Mortgage

FED GOVERNOR: PUT CAP ON BIG FINANCIAL FIRMS

A top Federal Reserve official yesterday called on Congress to consider capping the size of the nation's financial firms, marking one of the most high-profile challenges to the way Wall Street does business, The Wall Street Journal reported yesterday. In a Philadelphia speech, Fed governor Daniel Tarullo recommended curbing banks' growth by putting a limit on their nondeposit liabilities, which are sources of funding for operations that go beyond consumer deposits. The idea takes direct aim at the biggest U.S. banks, including J.P. Morgan Chase & Co., Bank of America Corp., Goldman Sachs and Citigroup Inc., all of which rely heavily on such funding. Firms outside of this tier make much greater use of regular deposits. Tarullo, who drives much of bank policy-making at the Fed, is the highest-ranking regulatory official to call for limiting the size of banks. Even though the chance of congressional action depends in part on the outcome of November's election, the concept also fits into a growing chorus from across the political spectrum. Critics have voiced concern that the nation's largest financial institutions are too big to fail and pose too great a risk to the U.S. financial system. Tarullo's suggestion would cap banks' nondeposit liabilities—which are usually some form of debt, such as short-term borrowings—at a fixed percentage of the U.S. economy, a number he didn't specify. He also warned that the Fed should block any merger or acquisition this group of big banks attempts to make. If larger banks continue to expand, Tarullo said in Wednesday's speech, the market perception will increase that certain of them are "too big to fail," meaning that the federal government would rescue them rather than risk rocking the financial system. Click here to read the full article.

U.S. MORTGAGE FRAUD INITIATIVE DATA INCLUDED OLDER CASES

The Obama administration announced that a yearlong crackdown on mortgage fraud netted charges against 530 suspects in the year ending Sept. 30. However, the list included cases filed as many as two years before U.S. Attorney General Eric Holder said the initiative began, Bloomberg News reported today. Holder said at a news conference in Washington, D.C., on Tuesday that the initiative ran from Oct. 1, 2011 to Sept. 30, 2012, and resulted in "285 federal criminal indictments and informations against 530 defendants for allegedly victimizing more than 73,000 American homeowners—and inflicting losses in excess of $1 billion." A sampling of cases incorporated in the data Holder cited shows those numbers includes cases filed as early as 2009. Cases filed before the start of the initiative were included because some type of "law enforcement action" occurred during the yearlong period, according to William Carter, a spokesman for the Federal Bureau of Investigation. Those actions could include indictments, convictions and sentencings, he said. The "Distressed Homeowner Initiative" was spearheaded by the FBI, which began to recognize a sharp increase in fraud aimed at struggling homeowners in the years following the 2008 housing crisis. The information used to compile the results from the initiative came from an FBI survey of the agencies involved in the Mortgage Fraud Working Group. Click here to read the full article.

WHAT TO DO WITH AMERICA'S 14 MILLION VACANT HOMES?

With all the numbers hinting at a housing market recovery, it's a good time to take a look at the challenge of what to do with the millions of homes in America that nobody seems to want, The Wall Street Journal reported on Tuesday. As of the end of June, there are just over 132.7 million housing units in America, and 10.6 percent of them—more than 14 million—are vacant year-round. That number includes everything from holiday homes to places in the temporary purgatory between being rented or sold and new occupants moving in. But at one end of that spectrum are nearly 4 million homes that aren't just sitting unsold or unrented—they're not even on the market. While vacant properties are broadly decreasing in number as more are sold or rented, that final "other" number—places simply not on the market and not being used for anything—has actually increased in the last year. These vacant homes are bad news for all involved, depressing property values around them, falling into disrepair, and often attracting higher crime rates and other social problems. Places where private investors will likely do much of the heavy lifting include areas like Phoenix, where a boom-era oversupply of new homes is gradually being bought up at low prices and turned into rental units. But other towns prone to longer-term decline will need to simply tear buildings down. And for that, land banks—government or nonprofit entities that own, manage and dispose of vacant land—have a role to play. Click here to read the full article.

JOBLESS CLAIMS IN U.S. FALL TO FOUR-YEAR LOW

Fewer Americans than forecast filed first-time claims for unemployment benefits last week, which may reflect difficulty adjusting the data for seasonal swings at the start of a new quarter, Bloomberg News reported today. Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008, Labor Department figures showed today. Economists had forecast 370,000 claims, according to the median estimate in a Bloomberg survey. At the same time, the cooling of the global economy and a lack of clarity on U.S. fiscal policy are acting as hurdles for faster gains in employment. The report "is consistent with a labor market that is gradually getting better," said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Conn., who had predicted a decline in claims. "Layoffs are at a low level and don't seem to be going anywhere. Hiring is still very muted." Click here to read the full article.

U.S. GROWTH EXPECTED TO BE SLOW INTO 2013

The unemployment rate registered a dramatic 0.5 percentage-point drop over the past two months, but economists don't expect that pace of decline to continue, the Wall Street Journal reported today, citing its latest forecasting survey. "The general trend in the unemployment rate is lower, and this should continue to be true as long as the economy grows along the profile we project," said Joseph LaVorgna at Deutsche Bank. "However, the cumulative five-tenths decline over the past two months appears to be overdone." It is expected that the jobless rate will still be at 7.8 percent by June of next year, matching the September figure released last week. The reason for the stagnation in the job market is expectations for lackluster economic growth during the rest of 2012 and into 2013. Economists say they don't see the U.S. falling back into recession and for the most part believe that the economy will grow above 3 percent in 2013. But about two-thirds of the respondents say the risks remain more to the downside than upside. Click here to read the full article.

