NEWS AND ANALYSIS
WILL A DEBTOR WITH THE RIGHT TO APPEAL AN ORDER DENYING CONFIRMATION OF A BANKRUPTCY PLAN BE LESS LIKELY TO NEGOTIATE WITH CREDITORS? JUSTICES EXAMINE IN BULLARD
by Prof. Anne Lawton
ABI Resident Scholar
The Supreme Court on April 1 heard oral argument in Bullard v. Blue Hills Bank, the second of two bankruptcy cases that the Court heard that day (an analysis of Harris v. Viegelahn appeared in Tuesday's edition of the ABI Bankruptcy Brief). In Bullard, the Court took up the question of whether an order denying confirmation of a chapter 13 plan with leave to file an amended plan is a final order appealable as of right. While several Justices were skeptical of the dire consequences cited by respondent Blue Hills Bank, they also recognized that a debtor with the right to appeal an order denying confirmation of his plan might have less incentive to negotiate an acceptable compromise with his creditors. Read the full analysis.
POST-CRISIS RISK CASTS A DARKENING SHADOW ON FINANCIAL INDUSTRY
While government officials have forced banks to bulk up their capital buffers, ditch dangerous lines of business and pay more than $100 billion in penalties for bad behavior, risky activity has been migrating to the shadow-banking system, the Wall Street Journal reported today. A shadow bank is a catch-all label for any entity that supplies credit but doesn’t fund itself with deposits, as banks do. Shadow banks have long played a vital, innovative role in the U.S. Between 1980 and 2008, banks' share of the supply of credit to businesses and households in the U.S. fell from 44 percent to 20 percent. The rest came from finance companies, asset-backed securities, investment banks, institutional fund managers and government-sponsored enterprises such as Fannie Mae and Freddie Mac. Shadow banks were central to the mortgage bubble. Subprime mortgages were originated largely by lightly regulated firms, bundled into securities and sold to opaque funds financed with short-term IOUs. When the subprime bubble popped, many died or shrank. Banks have only partly filled the gap. Instead, the primary beneficiaries have been other kinds of shadow banks, such as exchange-traded funds and private-equity funds. The shift, according to an International Monetary Fund report issued Wednesday, stems from "tighter regulations on banks, rising compliance costs," and banks' "deleveraging" -- reducing the ratio of their loans to the capital they have to absorb losses. Read more. (Subscription required.)
AFTER PEAK OF FORECLOSURES, HOME BUYERS ARE BACK
More than five million American families lost their homes to foreclosure between 2007 -- the year when the crisis kicked up -- through the end of last year, the Wall Street Journal reported today. Since foreclosures and most negative credit events stay on credit reports for up to seven years, for those who lost their homes in the early years of the crisis, credit scores are improving as the black marks drop away, improving their ability to borrow again. This could have widespread implications for the U.S. economy, including a boost in demand for mortgages in the coming years. Fair Isaac Corp., which developed the widely used FICO credit scores, estimates that there were 910,000 consumers whose credit reports showed they had foreclosure proceedings begin on their homes between October 2007 and October 2008. Of those, some 264,400 had no evidence of the event on their credit reports by last October. That number will rise by up to 645,600 by the end of this year, according to FICO. The end of the seven-year period can be a game-changer for borrowers, who can qualify for new home loans and lower interest rates. Read more. (Subscription required.)
FANNIE MAE PLANS FIRST SALE OF NON-PERFORMING LOANS
Mortgage finance company Fannie Mae revealed details yesterday of its first-ever large sale of non-performing mortgages, a move that could make it easier for some of the borrowers behind on their loans to stay in their homes, CreditCollectionRisk.com reported today. Fannie Mae's auction will include 3,200 mortgages with $786 million in unpaid principal. The auction will be offered in two pools. The first one will have approximately $180 million in unpaid principal balance, and the second one will carry the bigger piece of $606 million in unpaid principal balance. Eventually, the company plans to auction off such loans regularly. Some housing advocates have encouraged the mortgage-finance companies to ramp up such sales, arguing that private investors have more leeway to ensure that borrowers can pay their loans again and avoid foreclosures. Freddie Mac began selling non-performing loans last year. The U.S. Department of Housing and Urban Development has sold such loans for several years. Read more.
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NEW CASE SUMMARY ON VOLO: IN RE 2920 ER LLC (5TH CIR.)
Summarized by Lars Fuller of BakerHostetler
The Fifth Circuit denied petition for mandamus relief, but vacated the district court's order prohibiting the judgment debtor from transferring funds and compelling post-judgment discovery, because the district court had not yet entered final judgment, and the orders did not comply with Rules 64 or 65. The judgment debtor petitioned for writ of mandamus seeking to vacate the district court's order after the district court denied the debtor's motion for interlocutory appeal.
There are nearly 1,700 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: SWIPE FEE CAP WOULD COME AT A COST TO DATA SECURITY
A recent blog post writes that putting a cap on debit card interchange fees will limit data security investment by the financial industry.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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