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Analysis: New Firms Catching Up to Banks in Foreclosure Rankings - ABI

The number of home foreclosures is down sharply from the depths of the financial crisis, even as many of the mortgage firms involved remain the same, including Fannie Mae, Wells Fargo, Bank of America and JPMorgan Chase. But the latest foreclosure rankings also include a number of firms that barely registered or did not exist when the crisis began a decade ago, the New York Times reported today. These new entrants include firms affiliated with the private equity giant Lone Star Funds, the mortgage lender PennyMac Loan Services, the investment bank Goldman Sachs and the mortgage firm Carrington Mortgage Services. This changing of the guard in the foreclosure rankings, based on data compiled by RealtyTrac, reflects the new reality that most foreclosures today are not coming from mortgages written during the post-crisis period, but from soured loans written before the crisis that are in the final stages of liquidation.


Bill to Create Section of Bankruptcy Code for Banks Advances in House - ABI

Legislation to create a special section of the bankruptcy code for banks advanced in the House Wednesday, a step toward preparing a new system to prevent chaotic bank failures that have prompted taxpayer bailouts, the Washington Examiner reported today. The House Judiciary Committee advanced the legislation Wednesday on a voice vote, but future action on bank bankruptcy could turn contentious. In a joint statement, committee Chairman Bob Goodlatte (R-Va.) and bill author Rep. Tom Marino (R-Pa.) said that "the costs associated with a failing financial institution should be borne by those who have a stake in the company, and hard-working Americans should not have to worry that their tax dollars will be used to bail out another Wall Street bank." Speaking at Wednesday's vote, the top Democrat on the committee, Rep. John Conyers of Michigan, agreed that the collapse of investment bank Lehman Bros. in the 2008 financial crisis "clearly revealed that current bankruptcy law is ill-equipped to deal with complex financial institutions in economic distress." The bankruptcy bill, he said, would be an "excellent complement" to the government-led process for resolving banks created by the 2010 Dodd-Frank financial reform law signed by former President Barack Obama.


Justices Side With Free-Speech Challenge to Credit Card Fees - ABI

The Supreme Court ruled yesterday that the First Amendment applies to a New York law concerning credit card fees, the New York Times reported. The decision was a victory for five businesses that had sought to tell their customers that they imposed a surcharge for using credit cards. But the Supreme Court decided only that the law regulated their speech rather than their conduct, and it left it to an appeals court to determine whether the law violated the First Amendment. “The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer,” Chief Justice John G. Roberts Jr. wrote for the majority in Expressions Hair Design v. Schneiderman, No. 15-1391. “Sellers are free to charge $10 for cash and $9.70, $10, $10.30 or any other amount for credit. What the law does regulate is how sellers may communicate their prices.”


Republicans Want Mnuchin to End “Too-Big-to-Fail” Designations for Nonbanks - ABI

Congressional Republicans yesterday made their case for Treasury Secretary Steven Mnuchin to end the practice of bringing nonbank financial institutions such as insurers under greater supervision if they’re deemed too-big-to-fail by the Financial Stability Oversight Council (FSOC), MorningConsult.com reported. In a letter, 10 of the 12 GOP members of the Senate Banking Committee told Mnuchin, who heads FSOC, that the council’s process for designating nonbanks systemically important financial institutions “lacks transparency and accountability, insufficiently tracks data, and does not have a consistent methodology for determinations.” The senators, including Committee Chairman Mike Crapo of Idaho, said they hope Munchin “will review the policies and procedures” for labeling nonbank SIFIs. The correspondence did not mention whether the Trump administration should drop its legal defense of FSOC in a federal court challenge of MetLife Inc.’s SIFI label. On the other side of the Capitol, Rep. Ann Wagner (R-Mo.), who heads the House Financial Services Subcommittee on Oversight and Investigations, told reporters Tuesday that ending nonbank designations “should be, at the very least, where we start” the process of changing FSOC practices.


Sluggish Housing Recovery Took $300 Billion Toll on U.S. Economy, Data Show - ABI

The decline in homeownership rates to near 50-year lows is partly to blame for the U.S. economy’s sluggish recovery from the last recession, new data suggest, the Wall Street Journal reported today. If the home-building industry had returned to the long-term average level of construction, it would have added more than $300 billion to the economy last year, or a 1.8 percent boost to gross domestic product, according to a study expected to be released today by the Rosen Consulting Group, a real estate consultant. In 2016, total spending on housing declined to 15.6 percent of GDP, a broad measure of goods and services produced across the U.S., compared with a 60-year average of nearly 19 percent. The share of spending specifically linked to new-home construction and remodeling likewise declined to 3.6 percent of GDP, just over half its pre-recession peak in 2005.