WATCH COMMISSION HEARING LIVE NEXT WEEK!

ABI's Commission to Study the Reform of Chapter 11 will hold a public hearing on Wednesday, October 17, at the LSTA Annual Conference in New York. The event will be live webcast beginning at 3:15 p.m. ET at the Commission's website (commission.abi.org).

ABI MEMBERS CAN RECEIVE A DISCOUNT ON THEIR PURCHASE OF A DEBTOR WORLD

A Debtor World, published by Oxford University Press, contains a collection of contributions about the societal implications of private debt from top scholars at the 2008 Debt Symposium sponsored by ABI and hosted by the University of Illinois College of Law. The essays comprising this volume are authored by dozens of leading U.S. and international academics who have written about debt or issues related to debt in a wide range of disciplines including law, sociology, psychology, history, economics and more. The collection explores debt as neither a problem nor a solution but as a phenomenon, and promotes the exchange of knowledge to better comprehend why consumers and businesses decide to borrow money. It explores what happens to businesses and consumers under heavy debt loads, and what legal norms and institutions societies need in order to encourage the efficient use of debt while promoting a greater understanding of the global phenomenon of increased indebtedness and societal dependence. To order your copy and receive an ABI member discount, please click here and enter promo code "31256" when making your purchase. The discount expires 12/31.

ABI IN-DEPTH

MEMBERS WILL NOT WANT TO MISS ABI'S PROGRAM AT NCBJ'S ANNUAL MEETING ON OCT. 26

Members planning to attend the 86th Annual NCBJ Annual Conference in San Diego from Oct. 24-27 will not want to miss the exciting line-up scheduled for the ABI program track on Oct. 26. In addition to roundtable discussions on the hottest consumer and business bankruptcy topics, ABI will be hosting a ticketed luncheon that will feature the presentation of the 7th Annual Judge William L. Norton, Jr. Judicial Excellence Award and entertainment by Apollo Robbins, a sleight-of hand artist, security consultant and self-described gentleman thief. Click here to register for the Conference.

To view the list of ABI programs on Oct. 26 and the full NCBJ Annual Conference schedule, please click here.

ABI's Chapter 11 Reform Commission will also be holding a public hearing on Oct. 26 from 2:30-4:30 p.m. PT at the San Diego Marriott. Interested parties have the opportunity to submit testimony at the hearing. For further information, please contact ABI Executive Director Samuel J. Gerdano at [email protected].

LATEST CASE SUMMARY ON VOLO: WILLIAMS V. KING (IN RE KING; BAP 8TH CIR.)

Summarized by Lars Fuller of Baker and Hostetler LLP

The Eighth Circuit BAP affirmed an order of the U.S. Bankruptcy Court for the Western District of Missouri denying a motion to reconsider an order awarding sanctions and directing a creditor to dismiss a claim pending in state court as violating the debtor's chapter 7 discharge. The bankruptcy court had first granted a motion for sanctions against the appellants, then denied the appellants' motion to reconsider. The appellants appealed both the order for sanctions and the order denying the motion to reconsider. The BAP indicated that the appeal of the motion for sanctions was likely untimely, but the timeliness was not necessary for disposition, given the affirmation of the bankruptcy court's order on the merits and the timely appeal of the denial of the motion to reconsider.

There are more than 650 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: LETTING YOUR CREDITORS SUE YOU

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post raises the notion of debtors allowing creditors to sue them, rather than the debtors filing for bankruptcy, as a way to deal with debt.

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.

ABI Quick Poll

Bankruptcy courts should adopt formal loss mitigation procedures to facilitate the negotiation of residential mortgage modifications for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?

Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

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October
- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar
October 15, 2012
- ABI/Bloomberg Distressed Lending Conference
October 16, 2012 | New York, N.Y.
- International Insolvency and Restructuring Symposium
     October 18, 2012 | Rome, Italy
- ABI/St. John's "Bankruptcy and Race: Is There a Relation?" Symposium
     October 19, 2012 | Queens, N.Y.
- ABI Program at NCBJ's Annual Conference
     October 26, 2012 | San Diego, Calif.

November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Professional Development Program
     November 9, 2012 | New York, N.Y.

- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.
- Winter Leadership Conference
     November 29 - December 1, 2012 | Tucson, Ariz.

December
- Forty-Hour Bankruptcy Mediation Training
     December 4-8, 2012 | New York, N.Y.

2013

January
- Rocky Mountain Bankruptcy Conference
     January 24-25, 2013 | Denver, Colo.

February
- Kansas City Advanced Consumer Bankruptcy Practice Institute
     February 17-19, 2013 | Kansas City, Mo.

