CFTC Finalizes Rules to Improve Swap Data Reporting


On September 17, the Commodity Futures Trading Commission (CFTC) approved three final rules to revise CFTC regulations for swap data reporting, dissemination and public reporting requirements for market participants. The CFTC also approved a final rule that will permit derivatives clearing organizations organized outside of the U.S. to be registered with the CFTC. The CFTC also approved a supplemental notice of proposed rulemaking regarding amendments to the CFTC’s regulations that govern bankruptcy proceedings for commodity brokers. Release.

Lehman Estate Settles Claims By RMBS Insurer and Trustee


On September 20, 2016, Judge Shelley Chapman of the U.S. Bankruptcy Court for the Southern District of New York approved the $37 million settlement of $1.3 billion in claims asserted against the estates of two defunct Lehman Brothers’ entities by Syncora Guarantee Inc. in its capacity as the insurer for certain certificates issued from the GMFT 2006-1 RMBS trust. After being sued by the GMFT 2006-1 Trustee for payment under the insurance policy, Syncora filed its own claim for indemnification against Lehman as sponsor of the securitization. In addition to settling Syncora’s claim, the agreement also releases Lehman from all potential claims brought by the GMFT 2006-1 Trustee, U.S. Bank NA, in exchange for Lehman’s cooperation in a separate lawsuit arising from GreenPoint Mortgage Funding Inc.’s alleged failure to repurchase defective loans. Settlement Order. Settlement Agreement Submitted For Approval.

CFPB Finalizes New Foreclosure Protections


On August 4, 2016, the Consumer Financial Protection Bureau (CFPB) issued updated servicing rules to expand foreclosure protections for homeowners and struggling borrowers. The new measures include expanding consumer protections to surviving family members, clarifying borrower protections in servicing transfers, providing periodic statements to borrowers in bankruptcy, and requiring servicers to provide certain foreclosure protections more than once over the life of the loan, among other protections. The majority of the provisions of the final rule will become effective 12 months after publication in the Federal Register. Press Release. Final Rule.

Detroit Confirms Chapter 9 Plan of Adjustment

Approximately 16 months after filing the largest chapter 9 bankruptcy in history, Detroit received approval November 7 of its chapter 9 plan of adjustment.  Bankruptcy Judge Stephen Rhodes of the Eastern District of Michigan Bankruptcy Court, confirmed the plan at a several-hour hearing where he read into the record an “oral opinion.”  Judge Rhodes held that the plan “meets the legal requirements for confirmation” and lauded the plan, describing it as an “extraordinary accomplishment in bankruptcy and an ideal model for future municipal restructurings.”  In re City of Detroit, Case No. 13-53846 (Bankr. E.D. Mich., November 7, 2014). Click here to read more.

Rating Agency Developments

On October 9, S&P released its updated global methodology and assumptions for assessing the credit quality of securitized non-real estate related consumer receivables, including, but not limited to, auto, credit card, student, and unsecured personal loan asset-backed securities. Report.

On October 9, S&P released its updated criteria for analyzing cash flows of structured finance securities. Report.

On October 9, S&P released its updated methodology and assumptions for assessing operational risk associated with transaction parties in structured finance transactions. Report.

On October 7, Moody’s released its bankruptcy remoteness criteria for special purpose entities in global structured finance transactions. Report.

On October 7, Fitch released its updated Global Structured Finance and Covered Bonds Rating Criteria Hierarchy. Report.

On October 3, Fitch released its criteria for rating nonprofit nursing homes. Report.

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Lehman Court Finds Safe Harbors Protect Damage Calculation Provisions in Swap

Judge James M. Peck issued a significant opinion in the Lehman Brothers bankruptcy late last month, which preserved important safe harbored rights.  The opinion protects a non-debtor counterparty’s right to rely on a contractually agreed methodology for calculating damages upon the liquidation of a safe harbored swap agreement—even if the debtor’s bankruptcy triggers the provision.  To read the complete Orrick alert, please click here.

Bankruptcy Court Rules Detroit Eligible for Chapter 9

At a hearing on December 3, Judge Stephen Rhodes ruled that the City of Detroit was eligible to file for protection under Chapter 9 of the Bankruptcy Code.  While the City filed for bankruptcy back in July and has been conducting a number of bankruptcy-related activities, this ruling officially launches the bankruptcy process.  Later in the week, Judge Rhodes issued a 143-page opinion detailing his analysis.  The analysis was largely based on the facts at hand and a simple application of those facts to the standards for a chapter 9 filing.  Among the Judge’s most noteworthy rulings: because pension rights are contractual rights under the Michigan constitution, they are subject to impairment in a federal bankruptcy proceeding.  Opinion.

Orrick Restructuring Alert: Lessons for Lenders from Tousa Circuit Court Decision

This alert, written by Raniero D’Aversa, Jonathan Guy and Amy Pasacreta, discusses the bankruptcy case of TOUSA, Inc. and its various subsidiaries is one where lenders have seen their fortunes rise and fall. On March 15, 2012, they fell again when the Eleventh Circuit reversed the District Court’s opinion and reinstated the Bankruptcy Court’s order, which had disgorged over $400 million from Tousa’s senior lenders and avoided certain guarantees and liens granted to them by the Conveying Subsidiaries. Specifically, the Circuit Court found: (i) the Tousa Bankruptcy Court did not err when it found the Conveying Subsidiaries did not receive reasonably equivalent value in exchange for the new liens provided to the New Lenders; and (ii) the Transeastern Lenders were the direct beneficiaries of the new liens and as such subject to the avoidance powers of section 550(a). Click here to read more.

Los Angeles Federal Court Has Jurisdiction Over RMBS Suit

On December 29, 2010, the Honorable Mariana R. Pfaelzer denied a motion by Stichting Pensioenfonds ABP (“Plaintiff”) to remand its claims against Countrywide and others to state court. Judge Pfaelzer concluded that the case was sufficiently related to a bankruptcy case to confer federal jurisdiction in light of contractual indemnification obligations of a bankrupt originator, American Home Mortgage Corp., to Countrywide. The Court also concluded that there were no equitable grounds meriting remand. Decision.