At a House subcommittee meeting this week, Congressman Barney Frank stated that if the mortgage servicers do not act to stem the foreclosure crisis by modifying more mortgages, there would be an increased chance that Congress will enact bankruptcy laws allowing certain mortgage modifications. Frank stated that “the best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.”
Frank reportedly told the Wall Street Journal that he intends to eventually include a mortgage modification provision in legislation that will overhaul the financial system. He also stated that legislation should address the problem of mortgage service's claiming lack of authority due to securitization. Frank also argued that proposed bankruptcy mortgage modification will not affect the flow of credit as it will be limited to mortgages already in existence.
It is also reported this week that Michigan Congressman John Conyers told a House panel that it is time to reconsider the proposed bankruptcy mortgage modification bill - the Helping Families Save Their Homes in Bankruptcy Act.
Friday, September 11, 2009
Thursday, September 10, 2009
HAMP Hearing by House Subcomittee
The House Subcommittee on Housing and Community Opportunity held a hearing yesterday on the "Progress of the Making Home Affordable Program: What are the Outcomes for Homeowners and What Are the Obstacles to Success?"
Assistant Treasury Secretary Michael Barr's written testimony outlined the steps being taken by the Administration to strengthen the housing sector and help homeowners. He referenced the new home buyers tax credit and the Making Home Affordable Program, including the Home Affordable Modification Plan ("HAMP") which is a "$75 billion program to lower mortgage payments for at risk borrowers" for up to 3 to 4 million borrowers. He stated that forty-five servicers have sign up for HAMP, that offers have been extended on over 570,000 trial modifications, and that over 360,000 trial modifications are already underway. But the Wall Street Journal reports that these figures amount to only 12% of eligible borrowers having started trial loan modifications under HAMP according to a Treasury report and that there are increasing concerns about the number of borrowers who will actually receive a permanent modification after receiving three month trial period modification.
Assistant Secretary Barr stated that HAMP's guidelines require servicers "to service all loan in their portfolio according to HAMP guidelines, unless explicitly prohibited by pooling and servicing agreements, and further must make reasonable efforts to obtain waivers of any limits on participation."
He also that that the parties are working on "establishing denial codes that will require servicers to report the reason for modification denials, both to Treasury and to borrowers." He expects the denial codes to become operational on October 1.
Alys Cohen of the National Consumer Law Center also offered written testimony. She testified that the HAMP program is not providing a sufficient number of loan modifications and that the offered modifications often do not meet the HAMP guidelines. She also stated that the implementation of HAMP has been slow and sporadic. She advocates that Congres should mandate a stronger approach to loan modification, including allowing bankruptcy judges to modify appropriate mortgage loans. She suggested the following improvements: 1. the Net Present Value model for qualifying homeowners should be made public, 2. the HAMP guidelines and directives should be consolidated and clarified, 3. institution of an independent review process upon denial, and 4. access to an ombudsman for complaints.
Congressman Barney Frank argued that proposed bankruptcy mortgage modification will not affect the flow of credit as it will be limited to mortgages already in existence. He stated that if the mortgage servicers do not act to stem the foreclosure crisis by modifying more mortgages, there would be an increased chance that Congress will enact bankruptcy laws allowing certain mortgage modifications. Frank stated that “the best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” Frank reportedly told the Wall Street Journal that he intends to eventually include a mortgage modification provision in legislation that will overhaul the financial system. He also stated that legislation should address the problem of mortgage service's claiming lack of authority due to securitization.
Assistant Treasury Secretary Michael Barr's written testimony outlined the steps being taken by the Administration to strengthen the housing sector and help homeowners. He referenced the new home buyers tax credit and the Making Home Affordable Program, including the Home Affordable Modification Plan ("HAMP") which is a "$75 billion program to lower mortgage payments for at risk borrowers" for up to 3 to 4 million borrowers. He stated that forty-five servicers have sign up for HAMP, that offers have been extended on over 570,000 trial modifications, and that over 360,000 trial modifications are already underway. But the Wall Street Journal reports that these figures amount to only 12% of eligible borrowers having started trial loan modifications under HAMP according to a Treasury report and that there are increasing concerns about the number of borrowers who will actually receive a permanent modification after receiving three month trial period modification.
Assistant Secretary Barr stated that HAMP's guidelines require servicers "to service all loan in their portfolio according to HAMP guidelines, unless explicitly prohibited by pooling and servicing agreements, and further must make reasonable efforts to obtain waivers of any limits on participation."
He also that that the parties are working on "establishing denial codes that will require servicers to report the reason for modification denials, both to Treasury and to borrowers." He expects the denial codes to become operational on October 1.
Alys Cohen of the National Consumer Law Center also offered written testimony. She testified that the HAMP program is not providing a sufficient number of loan modifications and that the offered modifications often do not meet the HAMP guidelines. She also stated that the implementation of HAMP has been slow and sporadic. She advocates that Congres should mandate a stronger approach to loan modification, including allowing bankruptcy judges to modify appropriate mortgage loans. She suggested the following improvements: 1. the Net Present Value model for qualifying homeowners should be made public, 2. the HAMP guidelines and directives should be consolidated and clarified, 3. institution of an independent review process upon denial, and 4. access to an ombudsman for complaints.
