A recap of the informed opinions (and the discussions they generated) on BankThink this week.

BankThink
(posted 1 week 2 days ago)

A Manhattan bankruptcy judge will consider a settlement Tuesday that raises millions of dollars for Bernard Madoff‘s cheated investors.
Under the deal, real-estate developer Edward Blumenfeld, as well as his family and company, will return $32.75 million in cash that they received from investing with Mr. Madoff before the 2008 collapse of his Ponzi scheme.
They’ll also surrender $29.35 million in claims against Mr. Madoff’s investment firm.
The settlement, the product of multiple mediation sessions, resolves litigation that trustee Irving Picard brought in December 2010 to recover $88 million that Mr. Blumenfeld and the other defendants received from Mr. Madoff in the six years before his arrest, including $27 million in false profits. The lawsuit also sought to knock out the claims the defendants brought against Mr. Madoff’s firm.
Mr. Blumenfeld and his fellow defendants disputed the lawsuit and denied that they received the payments from Mr. Madoff’s investment firm with any knowledge or suspicion of fraud.
Mr. Picard, who is overseeing the liquidation of Mr. Madoff’s firm, says the deal will avoid the need for costly and time-consuming litigation.
Mr. Picard has recovered or struck deals to recover more than $9.8 billion of the $17.3 billion in principal that Mr. Madoff was convicted of stealing from investors. More than half of the recovered funds have been returned to investors.

WSJ.com: Bankruptcy Beat
(posted 1 week 2 days ago)

Nonbank acquisitions require a certain level of expertise, John Allison writes in his new book. In this excerpt, he discusses how BB&T views the insurance business and why he stuck with subprime auto finance when others bailed. Part 4 of 5.

BankThink
(posted 1 week 2 days ago)

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Got private student loans?
I’ve got good news and bad news.
Bad news first.
Private Student Loans Inflexible
Private student loans have no built in mechanisms for deferment and forbearances, like government-backed loans do.
There are no income based repayment plans, as there are with federal student loans.’  No “outs” for disability or schools that close and leave you stranded.
No discharge in bankruptcy.
So, regardless of what life hands you, you have to pay according to the terms of the note.
But I promised you some good news.
Private Student Loans Must Play By The Rules
The promising news is that private student loans are hardy different in the eyes of the law than credit cards.  That makes them subject to all the rules about collection that apply to any other debt.
One of those rules is timeliness.  Lawyers call it the statute of limitations.
The rule essentially says that a creditor who isn’t being paid must sue within a fixed period, or lose the right to use the courts to enforce its debt.

(posted 1 week 2 days ago)

Fannie Mae has entered into deals with JPMorgan Chase and other companies that transfer some of the credit-loss risk on mortgage-backed securities to investors. Not only do these deals reduce the danger that taxpayers could be forced to cover the GSEs' losses, they may help make mortgages more affordable.

BankThink
(posted 1 week 2 days ago)

Check out the latest news from Financial Poise. Don’t miss out on our upcoming live webinars and see what’s new on demand! View the full newsletter here.

(posted 1 week 2 days ago)

Receiving Wide Coverage ...

The Rate Hike Waiting Game: The Federal Reserve may push its timeline for raising interest rates back from mid-2015 if wage growth fails to improve, according to articles in both the Wall Street Journal and the New York Times. The fact that more people are quitting their jobs suggests the labor market may be tightening, according to the Journal, but there are other signs that strong pay increases may be a ways...

BankThink
(posted 1 week 2 days ago)
OW Bunker vessels in Singapore.
O.W. Bunker

Denmark’s O.W. Bunker AS on Thursday placed its U.S. subsidiaries in Chapter 11 bankruptcy, just days after the shipping fuel supplier said it had discovered a $125 million fraud committed by senior employees at its Singapore unit. Read the Daily Bankruptcy Review story in the Wall Street Journal.
(Daily Bankruptcy Review is a daily newsletter with comprehensive coverage and analysis of emerging and in-progress insolvencies and turnarounds. For a two-week trial, visit our homepage, scroll to the bottom and click “try for free.”)

WSJ.com: Bankruptcy Beat
(posted 1 week 2 days ago)

In re NNN Parkway 400 26, LLC, 505 B.R. 277 (Bankr. C.D. Cal. 2014) – The primary creditor (an undersecured lender) objected to the debtors’ proposed plan of reorganization on various grounds, including that the plan violated the “absolute priority rule,” … Continue reading →

(posted 1 week 2 days ago)

The NYT has a piece about credit reporting of so-called "zombie debt"--debt that has been discharged in bankruptcy.  Apparently the US Trustee Program is investigating various creditors in connection with this debt.
The reporting obscured a bit of very subtle bankruptcy metaphysics. The discharge of debt in bankruptcy does not void the debt. The debt is still owing. But it cannot be collected except if the debtor volunteers to repay it. The discharge is an injunction against the enforcement of the debt against the debtor as a personal liability. The discharge voids judgments on the debt, but not the debt (and it does not prevent the enforcement of liens).  In other words, the debt still exists post-discharge.  It just isn't enforceable.
That means that there is nothing per se inaccurate about the debt being reported to a credit reporting agency as owing, provided that the debt is also reported as discharged in bankruptcy. (Different story altogether under Fair Credit Reporting Act and Fair Debt Collection Practices Act if the discharge is not reported.)   

Credit Slips
(posted 1 week 2 days ago)