BIG U.S. BANKS FACE TOUGHER STANDARDS

The Federal Reserve today outlined a multi-pronged plan to place the nation's largest banks under increasingly stringent capital requirements to guard the financial system from risks posed by "too big to fail" companies, the Wall Street Journal reported today. Fed officials said that they hope to act in the coming months on four separate proposals aimed at the eight largest U.S. firms considered "systemically important" to the global economy, including Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. Fed Gov. Daniel Tarullo, the agency's point man on regulation, said that regulators could soon propose a higher leverage ratio, which is expected to fall between 5 and 6 percent, for the largest banks. This capital measure gauges equity against total assets and is favored by some regulators as a better measure of a bank's ability to withstand stress. Regulators are also working on a requirement that these banks hold a minimum amount of long-term debt, a separate charge based on a firm's reliance on volatile forms of short-term funding, and a special surcharge agreed upon by international regulators. Read more. (Subscription required.)

COMMENTARY: THE CORKER-WARNER HOUSING REFORM WON'T WORK

The Corker-Warner bill, introduced last week by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), proposed a new government agency to insure mortgages, but it will only ensure the same loose lending that caused the last financial crisis, according to a commentary in today's Wall Street Journal. The bipartisan bill's intent is to eliminate Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants that cratered in 2008 and were bailed out by taxpayers to the tune of $180 billion. The recent financial crisis was the result of government housing policies. Beginning in 1992, these policies required Fannie and Freddie to lower their underwriting standards so people who otherwise lacked the credit standing or financial resources could purchase homes. Fannie and Freddie could take on the risks of these loans only because of the implicit backing of the federal government. The agency proposed in the Corker-Warner bill will establish a new government agency, the Federal Mortgage Insurance Corp. (FMIC), to insure mortgage-backed securities and wind down Fannie and Freddie. As with Fannie and Freddie, investors in mortgage-backed securities will not have to worry about the quality of the underlying mortgages. A major feature of Corker-Warner is the requirement that the private sector share the insurance risk with the new FMIC. The bill specifies that a private risk-sharer like a bond insurer must take the first losses, no less than 10 percent on any securitized pool of mortgages. This is intended to protect the FMIC against losses, though it works only if the quality of the mortgages remains high. Read the full commentary. (Subscription required.)

NORTH LAS VEGAS EMINENT DOMAIN PROPOSAL FACES PUSHBACK FROM HOMEOWNER

A controversial eminent domain proposal rolled out in North Las Vegas, Nev., to help underwater homeowners with their mortgages is facing pushback from an unlikely party—a homeowner living in the city, Housingwire.com reported yesterday. Gregory Smith sued North Las Vegas, claiming that an eminent domain strategy, proposed locally with the help of consultancy firm Mortgage Resolution Partners (MRP), violates several portions of the U.S. and Nevada State Constitutions. The plan follows a similar pattern that MRP has proposed in other jurisdictions — namely that homeowners who are underwater in the city can be helped by giving local governments the power of eminent domain to seize property rights, thereby allowing officials to grant upside-down borrowers a principal reduction after taking over their loans. In his lawsuit, Smith suggests that this type of intervention into investor property rights violates the Fifth and Fourteenth Amendments of the Constitution, along with various sections of the Nevada Constitution. Furthermore, Smith claims that the proposal disrupts contractual rights granted to all U.S. citizens through the Constitution, as well as the Commerce Clause, which governs interstate commerce. If such a plan were to stick and make it into law, Smith says roughly 5,000 local mortgages would qualify, with MRP targeting loans that are current, underwater and owned by private securitization trusts. This is not the first time MRP has managed to stir up debate in local municipalities: San Bernardino County, Calif., previously debated the strategy before killing off the idea. Read more.

COMMENTARY: WIELDING DERIVATIVES AS A TOOL FOR DECEIT

Derivatives are not always “financial weapons of mass destruction,” as Warren Buffett famously called them, but they are often weapons of mass deception, according to an editorial in Friday's New York Times. Sometimes, banks use derivatives they create to help their clients deceive the public, according to the editorial, and at other times they enable the banks to deceive those clients. The latest revelation of deception by derivatives came in Italian government documents leaked this week to two European newspapers, La Repubblica and The Financial Times. The Financial Times reprted that it appeared as though Italy had used derivatives in the 1990s to allow it to make its budget deficit seem smaller, thus enabling it to qualify for admission to the euro zone. The report added that it appeared that those derivatives, now restructured, might be exposing Italy to a loss of 8 billion euros ($10.4 billion). Such deception by derivatives is hardly new, according to the editorial. Enron used derivatives called “prepaid forward” contracts to hide debt in a way that made corporate cash flow appear better, something the company thought was necessary to impress the bond rating agencies. The banks have done an excellent job, according to the editorial, of persuading the Financial Accounting Standards Board, which sets the rules, not to mess with them. Rather than force the banks to put the assets and liabilities on their balance sheets, as is required in most other countries, the board has proposed additional disclosures that might make it easier to discern the reality. Read the full editorial.

NEW ABI LIVE WEBINAR ON JULY 15 TO FOCUS ON THE § 1111(b) ELECTION, PLAN FEASIBILITY AND CRAMDOWN ISSUES

Utilizing a case study, ABI's panel of experts will explore issues surrounding a lender’s decision on whether or not to make an election under § 1111(b), plan feasibility and voting. The abiLIVE panel will also walk attendees through the necessary mathematical analyses used to analyze these issues. The webinar will take place on July 15 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.

