 1-2:30 p.m. ET and will examine how to draft loan workout agreements. Learn the purpose and legal underpinnings of the various component parts of frequently used workout documents such as forbearance agreements, intercreditor agreements and restructuring/override agreements. The panel will focus on real-world examples of good and bad provisions of workout documents and will provide drafting tips. Group discounts available! Click here to register.
ABI MEMBERS WELCOME TO ATTEND "THE LEGACY OF MR. PONZI: THE MADOFF AND STANFORD CASES" PROGRAM NEXT WEEK PRESENTED BY THE AMERICAN COLLEGE OF BANKRUPTCY
The American College of Bankruptcy First Circuit Fellows will present "The Legacy of Mr. Ponzi: the Madoff and Stanford Cases" program from 1-4 p.m. ET on March 28 at the Boston College Law School in Newton, Mass. The program will include a panel discussion featuring the Madoff trustee, a co-Liquidator of Stanford International Bank, and reporters from the New York Times and Associated Press who covered the Madoff and Stanford cases. There is no charge to attend the program. For more information or to register, please click here.
LEADING SCHOLARS TO PRESENT RESEARCH AND PROPOSALS FOR POTENTIAL CHAPTER 11 REFORMS AT THE ABI ILLINOIS SYMPOSIUM ON CHAPTER 11 REFORM APRIL 3-5
Advancing the dialogue on important reform issues in conjunction with ABI's Commission to Study the Reform of Chapter 11, ABI and the University of Illinois College of Law have assembled leading scholars to present academic papers on issues related to the Commission's work. Scholars will present papers and debate the consequences of the increased importance of secured credit to modern restructuring law to members of the Commission and fellow scholars at the ABI Illinois Symposium on Chapter 11 Reform at the Kirkland & Ellis Conference Center in Chicago on April 3-5. The papers presented at the Symposium will be published in a forthcoming issue of the University of Illinois Law Review.
For a schedule containing a list of all presenters and commentators at the Symposium and to register, please click here.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: WU V. MARKOSIAN (IN RE MARKOSIAN; 9TH CIR.)
Summarized by Joel Newell of Lane & Nach, P.C.
The Ninth Circuit BAP determined that 11 U.S.C. § 1115 does not apply upon conversion from chapter 11 to chapter 7; however, 11 U.S.C. § 348 governs the effect of a conversion. The BAP relied on 11 U.S.C. § 348(a) wherein the date of the petition remains unchanged; therefore, "personal service income received during the chapter 11 estate is recharacterized as property of the debtor under [11 U.S.C. §] 541(a)(6) when the case is converted to chapter 7." Therefore, upon conversion, the bonus reverted back to the debtors.
There are more than 1,200 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: QUIZNOS SERVES UP ITS PRE-PACKAGED BANKRUPTCY
A recent blog post takes a closer look at Quiznos' pre-packaged chapter 11 filed on Friday.
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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