Congressman Barney Frank argued that proposed bankruptcy mortgage modification will not affect the flow of credit as it will be limited to mortgages already in existence. He stated that if the mortgage servicers do not act to stem the foreclosure crisis by modifying more mortgages, there would be an increased chance that Congress will enact bankruptcy laws allowing certain mortgage modifications. Frank stated that “the best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” Frank reportedly told the Wall Street Journal that he intends to eventually include a mortgage modification provision in legislation that will overhaul the financial system. He also stated that legislation should address the problem of mortgage service's claiming lack of authority due to securitization.
Tuesday, September 1, 2009
Arguments in the Madoff Case - About "Legitimate Expections"
Madoff investors have filed objections to trustee Picard's determination of their SIPC claims for the amount set forth in their November 30, 2008 Madoff statement. The trustee rejects various claimants on that basis that they had already withdrawn more than was deposited into their account, leaving not "net equity." Apparently the trustee's methodology was to net out all deposits and withdrawals back to 1993 and give no credit for "appreciation" in the account or a reasonable rate of return on the money.
One objecting claimant alleges that the trustee does not point to a provision of the Securities Investor Protection Act ("SIPA") that "authorizes him to limit SIPC insurance to customers who have a positive net investment on his 'cash in/cash out' valuation." The claimant argued that SIPC is "statutorily bound" to honor a customer's "legitimate expectations" based upon written transaction confirmations even when the broker-dealer never purchased the securities. The claimant argued that the trustee's position was contrary to that taken by SIPC in the New Times Securities Services, Inc. ponzi scheme case where SIPC allegedly voluntarily agreed to pay customers up to $500,000 based on their final brokerage statements.
The claimants argues that the trustee is attempting to change SIPA's statutory definition of "net equity. " In 15 U.S.C. section 78lll(11), SIPA sets forth that
The term 'net equity' means the dollar amount of the account or accounts of a customer, to be determined by -
(A) calculating the sum which would have been owed by the debtor to such customer if the debtor had liquidated, by sale or purchase on the filing date, all securities positions of such customer...; minus
(B) any indebtedness of such customer to the debtor on the filing date...
One claimant alleged that the trustee was acting to "enrich SIPC" and allow it to avoid paying SIPC insurance to many long-term Madoff investors. The claimant also alleges that SIPC was acting to "save money for the brokerage community at the expense of innocent investors."
The claimant alleged that he did indeed have a "legitimate expection" that his account was genuine and that his account statements set forth Fortune 100 stocks and US Treasury securities earning him a 9 - 11% in the past few years.
The claimant also argued that he is entitled to interest on his funds deposited with Madoff under New York law. Furthermore, the claimant aruged that the trustee has no right to utilize bankruptcy trustee avoidance powers as his actions were not in an effort to assure an equal distribution of the debtor's assets among its creditors. The claimant also argued that the trustee was barred by the statute of limitations in the fraudulent conveyance laws and that even if the trustee's "cash in/cash out" methodology was proper, he was required to use the balance in the account as of the first day of the statute of limitations period.
One objecting claimant alleges that the trustee does not point to a provision of the Securities Investor Protection Act ("SIPA") that "authorizes him to limit SIPC insurance to customers who have a positive net investment on his 'cash in/cash out' valuation." The claimant argued that SIPC is "statutorily bound" to honor a customer's "legitimate expectations" based upon written transaction confirmations even when the broker-dealer never purchased the securities. The claimant argued that the trustee's position was contrary to that taken by SIPC in the New Times Securities Services, Inc. ponzi scheme case where SIPC allegedly voluntarily agreed to pay customers up to $500,000 based on their final brokerage statements.
The claimants argues that the trustee is attempting to change SIPA's statutory definition of "net equity. " In 15 U.S.C. section 78lll(11), SIPA sets forth that
The term 'net equity' means the dollar amount of the account or accounts of a customer, to be determined by -
(A) calculating the sum which would have been owed by the debtor to such customer if the debtor had liquidated, by sale or purchase on the filing date, all securities positions of such customer...; minus
(B) any indebtedness of such customer to the debtor on the filing date...
One claimant alleged that the trustee was acting to "enrich SIPC" and allow it to avoid paying SIPC insurance to many long-term Madoff investors. The claimant also alleges that SIPC was acting to "save money for the brokerage community at the expense of innocent investors."
The claimant alleged that he did indeed have a "legitimate expection" that his account was genuine and that his account statements set forth Fortune 100 stocks and US Treasury securities earning him a 9 - 11% in the past few years.
The claimant also argued that he is entitled to interest on his funds deposited with Madoff under New York law. Furthermore, the claimant aruged that the trustee has no right to utilize bankruptcy trustee avoidance powers as his actions were not in an effort to assure an equal distribution of the debtor's assets among its creditors. The claimant also argued that the trustee was barred by the statute of limitations in the fraudulent conveyance laws and that even if the trustee's "cash in/cash out" methodology was proper, he was required to use the balance in the account as of the first day of the statute of limitations period.
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