Daily Archives: August 6, 2012

Wall Street lenders want bankrupt city of Stockton to pay them before own retirees

Wall Street lenders say they’re getting a raw deal in Stockton’s bankruptcy, losing millions while the city continues to fund pricey employee pensions.

The city says too bad.

A blistering statement issued this week by Assured Guaranty, a bond insurance company based in Bermuda, suggests that Stockton is the new battleground in the fight over retirement promises made to government workers.

Assured Guaranty complained that Stockton, after filing for bankruptcy protection, is stiffing bondholders to give preferential treatment to employees and CalPERS. The company called that “a contortion of the bankruptcy process” and said today it will press its argument in court.

Assured’s broadside raises new questions about a topic once thought to be out of bounds: whether governments can tamper with retirement plans.

While some corporations have used bankruptcy to cut their obligations to retirees, public-sector pensions generally have been considered sacred: Once workers go on the payroll, their retirement can’t be touched.

Responding to Assured’s claim, CalPERS said pension obligations take precedence over lenders under California law.
Read more here: http://www.sacbee.com/2012/08/03/4688241/bond-insurer-blasts-stockton-for.html#storylink=cpy

RBS says San Bernardino County eminent domain for mortgages proposal may not be worth controversy

A Royal Bank of Scotland analysis questions a controversial proposal for a San Bernardino County agency to use eminent domain to buy “underwater” mortgages.

The bank asserts that declining foreclosure rates mean a relatively low number of homeowners will benefit from the plan. With that conclusion in mind, analysts for the Royal Bank of Scotland question whether such bold action as eminent domain is necessary.

“Something is working, and the best approach for government officials might be to simply let the system continue to mend itself,” the bank’s study reads.

The assertion that “something is working,” however may be subject to as much debate as the eminent domain proposal itself.

Although the county’s foreclosure rates have trended downward, they remain high. Also, an estimated 150,000 households in the county are “underwater,” meaning they owe more on their mortgages than their house’s current market value.

The eminent domain proposal itself comes from San Francisco-based Mortgage Resolution Partners.

Company co-founder John Vlahoplus said Friday that banking interests oppose the plan because they want to cherrypick from future foreclosures and convert those homes into rental properties.

“They’ll turn stable middle-class neighborhoods into ones that have transient renters,” Vlahoplus said.

Mortgage Resolution Partners proposes to raise private capital to buy home loans that have been packaged into private-label mortgage-backed securities.

Read on.