U.S. banking regulators are planning to examine large, complex loans made by the biggest banks more frequently as part of an effort to better assess whether risks are building across the industry, the Wall Street Journal reported yesterday. Beginning next year, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. will reportedly be conducting their joint national examination of major loan portfolios twice a year instead of annually. The agencies are also discussing requiring banks to report portfolio data on a quarterly basis instead of annually. The heightened focus on banks’ loan portfolios comes as regulators push to rein in banks that are heavily involved in providing leveraged loans, which are made to highly indebted companies and often fund corporate buyouts by private-equity firms. Regulators have expressed concern about what they view as a proliferation of questionable loans made by banks to heavily indebted companies, and in March 2013 they finalized guidance urging banks to adopt stricter underwriting standards and loan-review policies when providing what regulators see as high levels of debt. In recent months, banks appear to have begun adhering to the advice more closely after months of continuing to back highly leveraged deals, industry data show. But the industry’s relatively slow reaction has tested regulators and prompted them to consider changes to the way they oversee major loan deals involving multiple banks. Click here to read the full article (subscription required).
MADOFF TRUSTEE TO HIGH COURT: OVERTURN RULING BLOCKING $4B IN PAYOUTS
The trustee finding money for victims of Bernard Madoff's epic fraud asked the U.S. Supreme Court on Tuesday to overturn a court ruling that he says may prevent the recovery of nearly $4 billion, reward those who unwittingly profited from the Ponzi scheme at the expense of those who did not, and have far-reaching effects for future victims of financial fraud, the Associated Press reported Tuesday. Lawyers for trustee Irving Picard have asked the high court to look at the December ruling by the Second U.S. Circuit Court of Appeals in Manhattan, saying that the ruling guts Picard's authority at a time when trustees are increasingly relying on clawbacks to recover money from those who profited from illegal schemes, and redistribute money to those who did not. The court papers say that the appeals court decision has had an "absurd result," extending a "stockbroker defense" designed by Congress as a narrow exception to the clawback authority, which they said was created to prevent any potential market instability that might result if a trustee unwound large numbers of actual securities trades by the debtor, possibly causing the insolvency of one market participant "to spread like a contagion throughout the market." But Picard's lawyers say that Congress did not intend for the stockbroker defense to extend to someone like Madoff. Picard has so far recovered $10.5 billion for investors, largely through deals reached with some of the thousands of investors who received more money from Madoff than they had invested. That money is not threatened by the Second Circuit decision. Click here to read the full article.
ANALYSIS: THE NONPROFIT BEHIND BILLIONS IN MORTGAGE AID IS IN DISARRAY
Hoping to deliver relief to Americans pounded by the financial crisis, the government has been pouring billions of dollars into a sort of Red Cross for homeowners: NeighborWorks America, a nonprofit chartered by Congress, according to a Bloomberg analysis yesterday. The organization is tasked with distributing much of that money to counseling groups that dispense mortgage advice and sometimes financial aid. However, a close look at the group reveals a house in disorder — with sweetheart contracts, document fudging and unexplained departures of top officials. Its contracting issues, which haven’t been made public, are sparking concerns about whether the group has in fact been a good manager of some $2 billion in congressional appropriations it has received since 2007. Some government inspectors and Republican lawmakers are also asking whether the organization has delivered on its post-crisis mission of keeping Americans in their homes. The Washington, D.C.-based group, officially the Neighborhood Reinvestment Corp., has countered that it has been a good steward of federal money. According to a spokesman for the nonprofit, it took immediate action to address shortcomings in its procurement process and hired an executive to review contracts. Questions about the group’s finances have been emerging as House Republicans said this week they’re seeking ways to cut federal spending by $5.5 trillion over the next nine years. Click here to read the full analysis.
