Senate Democrats are planning to bring their housing stimulus package, S. 2636, up for a vote on Tuesday, the Associated Press reported on Saturday. The measure includes provisions to let bankruptcy judges lower payments for homeowners facing foreclosure while also letting localities with the highest foreclosure rates access federal grants to buy foreclosed properties and provide $200 million in counseling to distressed borrowers. Sen. Charles E. Schumer (D-N.Y.) said that Bush should lean on congressional Republicans to allow votes on the Democratic measure. The administration’s moves over the past about six months include expanding the Federal Housing Administration’s ability to offer refinancing to homeowners with good credit, allowing Fannie Mae and Freddie Mac to buy up more home loans, and brokering help for struggling homeowners through the Hope Now Alliance. The group has agreed to offer a five-year rate freeze for people who have not missed payments or a 30-day foreclosure pause for those who fall behind. The president has come out strongly against the Democrats’ housing package, warning that an overzealous governmental response to the nation’s housing woes could hurt the economy’s ability to recover long-term.

The Bush administration is considering regulatory changes to aid homeowners who owe more money on their mortgages than their homes are worth, the Wall Street Journal reported today. The Department of Housing and Urban Development plan would enable homeowners who are “underwater” on their mortgages to qualify for a partial backstop through HUD’s Federal Housing Administration. HUD’s new plan, recently submitted to the White House’s Office of Management and Budget, would allow many more people to qualify, though it still is unclear what the requirements would be. HUD had $21.3 billion in its mortgage-insurance fund at the end of 2007 to protect against losses. At the end of February, the agency insured 3.8 million loans with a total unpaid balance of $364.7 billion.
See Also: Bankruptcy Lawyers New York

Treasury Secretary Henry M. Paulson Jr. yesterday called for strengthened federal oversight of investment banks in the wake of the collapse this month of Wall Street giant Bear Stearns, the Washington Post reported today. Paulson urged investment banks to provide more information about their operations, especially since the Federal Reserve has begun to allow these firms, for now, to borrow public money when they run short on cash. He said the heightened oversight should also be temporary. The Treasury will soon unveil a plan to streamline the regulatory system and strengthen federal oversight of investment banks and the esoteric instruments they sell.
See Also: Bankruptcy New York

Despite objections from the U.S. Trustee in New Century Financial Corp.’s chapter 11 case, Bankruptcy Judge Kevin J. Carey signed off on the bankrupt lender’s disclosure statement, Bankruptcy Law360 reported yesterday. U.S. Trustee Kelly Stapleton had objected to the plan, saying that it gave a “truncated” account of a special examiner’s report that said New Century may have misled investigators regarding its post-petition cash collateral use. Earlier this month, New Century filed a new plan in response to some creditors that have filed objections similar to Stapleton’s, including Goldman Sachs and Wells Fargo. No creditors have yet weighed in on the new plan in court filings. Among other changes, the new plan significantly increases its estimate of the number of unsecured claims lodged against New Century, from 2,284 to 6,568. New Century estimated that reconciling those claims would cost somewhere between $1 billion and $2 billion. Judge Carey scheduled a confirmation hearing for April 24.

The Office of Federal Housing Enterprise Oversight (OFHEO), regulator for Fannie Mae and Freddie Mac, is expected to announce a plan this morning that will give the government-sponsored entities more scope to prop up the home-mortgage market, the Wall Street Journal reported today. The plan involves a reduction in capital requirements for the companies and a promise by them that they will each raise several billion dollars of capital this year, likely through a sale of preferred shares. As a result, they are expected to be able to provide additional funding of as much as $200 billion for home mortgages and related securities. OFHEO for the past several years has required Fannie and Freddie to hold 30 percent more capital than their usual minimum while they have worked to resolve lapses in their accounting and internal-risk controls, a process now viewed as largely complete. The regulator is now expected to reduce that capital “surcharge” initially to 20 percent. The deal came together this week amid prodding from the Treasury Department.

President Bush welcomed the Federal Reserve’s sweeping intervention in the nation’s financial markets as his administration faced accusations that it had supported the bailout of a prestigious investment bank while doing little to address the hardships of Americans facing foreclosures on their homes, the New York Times reported today. Treasury Secretary Henry Paulson dismissed questions of whether the administration was bailing out a financial giant while homeowners faced foreclosure, noting that Bear Stearns shareholders received only $2 a share for stocks that not long ago had been worth $170. Many Democrats have called on the administration to do more to support economic initiatives already on the legislative agenda.

Delphi Corp. heads into bankruptcy court today in an effort to hold together its exit-financing plan amid signs of increasing tension among its financial backers, the Wall Street Journal reported today. The issues include an allegation by Delphi that at least one of the backers is investing in the parts maker’s securities, possibly betting the deal will collapse. In papers filed with the court, Delphi’s attorney said the company has “credible information” that at least one member of its investor group has been “trading and/or shorting” the company’s public securities. It didn’t identify an investor. Attorney Jack Butler of Skadden, Arps, Slate, Meagher & Flom made the statement in a Feb. 20 letter to an attorney for private-equity firm Appaloosa Management LP, which leads a group of six investors funding Delphi’s plan. In court papers, Mr. Butler warned that the company might ask a judge to take up the matter. “One or more” of the investors “may have material unrealized or realized gains on these investments,” Butler wrote. At least one of the investors may have discussed with Appaloosa’s representatives the possibility that the $2.55 billion investment deal might unravel, he said.

Ziff Davis Media Inc., the publisher of PC Magazine and the video-game magazine EGM, filed for bankruptcy yesterday, Bloomberg News reported. Ziff Davis Media said it plans to swap a new $57.5 million senior secured note and at least 88.8 percent of the common stock in the reorganized company for $225 million of existing senior debt. The New York-based company said that it has a debt-restructuring agreement with senior noteholders, but that subordinated noteholders haven’t agreed to the restructuring. Holders representing more than 80 percent of Ziff Davis Media’s outstanding senior floating-rate notes have agreed to the company’s restructuring plan and will provide $24.5 million to fund operations during the chapter 11 reorganization and after the company emerges from bankruptcy.