ABI GOLF TOUR UNDERWAY; NEXT STOP IS THE NORTHEAST BANKRUPTCY CONFERENCE ON JULY 12

The next stop for the ABI Golf Tour is the famed Newport National course in Newport, R.I., in conjunction with the Northeast Bankruptcy Conference on July 12. Final scoring to win the Great American Cup—sponsored by Great American Group—is based on your top three scores at seven scheduled ABI events, so play as many as you can before the tour wraps up at the Winter Leadership Conference in December. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! There's no charge to register or participate in the Tour.

ABI IN-DEPTH

NEW ABI "BANKRUPTCY IN DEPTH" ON-DEMAND CLE PROGRAM LOOKS AT PRINCIPLES OF PROPERTY OF THE ESTATE: DEMYSTIFYING EQUITABLE INTERESTS

In this 90-minute seminar, Profs. Andrew Kull of Boston University School of Law and Scott Pryor of Regent University School of Law provide an in-depth analysis of a legal principle that has become, in their words, "a long-lost area of the law": § 541 of the Bankruptcy Code. Seeking to demystify what is meant by "property of the estate" and, in particular, the distinction between legal or equitable interests of the debtor in property, Kull and Pryor describe the legal entanglements that ensue when legal title belongs to one person but the equitable title belongs to someone else. The cost of the seminar, which includes written materials and qualifies for 1.5 hours of CLE, is $95. To order or to learn more, click here.

ASSOCIATES: ABI'S NUTS & BOLTS ONLINE PROGRAMS HELP YOU HONE YOUR SKILLS WHILE SAVING ON CLE!

Associates looking to sharpen their bankruptcy knowledge should take advantage of ABI's special offer of combining general, business or consumer Nuts & Bolts online programs. Each program features an outstanding faculty of judges and practitioners explaining the fundamentals of bankruptcy, offering procedures and strategies tailored for both consumer and business attorneys. Click here to get the CLE you need at a great low price!

NEW CASE SUMMARY ON VOLO: MARSHALL V. MARSHALL (IN RE MARSHALL; 9TH CIR.)

Summarized by Lovee Sarenas of the U.S. Bankruptcy Court for the Central District of California

The Ninth Circuit upheld the decision of the district court to affirm three decisions of the bankruptcy court involving the chapter 11 bankruptcy estate of Howard Marshall III and his wife, Ilane, that was appealed by Pierce Marshall. First, the Ninth Circuit held that a party has no due process right to a random assignment of a bankruptcy case absent a showing of bias or partiality by the presiding judge. Thus, assigning the debtor's chapter 11 case to Judge Bufford, who was the presiding judge in the related chapter 11 case of Vickie Marshall, was not an error. The appellate court rendered a broad view of "related cases" as defined under the bankruptcy court's local rule 1015-2(a). The circuit court rejected evidence of bias solely from the bankruptcy judge's adverse decisions in the Vickie Marshall bankruptcy case against Pierce for purposes of 28 USC sec. 455. Without more, the Ninth Circuit opined that decisions based on facts shown or events that took place during the court's decision do not demonstrate bias.

There are more than 900 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: FURTHER EXAMINATION OF THE CORKER-WARNER BILL

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post takes a closer look at the bill introduced last week by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.). The post finds that the bill's explicit guarantee of backing of risky mortgages is better than the implicit one Fannie and Freddie had, but a more fundamental approach would be to demand that financial actors internalize and capitalize the risks themselves.

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.

ABI Quick Poll

Law firms should provide support for law student-staffed bankruptcy clinics for consumer debtors.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

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2013

July
- Northeast Bankruptcy Conference and Northeast Consumer Forum
     July 11-14, 2013 | Newport, R.I.
- abiLIVE Webinar
     July 11-14, 2013 | Newport, R.I.
- Southeast Bankruptcy Workshop
     July 18-21, 2013 | Amelia Island, Fla.

August
- Mid-Atlantic Bankruptcy Workshop
    August 8-10, 2013 | Hershey, Pa.
- Southwest Bankruptcy Conference
    August 22-24, 2013 | Incline Village, Nev.

September
- ABI Endowment Golf & Tennis Outing
    Sept. 10, 2013 | Maplewood, N.J.
- ABI Endowment Baseball Game
    Sept. 12, 2013 | Baltimore, Md.
- Lawrence P. King and Charles Seligson Workshop on Bankruptcy & Business Reorganization
    Sept. 18-19, 2013 | New York
- Bankruptcy 2013: Views from the Bench
    Sept. 27, 2013 | Washington, D.C.

October
- Midwestern Bankruptcy Institute Program and Midwestern Consumer Forum
    Oct. 4, 2013 | Kansas City, Mo.
- ABI Endowment Football Game
    Oct. 6, 2013 | Miami, Fla.
- Chicago Consumer Bankruptcy Conference
    Oct. 14, 2013 | Chicago, Ill.

November
- Austin Advanced Consumer Bankruptcy Practice Institute
   Nov. 10-12, 2013 | Austin, Texas
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.

December
- ABI/St. John’s Bankruptcy Mediation Training
    Dec. 8-12, 2013 | New York

BANKRUPTCY CASES TO BE CONSIDERED BY SUPREME COURT PREVIEWED IN NEW "BANKRUPTCY IN DEPTH" VIDEO

ABI's next "Bankruptcy In Depth" video features ABI Resident Scholar Kara Bruce talking with Eric Brunstad of Dechert LLP (Hartford, Conn.) to preview the bankruptcy cases that the Supreme Court will consider during its 2013 term. Brunstad, who has argued many cases before the Court and is an expert in bankruptcy appellate practice, discusses in depth Law v. Siegel, which questions whether the court may use its general equitable authority under §105 of the Bankruptcy Code to surcharge a debtor's exempt assets, and Executive Benefits Insurance Agency v. Arkison (In re Bellingham), which will address the bankruptcy court's authority to adjudicate Article III matters. He also provides a candid view of what it is like to argue a case before the Court and an in-depth analysis of the issues involved with the upcoming cases. Click here to watch a preview of the forthcoming ABI "Bankruptcy In Depth" video.

