Large Wall Street banks would have more trading freedom under the Volcker Rule as a result of changes U.S. regulators are considering, the Wall Street Journal reported. The draft changes to the rule, which restricts bankers’ trading activities, are designed to lower the burden banks face to prove that short-term trades don’t violate the rule. Regulators are also seeking to alter the definition of permitted hedging and market-making activities to limit the rule’s impact on non-U.S. investment funds, and to cut compliance requirements for banks with trading desks under a certain size. The changes could be published as soon as late May.
Commentary: GOP’s Ambitious College Reform Plan*
College administrators have barely had time to digest the full impact of tax reform, but they are already facing a new challenge as Washington weighs a major piece of legislation that could shake up the way higher education does business, according to a commentary in the Wall Street Journal. The 1965 Higher Education Act, one of the brightest stars in Lyndon B. Johnson’s Great Society constellation, is due for reauthorization this year. Since the HEA’s last reauthorization in 2008, undergraduate tuition and fees have increased by 25 percent in real terms. The HEA might have expanded access to college, but the soaring costs — and the borrowing required to meet them — have turned the process into a kind of debt peonage for many students, according to the commentary. Instead of a clean reauthorization of the HEA, Rep. Virginia Foxx (R-N.C.), chair of the House Committee on Education, wants a complete overhaul. On Dec. 12, her committee passed H.R. 4508, the "Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act." One of the bill's proposals is to consolidate the six existing student-aid programs into a single Federal ONE Loan Program, and likewise streamline grants into a single program. It replaces the existing repayment plans with a single 10-year plan of 120 equal payments and a single income-based plan (in which borrowers would pay back 15 percent of their discretionary income, down to a minimum of $25 a month). *The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
ABI's Commission on Consumer Bankruptcy will submit recommendations to the Department of Education's request for information on the evaluation of undue hardship claims in adversary actions seeking student loan discharges in bankruptcy. Once submitted by the deadline of May 22, the recommendations will be available at https://consumercommission.abi.org/.
Mortgage Delinquencies Show Improvement but Still Face Pressure
Late payments on single-family home mortgages improved on a consecutive-quarter basis as more recovery from Hurricanes Harvey and Irma took hold, but more potential loan performance concerns lie ahead, NationalMortgageNews.com reported. Overall, seasonally adjusted delinquencies in the first quarter declined by 54 basis points from the previous quarter but were just 8 basis points lower than the same period in 2017, according to the Mortgage Bankers Association's latest National Delinquency Survey. Most notably, the delinquency rate for FHA loans, which previously had been particularly affected by the storms, plummeted. The 136-basis-point consecutive-quarter improvement in the delinquency rate for FHA loans recorded in the first quarter marked the largest single-quarter decline ever seen in the survey.
Commentary: The Surprising Return of the Repo Man
Technology has made the repossession industry very efficient amid the soaring number of people falling behind on their car payments, according to a Washington Post commentary. No longer tethered to a tow truck and able to use big data to find targets, the repossession industry is booming at an unexpected time. Although the U.S. economy recently entered its second-longest-ever period of expansion, the auto loan delinquency rate last year reached its highest point since 2012, driven by souring subprime auto loans. It’s evidence of how the economic recovery has not been evenly felt, with some of Americans’ biggest purchases — automobiles — being fueled by unsustainable borrowing rather than rising wages, according to the commentary. “So much of America is just a heartbeat away from a repossession — even good people, decent people who aren’t deadbeats,” said Patrick Altes, a veteran agent in Daytona Beach, Fla. “It seems like a different environment than it’s ever been.”
Analysis: The 130-Year-Old Bankruptcy that Created a $5 Billion Oil Giant
Texas Pacific Land Trust, a listed land bank created out of a railroad bankruptcy more than a century ago, has climbed more than 2,200 percent since 2010, outperforming the stocks of shale oil producers, service companies and prospectors alike. It’s now worth more than $5 billion, Bloomberg News reported. Its secret: vast tracts of mineral rights in the Permian Basin, the world’s hottest major oil region, earning revenues from the likes of Chevron Corp., which have to pay the trust when they produce from its land. Texas Pacific began with a failure: In the 19th century era of westward expansion, Texas and Pacific Railway Co. was attempting to build a railroad from Marshall in its home state to San Diego. It was granted land under a federal charter to build the line, but after delays and financial difficulties, the company went bankrupt in the 1880s. The railway bankruptcy predates the Texas petroleum boom that started in 1901 with the discovery of Spindletop, the field that’s credited with leading the U.S. into the oil age. Some 3.5 million acres, an area the size of Connecticut, were given to bondholders and placed in a trust to be sold off over time, with the proceeds going to repay creditors. The vehicle was listed in New York in 1927 with the mandate to buy back shares and pay dividends whenever land is sold, with the ultimate goal of liquidating itself. And after more than a century, the trust still retains almost 900,000 acres — and, crucially, mineral rights.
Nominations Now Being Accepted for the 2018 Class of ABI's “40 Under 40” Program!
Nominations are now open for ABI's “40 Under 40” program. This program recognizes outstanding young insolvency professionals who are driven by success, motivated by challenges and are role models for their peers. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Visit the website for additional details on nominations and applications.
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New on ABI's Bankruptcy Blog Exchange: The Real Fight over CFPB's Payday Rule Is Just Beginning
It's too late for Congress to overturn the consumer bureau's regulation on short-term lending, but acting Director Mick Mulvaney will have plenty of chances to reshape it, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