U.S. FORECLOSURES FALL TO LOWEST RATE SINCE JULY 2006
Foreclosure activity in the U.S. fell last month to its lowest rate in nearly nine years as banks started the process on fewer homes and scheduled fewer auctions than in the previous month, industry firm RealtyTrac said on Thursday, CNBC reported today. A total of 101,938 properties across the U.S. were at some stage of the foreclosure process, which includes foreclosure notices, scheduled auctions and bank repossessions, the group said. That drove overall foreclosure activity down 4.3 percent from January and down 9.4 percent from the same time last year. “Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years,” RealtyTrac vice president Daren Blomquist said. Lenders started the foreclosure process on 48,079 properties in February, down 4.9 percent from last month and a 7.3 percent decline from February 2014. Click here to read the full article.
DISCOUNTED SUBSCRIPTIONS TO AUDIO ABI JOURNAL AVAILABLE FROM MODIOLEGAL!
Subscribe now to our new streaming audio Journal, offered by ModioLegal. Narrated articles from each issue of the ABI Journal can now be accessed through your web browser -- on your computer, smartphone, or tablet -- for a low monthly fee. For a limited time, subscribe to this new service now for just $9.95 a month (regularly $12.95) with coupon code abi-early. Sign up for any audio Journal plan, and your first month is free! Go to http://www.modiolegal.com/subscribe to learn more, or send an email to [email protected] for a free demo.
SHIPPING SOON: ABI'S NEWEST PUBLICATION EXAMINES ISSUES SURROUNDING LITIGATION AND LIQUIDATION TRUSTS IN BANKRUPTCY
ABI's newest publication, A Practitioner's Guide to Liquidation and Litigation Trusts, tackles issues surrounding litigation and liquidation trusts established in an insolvent company's bankruptcy proceedings. Such cases as General Motors, ASARCO, Tronox, Enron and Bernard L. Madoff Investment Securities LLC have established these types of trusts as vehicles that can be separated from the insolvent company's business operations to administer assets that have uncertain recoveries or that may require significant time to handle (such as environmental claims). A Practitioner's Guide to Liquidation and Litigation Trusts is designed to give bankruptcy and other professionals an overview of how and when trusts can be used to handle significant large-scale litigation matters and the liquidation of other assets for the purpose of accumulating recoveries and distributing them across multiple claimants. The book offers guidance on the most common issues faced in establishing, managing, monitoring and ultimately concluding a liquidation trust or litigation trust. Convenient checklists, relevant case citations and references to bankruptcy-related issues, as well as recommended forms of trust agreements and suggested provisions for bankruptcy plans and disclosure statements, are also provided in this 300-page guide (which includes a separate thumbdrive containing more than 1,000 sample pages from liquidation and litigation cases).
In an unpublished decision, the Ninth Circuit Bankruptcy Appellate Panel held that a motion for relief from judgment under Rule 9024 is a contested matter; therefore, the bankruptcy court must find facts specifically and state its conclusions of law separately. Because the bankruptcy court did not engage the Pioneer-Briones analysis required for evaluating Fed. R. Civ. P. 60(b)(1) excusable neglect, or to make any findings and conclusions sufficient for review, the bankruptcy court's order was vacated and remanded.
There are more than 1,500 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: HOW FED POLICY ON SWIPE FEES QUASHES MARKET FORCES
A recent blog post makes the argument that since the cost of processing debit-card purchases has come down, the Federal Reserve should ensure that banks lower their merchant fees accordingly.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
ORDER YOUR PRINTED COPY OF THE FINAL REPORT OF ABI'S COMMISSION TO STUDY THE REFORM OF CHAPTER 11!
Order your printed copy of the Final Report of ABI's Commission to Study the Reform of Chapter 11! The 402-page Final Report contains more than 200 discrete recommendations of chapter 11 policy reforms. ABI's Commission to Study the Reform of Chapter 11 was established in 2012 with a mission to study and propose reforms to Chapter 11 of the Bankruptcy Code and related statutory provisions. After months of deliberations, the Commission unanimously adopted this report to provide to Congress. For the special price of $40, you will have all the testimony, studies and figures that went into compiling the recommendations at your fingertips! Click here to order.
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.