FEDERAL JUDICIARY BUDGET INCREASES IN LAST-MINUTE BUDGET DEAL

The budget deal Congress approved yesterday to reopen the government and raise the debt ceiling provides $51 million in additional funding to the judiciary and to federal defenders, the Legal Times reported today. Federal court officials and members of the Senate Judiciary Committee greeted the increase as good news, although it is small when compared to $350 million in budget cuts earlier this year as part of sequestration. The extra funding would primarily go to pay the backlog of attorney fees under the Criminal Justice Act, which funds court-appointed private counsel. Payments were suspended in mid-September, when funding ran out two weeks before the end of the fiscal year. The bill also includes $4.8 billion for judiciary salaries and expenses. That amounts to a $25 million annual increase over FY2013, court officials said. The legislation gives judiciary officials the ability to float those funds among accounts to respond to the most urgent budget needs as they arise. Overall, the judiciary budget would rise from about $6.65 billion to about $6.7 billion. Read more.

PROPERTY TAXES, SKIPPED PENSION PAYMENTS BOOST DETROIT'S CASHFLOW

A report released yesterday showed that Detroit's revenue dropped by 9 percent in the first quarter of fiscal 2014 compared with the same period in fiscal 2013, but an influx of property taxes and skipped pension contributions boosted the city's cashflow, Reuters reported yesterday. In his quarterly report to Michigan officials, Kevyn Orr, Detroit's state-appointed emergency manager, said the city ended the quarter on Sept. 30 with a cash balance of $128.5 million that exceeded projections by $56.7 million. However, Orr said that Detroit's financial condition "continues to be dire" as it works its way through bankruptcy court, where its eligibility to remain there will be the subject of a trial next week. City revenue for the quarter, including property, income and gambling taxes, totaled $220.2 million, a drop of about $22 million from fiscal 2013's first quarter. Expenses also fell by about $11 million as the city's headcount dropped to approximately 9,322 workers at the quarter's end from 10,325 in the same period last year, according to the report. Read more.

LATEST SETTLEMENT REPORT FINDS BANKS GIVING TIMELY MORTGAGE RELIEF

The $25 billion national mortgage settlement, intended to help homeowners affected by the housing crisis, appears to be running ahead of schedule, according to a new report by the monitor of the program, the New York Times reported today. However, the number of households helped by the settlement has fallen short of the original predictions, and critics complained that too much relief was given to people who gave up their homes in short sales and not enough to help people retain their homes. Early last year, five banks signed on to the settlement over their use of mass-produced, faulty documents to evict homeowners. As of Dec. 31, they had provided $38.7 billion in relief in raw dollar terms, the report said. But because not every type of relief is counted the same way under the settlement's terms, they had fulfilled only about 80 percent of their total obligation. Prior to yesterday, banks had self-reported their progress in raw dollar terms. The new report is the first in which the monitor, Joseph A. Smith Jr., has disclosed the amount of credit they have earned toward the settlement obligation. The report credited them $4.1 billion for principal reduction on primary mortgages, $2.2 billion for principal reductions in second mortgages, and $5.4 billion in short sales or deeds in lieu of foreclosure, in which the homeowner is allowed to sell the house for less than what is owed or simply hand it over to the bank. It also credited $2.6 billion for allowing people who owed more on their mortgage than their home was worth to refinance at lower interest rates. Read more.

FANNIE MAE SURVIVAL IS BACK ON THE TABLE FOR POLICYMAKERS

The consensus in Washington, D.C., that Fannie Mae and Freddie Mac should be dismantled is weakening amid opposition from hedge funds, regional banks and others who could benefit if the companies survive in some form, Bloomberg News reported yesterday. President Barack Obama and lawmakers from both parties have called for the two mortgage-finance companies to be replaced by a new U.S. housing system. While the official position hasn't changed, a bipartisan group of U.S. senators writing legislation is grappling with how to ensure that changes to Fannie Mae and Freddie Mac don't disrupt the recovering housing market. Some Democrats said that they are leery of engineering a switch that would liquidate the government-sponsored enterprises (GSEs), leaving it to private entities to risk their own capital on home loans. Since they nearly collapsed during the 2008 credit crisis, the two companies have drawn $187.5 billion from taxpayers and have been considered too politically toxic to be preserved. While the U.S. holds controlling stakes, the outcome will affect private investors including hedge funds Perry Capital and Paulson and Co., which have accumulated preferred shares and have spent months lobbying for Fannie Mae and Freddie Mac to be recapitalized. The hedge funds gained little traction in early meetings with senators such as Bob Corker (R-Tenn.), who publicly rejected their pleas in the spring. As the legislative process advances and involves a wider group of lawmakers, some are listening to the argument that an entirely new system could risk instability in the market. Read more.

