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May 24, 2011

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  NEWS AND ANALYSIS   

ELIZABETH WARREN RESPONDS TO SHARP CRITICISM FROM HOUSE PANEL
White House adviser Elizabeth Warren defended her actions while setting up the new Consumer Financial Protection Bureau (CFPB) from Republican critics at a hearing titled "Who's Watching the Watchmen" before the House Oversight Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, CNNMoney.com reported today. Chairman Patrick McHenry (R-N.C.) accused the Harvard Law Professor of lying the last time she went before Congress, when she said bureau staff had provided advice to state officials negotiating a settlement with mortgage servicers that improperly foreclosed on homeowners. McHenry pointed to a memo that the bureau put together on mortgage foreclosures that included a note that it was to go to Attorney General Tom Miller, the Iowa attorney general leading the talks with bank mortgage servicers. The congressman accused Warren of having a more central role in the talks than she told a congressional panel in March. Warren responded that she was simply providing information requested by Treasury Secretary Tim Geithner, saying that he had asked her to put the packet together for the attorney general. ABI members Adam Levitin and Todd Zywicki also testified. Witnesses also addressed the structure and budget of the new agency, which is fully operational on July 21. Progressive groups are urging the President to name Warren via recess appointment. Read more.

Click here to read the prepared witness testimony.

GOP PROPOSES INCREASE IN FHA DOWN PAYMENTS
A Republican-led proposal circulated yesterday would boost the down payment requirement for mortgages backed by the Federal Housing Administration, the Washington Post reported today. Borrowers who take out FHA-insured mortgages are permitted to put down as little as 3.5 percent, making those loans an especially attractive choice for first-time home buyers. But as defaults rose during the housing market's worst days, FHA's cash reserves dwindled, creating concerns that taxpayers may have to come to the agency’s rescue. The Republican proposal would require most FHA borrowers to put down at least 5 percent. Those who support the idea say that forcing borrowers to have more equity in their homes would better protect homeowners against default and thus improve the agency's finances. The issue will be discussed tomorrow at a House Financial Services subcommittee hearing led by Rep. Judy Biggert (R-Ill.). Read more.

STUDY: MORTGAGE-ONLY DEFAULTERS MAY BE SAFE CREDIT RISKS
People who default on their mortgages — but no other debts — are not as risky as expected, according to a new study from credit monitor TransUnion, USA Today reported today. TransUnion's research shows that those who only default on mortgages are less likely to then default later on new car loans or credit cards than are people who default on mortgages and at least one other debt at the same time. In the past five years, almost 4 million U.S. homes have been lost to foreclosure, says market researcher RealtyTrac. A chunk of those were "strategic defaults," in which homeowners who could afford to pay their mortgages walked because home values had tanked so much. FICO, keeper of the widely used FICO credit score, last month released one of the first credit studies on strategic defaulters and found them to be savvy about credit, with better credit histories than other mortgage defaulters. Read more.

AS BANK WOES EASE, FDIC FUND NEARS POSITIVE TERRITORY
Only four lenders were added to the government's list of problem banks in the first quarter, bringing the total to 888 from 884, the Federal Deposit Insurance Corporation said today, according to a New York Times report. That is the smallest increase since the financial crisis began and one of the clearest signs yet that the banking industry is returning to health. The FDIC fund that is used to protect depositors, which has operated at a deficit in the last seven quarters, is now expected to be replenished by the end of June. The banking industry posted a $29 billion profit in the first quarter, a 67 percent increase from the $17.4 billion it reported in the period a year earlier and its best quarterly result since the start of the crisis. Read more.

MADOFF TRUSTEE'S CASE AGAINST JPMORGAN MUST GO TO HIGHER COURT, JUDGE SAYS
A bankruptcy judge doesn’t have the authority to decide whether the trustee liquidating Bernard Madoff’s firm has the right to sue JPMorgan Chase & Co. for $6.4 billion, according to U.S. District Judge Colleen McMahon, Bloomberg News reported today. Judge McMahon said that she would determine whether trustee Irving Picard has standing to sue the bank on behalf of the con man's customers, as JPMorgan requested. The question of Picard's status requires "significant interpretation" of federal non-bankruptcy law that is not the province of a bankruptcy court, she said in a written opinion today explaining her May 4 decision to take the case. In its request, "JPMorgan has satisfied the standard for mandatory withdrawal" of the case to a higher court, she said. JPMorgan argued that Picard was hired to liquidate the Madoff firm and was not empowered by law to mount a class-action suit to recover money on behalf of Madoff customers. Read more.

ABI IN-DEPTH

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Find and purchase photos taken at ABI events at the new ABI Photo Store! You can now browse over a thousand high-quality digital images from ABI’s most recent events, such as the Annual Spring Meeting. Download, print and share your favorite images instantly for only $10 per image, with all proceeds going to benefit the ABI Endowment. Image downloads are available in [2000x1328px]. Click here to view the ABI Photo Store.

LATEST CASE SUMMARY ON VOLO: HORVATH V. BANK OF NEW YORK, N.A. (4th CIRCUIT)

The Fourth Circuit maintained Virginia's long history of ensuring that negotiable instruments remain freely transferable, specifically in instances where such instruments are endorsed in blank. The court further recognized that Virginia's codification of the provisions of the Uniform Commercial Code governing negotiable instruments was an affirmative act by the legislature to ensure the free transferability of negotiable instruments. More than 180 appellate opinions are summarized on Volo. Click here regularly to view the latest case summaries on ABI’s Volo website or subscribe to get summaries automatically.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: KEL LAWYERS SANCTIONED BY BANKRUPTCY JUDGE
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post looks at the U.S. Bankruptcy Court for the Middle District of Florida’s sanction of Kaufman, Englett and Lynd, PLLC (“KEL”) by banning them from practicing in bankruptcy court due to "numerous missteps and lack of diligence."

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
The new Consumer Financial Protection Bureau will be more effective if run by one director, as provided in the Dodd-Frank Act, than if run by a five-member board, as proposed in pending legislation. Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

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NEXT EVENT


Central States Bankruptcy Workshop

June 9-12, 2011
Register Today!

 

COMING UP

Northeast Bankruptcy Conference

JULY 21-24, 2011
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Southeast Bankruptcy Conference

JULY 27-30, 2011
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Mid-Atlantic Bankruptcy Workshop

AUGUST 4-6, 2011
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Southwest Bankruptcy Conference

Sept. 8-10, 2011
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Midwest Bankruptcy Conference

Sept. 16, 2011
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Views from the Bench Conference

Sept. 16, 2011
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  CALENDAR OF EVENTS

June
- Central States Bankruptcy Workshop
     June 9-12, 2011 | Traverse City, Mich.

July
- Northeast Bankruptcy Conference
     July 21-24, 2011 | Newport, R.I.
- Southeast Bankruptcy Conference
     July 27-30, 2011 | Kiawah Island, S.C.

August
- Mid-Atlantic Bankruptcy Workshop
     August 4-6, 2011 | Hershey, Pa.

   September
- Southwest Bankruptcy Conference
     September 8-10, 2011 | Las Vegas, Nev.
- Midwest Bankruptcy Institute and Consumer Forum
     September 16, 2011 | Kansas City, Mo.
- Bankruptcy 2011: Views from the Bench
     September 16, 2011 | Kansas City, Mo.
 
 
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