Supreme Court Reverses Jevic, Bars Structured Dismissals that Violate Priority Rules - ABI

Reversing the Third Circuit in Czyzewski v. Jevic Holding Corp., the Supreme Court ruled 6-2 yesterday in an opinion by Justice Stephen G. Breyer that the bankruptcy court, without consent from affected parties, cannot approve so-called structured dismissals that “deviate from the basic priority rules,” not even in rare cases, according to a special analysis from ABI Editor-at-Large Bill Rochelle. Justice Breyer was careful to narrow the Court’s holding so the opinion would not be interpreted to preclude first-day wage or critical vendor orders. Joined by Justice Samuel A. Alito, Jr., Justice Clarence Thomas dissented, saying that the writ of certiorari should have been dismissed as improvidently granted.
Additionally, Cliff White, Director of the Executive Office for U.S. Trustees, issued a statement praising the decision and appreciating the efforts of the U.S. Trustee Program in the litigation. “The Supreme Court ruled in favor of truck drivers whose employer fired them, went bankrupt the next day, and then denied them their right to priority payment under bankruptcy law,” White said. “The Supreme Court’s ruling is a victory for the faithful application of the Bankruptcy Code as Congress has written it. When the rules are clear and consistently applied by the courts, then the system works more fairly. In the long run, that benefits all stakeholders — debtors, creditors, and the American public.”


CFPB Opponents Suggest Trump Could Use DOJ to Justify Firing Cordray - ABI

President Donald Trump could fire Consumer Financial Protection Bureau Director Richard Cordray by getting legal justification from the Justice Department, according to a GOP lawmaker who’s critical of the CFPB’s structure, MorningConsult.com reported yesterday. Rep. Ann Wagner of Missouri, the chairwoman of the House Financial Services Subcommittee on Oversight and Investigations, said yesterday that the Office of Legal Counsel could provide an avenue to dismiss Cordray. She noted that the OLC gave the Clinton administration justification to avoid enforcing laws that it considered unconstitutional. That approach was supported by Ted Olson, a partner at the law firm Gibson, Dunn & Crutcher who is representing the mortgage servicer PHH in its effort to overturn the CFPB’s single-director structure. He said Dodd-Frank’s language, which only allows the president to fire the director on a “for cause” basis, would likely fall under the category of unconstitutional language that the president can choose not to enforce with OLC’s justification.


Bankers, House Republicans Have Competing Visions for CFPB - ABI

House Republicans are considering legislation that would restructure the Consumer Financial Protection Bureau in a way that allows the president to fire the agency’s director at will. Banking groups, however, are mostly in favor of taking a different approach: forming a bipartisan commission to lead the CFPB, MorningConsult.com reported today. GOP lawmakers who are angling to roll back key aspects of Dodd-Frank have shifted their stance on the consumer agency, a longtime target of GOP efforts to overhaul the 2010 law. Legislation introduced in September by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) would have changed the CFPB’s leadership from a single director to a bipartisan commission. But a revamped version of that bill, known as the Financial CHOICE Act, is expected to propose having a single director who the president can fire at will. “In the CHOICE Act, we want to have the director serve at the will of the president,” Rep. Blaine Luetkemeyer (R-Mo.), chairman of the Subcommittee on Financial Institutions and Consumer Credit, said earlier this month. However, several banking industry leaders are holding fast to the bipartisan commission plan. “We continue to believe that a commission style of governance for the CFPB would result in better regulation,” Francis Creighton, executive vice president of government affairs at Financial Services Roundtable, said last week.


Filing for Bankruptcy More Expensive Under Trump Budget - ABI

Filing for bankruptcy would likely cost more under President Donald Trump's budget proposal, the Birmingham (Ala.) News reported on Saturday. Trump's "America First: A Budget Blueprint to Make America Great Again," includes a provision that would raise an additional $150 million in 2017 through higher filing fees. Currently, the fees generate about $138 million; Trump's budget aims to see that grow to $289 million by 2018. The change, according to the outline would "ensure that those that use the bankruptcy court system pay for its oversight." The increased fees would go to the Department of Justice's U.S. Trustee Program, which oversees the administration of bankruptcy filings. The budget outline doesn't specify which filing fees will increase.


California Bill Would Eliminate Tax Deduction on Second Home - ABI

The California state legislature is considering a bill to eliminate a tax deduction for owners of second homes and spending the newly collected revenue on affordable housing, the Palm Beach Desert Sun reported. The bill, A.B. 71, proposes the elimination of the state mortgage interest tax deduction — a policy that allows Californians to deduct any interest they pay on their mortgages from their taxes — for second homes. Assemblymember David Chiu (D-San Francisco), the bill’s sponsor, said that about 31,000 Californians claimed the tax deduction last year, and if collected, those taxes could have totaled $360 million for the state. A.B. 71 would require the state to collect those funds and deposit them into the Low-Income Housing Tax Credit program, a popular mechanism for funding the construction of affordable housing. The structure of the tax program allows developers to leverage federal and private funds, so the $300 million in state funds could allow total investment of more than $1 billion.