FED WEIGHS SURCHARGE ON BANKS' PHYSICAL COMMODITY BUSINESSES

Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, the Wall Street Journal reported today. Such an approach could encourage banks to pare back their involvement in physical commodities, which has increasingly raised concerns among regulators and lawmakers. While no decision has been made, imposing a surcharge would allow the Fed to sidestep a legal jam caused by existing laws that set Goldman Sachs Group Inc. and Morgan Stanley apart from peers and give the former investment banks broad leeway to own commodities. The Fed has been considering scaling back the ability of banks to own such assets amid concerns that commodities ownership has expanded beyond what regulators originally envisioned. To avoid a regulatory situation where only some banks can own commodities, the Fed is considering a surcharge that would ensure that all banks hold more capital to account for potential risks posed by the assets they own or lease. Read more. (Subscription required.)

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

RISKY TIMES FOR SECURED LENDERS AND SERVICERS TO BE FOCUS OF FIRST ABI WORKSHOP PROGRAM- ATTEND IN PERSON OR VIA LIVE WEBSTREAM!

You will not want to miss the abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers." The program is cosponsored by TMA (Chesapeake), IWIRC (D.C./Greater Maryland) and RMA (Potomac), and will be held on Nov. 6 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 6 program include:

- Living with the New CFPB Mortgage Servicing Rules
- Business Lending: Navigating What Lies Ahead
- Business Lending: Recent Legal Developments

For more information or to register for the "Risky Times for Secured Lenders and Servicers" abiWorkshop on Nov. 6, please click here.

EXPERTS TO EXAMINE STUDENT LENDING AND BANKRUPTCY AT ABI WORKSHOP PROGRAM ON NOV. 15

Experts will tackle the hot topic of student lending issues in bankruptcy on the abiWorkshops series' new program, "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" The program will be held on Nov. 15 from 9 a.m. to 3 p.m. ET in the ABI Headquarters Conference Center in Alexandria, Va. The abiWorkshops series provides attendees two great ways of participating: You can register to attend in person at the ABI Conference Center, or you can participate via a live webstream! Topics that will be covered on the Nov. 15 program include:

- Student Lending Today: Who Borrows, How Much, Delinquency & Default Trends
- Repayment Options: Income Based Repayment and New Lender/Servicer Programs
- Litigation under Sect. 523(a)(8): What Proofs Are Needed? Evidence Demonstration

For more information or to register for the "You Can't Discharge Student Loans in Bankruptcy - Or Can You?" abiWorkshop on Nov. 15, please click here.

ABI GOLF TOUR UNDERWAY; LAST STOP FOR 2013 IS WINTER LEADERSHIP CONFERENCE IN DECEMBER

The 7th and final stop for the 2013 ABI Golf Tour is on Dec. 5 at the Trump National Golf Club, held in conjunction with ABI’s Winter Leadership Conference. Final scoring to win the Great American Cup — sponsored by Great American Group — is based on your top three scores from the seven ABI events. See the Tour page for details and course descriptions. The ABI Golf Tour combines networking with fun competition, as golfers "play their own ball." Including your handicap means everyone has an equal chance to compete for the glory of being crowned ABI's top golfer of 2013! A 22-handicapper won the tour event at July’s Southeast Bankruptcy Workshop. There's no charge to register or participate in the Tour.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: UTNEHMER V. CRULL (IN RE UTNEHMER; 9TH CIR.)

Summarized by Hilda Montes de Oca of the U.S. Bankruptcy Court for the Central District of California

Applying California partnership law, the Ninth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court because it erred when it decided that a partnership existed between the debtor defendant and plaintiff creditor based upon the terms of a loan agreement. As there was no partnership, the debtor owed no fiduciary obligations to the creditor. The BAP further found that the bankruptcy court used the wrong mens rea standard for defalcation. As a result, the bankruptcy court erred in determining that debtor's debt to creditor was excepted from discharge as a defalcation by a fiduciary pursuant to § 523(a)(4).

There are more than 1,000 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: OCC'S COMMERCIAL REAL ESTATE LENDING HANDBOOK MISSES THE MARK ON POTENTIAL LEGAL ISSUES

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post finds the new version of the Office of the Comptroller of the Currency's (OCC) Commercial Real Estate Lending Handbook to be lacking in addressing potential legal issues associated with risks in commercial real estate lending.

The abiWorkshops series' inaugural program, "Risky Times for Secured Lenders and Servicers," on Nov. 6 will cover potential legal issues associated with commercial lending. Attend in person or via live webstream.

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.

ABI Quick Poll

Does the bankruptcy court's Section 105 power enable it to surcharge the debtor's exempt property?

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

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.

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2013

October
- International Insolvency & Restructuring Symposium
    Oct. 25, 2013 | Berlin, Germany

November
- abiWorkshop: "Risky Times for Secured Lenders and Servicers"
   Nov. 6, 2013 | Alexandria, Va.
- Complex Financial Restructuring Program
   Nov. 7, 2013 | Philadelphia, Pa.
- Corporate Restructuring Competition
   Nov. 7-8, 2013 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
   Nov. 11, 2013 | Detroit, Mich.
-abiWorkshop: "You Can't Discharge Student Loans in Bankruptcy - Or Can You?"
   Nov. 15, 2013 | Alexandria, Va.

- Delaware Views from the Bench
   Nov. 25, 2013 | Wilmington, Del.

