Treasury Unveils Plan for Toxic Mortgage Assets
The Treasury today unveiled specific details regarding its plan to create a public-private partnership to purchase toxic assets from financial institutions, named the Public Private Investment Program (PPIP) for Legacy Assets. Along with its press release, the Treasury also released a white paper on the program. Among other things, the program provides FDIC and Federal Reserve financing to spur private investors to price and finance purchases of real estate loans held directly on the books of banks ("legacy loans") and securities backed by loan portfolios ("legacy securities").
U.S. Supreme Court Decides Vaden v. Discover Bank
The U.S. Supreme Court this week decided Vaden v. Discover Bank, a closely-watched case which more clearly defines the limits of federal jurisdiction under Section 4 of the Federal Arbitration Act, 9 U.S.C. §1 et seq. ("FAA").
In Vaden, Discover Bank's servicing affiliate filed a Maryland state court action to collect an unpaid credit card balance, asserting only state law claims. Vaden counterclaimed, asserting Discover's finance charges, interest, and late fees violated Maryland law. Separately, Discover Bank filed a petition to compel arbitration in the U.S. District Court for the District of Maryland, asserting that Vaden's state-law counterclaims were completely preempted by federal law, specifically §27 of the Federal Deposit Insurance Act, 12 U.S.C. 1831d(a). The district court granted the petition to compel arbitration and stayed the state court action. Vaden appealed. The Fourth Circuit eventually affirmed, after remanding for a determination of federal question jurisdiction.
Continue Reading...Mortgage Cram-Down Bill Passes House
The U.S. House has passed a compromise version of mortgage cram-down legislation, HR 1106, officially known as entitled the "Helping Families Save Their Homes in Bankruptcy Act of 2009."
Among other significant changes, the legislation permits a Chapter 13 bankruptcy plan to: (1) modify the rights of claim holders with respect to a claim for a loan originated before the effective date of the Act and secured by a security interest in the debtor's principal residence that is the subject of a foreclosure notice; and (2) deny debtor liability for certain fees and charges incurred while the bankruptcy case is pending and arising from a debt secured by the debtor's principal residence, unless the claim holder observes specified requirements.
The legislative summary details the bill's other changes, including amendments to the HOPE for Homeowners plan.
Treasury Releases Guidelines for Refinance and Modification
The Treasury today announced the release of Modification Guidelines for the "Homeowner Affordability and Stability Plan." The updated program description details the intended purposes of the plan, as does the updated Executive Summary.
The guidelines identify two types of mortgage assistance for homeowners: the Home Affordable Refinance, intended to assist underwater borrowers seeking to refinance to lower mortgage rates; and the Home Affordable Modification, intended to assist "at-risk" homeowners to modify mortgages. The refinance portion of the plan is designed to work with an improved Hope for Homeowners plan. The guidelines for modification detail eligibility and verification, loan modification terms and procedures, payments to lenders, servicers, and borrowers, and controls for transparency and accountability.
Continue Reading...9th Circuit Details Corporate Citizenship Tests
In a significant case for credit card issuers and retailers, the Ninth Circuit has detailed the application of its tests of corporate citizenship for purposes of federal jurisdiction. In Davis v. HSBC Bank Nevada, N.A., et al., the Court held that retailer Best Buy is not a citizen of California merely because it has more presence in this state than in any other state.
In Davis, plaintiff sued credit card issuer HSBC and retailer Best Buy, asserting claims for violation of California's unfair competition statute, §17200, and false advertising statute, §17500, alleging the companies defrauded consumers by failing to adequately disclose the credit card's annual fee. Defendants removed the case to federal court based on the Class Action Fairness Act of 2005 ("CAFA"). Plaintiff moved to remand based on the local controversy exception to federal jurisdiction, 28 U.S.C. §1332(d)(4), which bars federal jurisdiction where, among other things, at least one defendant is a citizen of the original forum state. The district court granted plaintiff's motion to remand. Defendants appealed.
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