December
- Winter Leadership Conference
    Dec. 5-7, 2013 | Rancho Palos Verdes, Calif.
January
- Western Consumer Bankruptcy Conference
    Jan. 20, 2014 | Las Vegas, Nev.
- Rocky Mountain Bankruptcy Conference
    Jan. 23-24, 2014 | Denver, Colo.

ACADEMICS WANT CONGRESS TO GIVE CHAPTER 14 A CHANCE

Members of Stanford University's Hoover Institution's "resolution project" say that the environment is right to revisit their proposed modification of the Bankruptcy Code that adds a section, dubbed "Chapter 14," to address large financial institutions, Dow Jones Newswires reported yesterday. When the official debate on Capitol Hill ended in July 2010 with the passage of the Dodd-Frank financial reform, it looked as though the Hoover Institution had lost its battle to keep the job of unwinding a failing financial institution out of the hands of government. Their proposal, presented at a Senate Banking Committee hearing, never gained traction, and Dodd-Frank's Title II tasks the Federal Deposit Insurance Corp. with intervening should the collapse of a financial institution threaten the economy. However, the academics now argue in a new book, Bankruptcy Not Bailout: A Special Chapter 14, that their proposal still has a chance at becoming law. The book's authors also have an unlikely supporter: the FDIC. "The FDIC would support improvements to the Bankruptcy Code that would better allow for the failure of a large complex financial institution without broad systemic disruption," said Andrew Gray, a spokesman for the FDIC, characterizing Title II as a last resort. "Constructive efforts to improve the bankruptcy law and reduce the likelihood that Title II would be necessary are positive." Acknowledging that the repeal of all or part of Dodd-Frank is unlikely, the authors argue that Dodd-Frank and chapter 14 could coexist, providing the government and companies with another option. Read more.

REGULATORS TRY TO BEAT THE CLOCK IN RATE PROBE

U.S. prosecutors are seeking more time to complete their investigation of alleged interest-rate fixing, while banks ensnared in the probe are trying to turn the clock to their advantage as they battle lawsuits claiming damages from rate-rigging, the Wall Street Journal reported today. The Justice Department recently asked several banks to sign "tolling" agreements, in which the companies promise they will not challenge any enforcement action on the grounds that the alleged wrongdoing occurred beyond the statute of limitations. The requests were sent to all the major banks under investigation including Citigroup Inc., Deutsche Bank AG, JPMorgan Chase & Co., Royal Bank of Scotland Group PLC and UBS AG. Read more. (Subscription required.)

ANALYSIS: CRIMINAL AND CIVIL MORTGAGE-FRAUD CASES HAVE EXPLODED SINCE HOUSING CRISIS

The problem of mortgage scams involving attorneys is growing, according to experts, the Wall Street Journal reported today. Joseph Dunn, executive director of the State Bar of California, said that more than 100 lawyers in California have been disbarred or otherwise disciplined, while about 200 others are facing charges or are under investigation. The California Bar has received more than 11,000 mortgage-related complaints about lawyers since early 2009. John Berry, director of the legal division of the Florida Bar, calls the involvement of attorneys in alleged mortgage scams "one of the most difficult issues we have had to deal with." In a national database of 25,000 homeowner complaints regarding suspected mortgage-related frauds, more than a quarter relate to activities by lawyers or law firms, said Yolanda McGill, a senior counsel at the nonprofit Washington-based Lawyers' Committee for Civil Rights under Law, which began collecting the complaints in 2010. The committee has filed eight lawsuits against parties for allegedly cheating homeowners with false promises of help with their mortgages. Read more. (Subscription required.)

REPORT: PAY GAPS WIDENING AMONG PARTNERS

According to a new survey conducted by legal search consultant Major, Lindsey & Africa and Am Law Daily affiliate ALM Legal Intelligence, partners at Am Law 200, NLJ 350, and American Lawyer Global 100 firms saw their annual compensation rise, on average, 6.4 percent to $681,000 over the past two years. The jump was apparently driven, at least in part, by an uptick in the average rate those partners are billing, from $555 per hour in 2010 to $585 today. The survey, which drew 2,228 responses from attorneys at the firms in question, shows that not all partners have benefited equally from the increase. On average, equity partners are better compensated than their non-equity counterparts, male partners make more than their female colleagues, corporate partners earn more than litigators, and partners in open compensation systems are paid better than those in closed compensation systems. Read more.

FORMER GM CEO: TIME FOR "GOVERNMENT MOTORS" TO HIT THE ROAD

Until the government sells its shares of GM, the company won't be master of its own destiny and will remain wrongly tagged a failure, according to a commentary in today's Wall Street Journal by former GM CEO Ed Whitacre. The government has been an active participant in GM's management for more than three years, according to Whitacre, and it is time for Treasury to step out of the way so that GM can fully focus on what it does best: designing, building and selling the world's best vehicles. The government's authority over GM today is not concentrated in the 500 million shares it still owns, which amount to a hefty but not controlling 26.5 percent ownership stake, according to Whitacre. Rather, the government's power comes from the management apparatus of TARP, the Troubled Asset Relief Program, from which the $50 billion bailout originally came. The result: GM spends an awful lot of time checking in with the people who administer TARP over everything from hiring to executive compensation and management. Read more. (Subscription required.)

HIGH-SPEED TRADING IN THE CONGRESSIONAL SPOTLIGHT

An insider of the secretive world of high-frequency trading is set to attack that industry today on Capitol Hill, giving lawmakers a potential road map to address practices that critics say can put ordinary investors at a disadvantage and the financial system at risk, the Wall Street Journal reported today. Since rapid-fire trading firms now provide many of the buy-and-sell orders that support the market, investors are at the mercy of automated systems that can run amok during volatile times, according to Dave Lauer, who last year quit his job as a trader for an elite Chicago high-frequency trading outfit. Lauer is part of a growing chorus of industry insiders blowing the whistle on approved trading techniques that they say are designed by the traders who derive the most benefit. Lauer is now a consultant on market-structure issues for Better Markets, a Washington, D.C., advocacy group funded by a hedge fund. He testified today before the Senate Banking committee about how he came to believe that high-speed trading has made the market less fair for many investors. One way sophisticated firms get an edge over other investors is the use of complex order types, which are commands that traders use to tell exchanges how to handle their buy-and-sell orders, according to Lauer's testimony. Regulators are looking into whether exchanges, in a rush to gain the business of high-frequency firms, have provided advantages to some sophisticated trading firms that allow them to trade profitably at the expense of other investors. High-frequency trading accounts for some two-thirds of all trading volume, experts say. Read more. (Subscription required.)

Click here for prepared testimony from today's Senate Banking Committee hearing.

SHOW YOUR SUPPORT FOR STEVEN GOLICK, A FELLOW COLLEAGUE AND ABI MEMBER

Our friend Steven Golick (Osler Hoskin & Harcourt LLP, Toronto) is facing a medical crisis. He has been diagnosed with a serious brain tumor, requiring complex surgery and treatment. Steven’s spirits are very strong and he and his family remain optimistic, but he can use our support. A prominent international restructuring attorney and an ABI member since 1994, Steven is also a founding member of the ABI house band, the Indubitable Equivalents. Because the band is important to Steven, his fellow band-mates have organized a new Blog site for Steven's friends and colleagues to show their love and support at this critical time. Please click on this link to enter and share your thoughts, and post as often as you'd like.

ABI IN-DEPTH

ABI LAUNCHES FIFTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS; PARTICIPANTS RECEIVE ONE-YEAR ABI MEMBERSHIP

Law school students are encouraged to submit a paper now through March 1, 2013, for ABI’s Fifth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings.

The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the prestigious ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

LATEST CASE SUMMARY ON VOLO: STATE OF NEVADA V. MORTGAGE ELECTRONIC REGISTRATION SYSTEM INC. (9TH CIR.)

Summarized by Richard Corbi of Lowenstein Sandler PC

Because the defendants had no "obligation" to record assignments or other documents relating to securing property, the prosecution failed to state a claim of liability under Nevada False Claims Act section 357.040(1)(g).

There are more than 600 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: SECOND CIRCUIT SUMMARILY REVERSES CLAIMS-TRADING DECISION

The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines a ruling by the U.S. Court of Appeals for the Second Circuit in Longacre Master Fund v. ATS Automation Tooling Systems. The Second Circuit summarily reversed a district court decision that will likely strengthen the hand of specialized firms that look to buy claims in large chapter 11 cases, according to the post.

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.

ABI Quick Poll

Bankruptcy courts should have unfettered discretion in adjusting fee applications, even when no party-in-interest has raised objections.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

HAVE YOU TUNED IN TO BLOOMBERG LAW'S VIDEO PODCASTS?

Bloomberg Law's video podcasts feature top experts speaking about current bankruptcy topics. The podcasts are available via Bloomberg Law's YouTube channel so that you can access the programs from your computer or device of your choice! Click here to view the Bloomberg Law video podcasts.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

September
- "When Is an Individual Chapter 11 the Best Fit?" Live Webinar
     September 27, 2012
- American College of Bankruptcy's "Bankruptcy: Back to the Future" Program
     September 28, 2012 | Chicago, Ill.

October
- Nuts & Bolts for Young and New Practitioners - KC
     October 4, 2012 | Kansas City, Mo.
- Midwestern Bankruptcy Institute Program, Midwestern Consumer Forum
     October 5, 2012 | Kansas City, Mo.
- Bankruptcy 2012: Views from the Bench
     October 5, 2012 | Washington, D.C.
- Chicago Consumer Bankruptcy Conference
     October 8, 2012 | Chicago, Ill.
- "Trending Issues: Examiners and Select Plan Confirmation Issues" Webinar
October 15, 2012
- ABI/Bloomberg Distressed Lending Conference
October 16, 2012 | New York, N.Y..
- International Insolvency and Restructuring Symposium
     October 18, 2012 | Rome, Italy

November
- U.S./Mexico Restructuring Symposium
     November 7, 2012 | Mexico City, Mexico
- Professional Development Program
     November 9, 2012 | New York, N.Y.
- Detroit Consumer Bankruptcy Conference
     November 12, 2012 | Detroit, Mich.
- Winter Leadership Conference
     November 29 - December 1, 2012 | Tucson, Ariz.

December
- Forty-Hour Bankruptcy Mediation Training
     December 4-8, 2012 | New York, N.Y.

2013

February
- Kansas City Advanced Consumer Bankruptcy Practice Institute
     February 17-19, 2013 | Kansas City, Mo.