Council OKs new home-rental law

City Manager gets 4.7% raise

City Manager Roger Hernstadt has now been in place for one year and at a previous council meeting, the council had set down the January meeting for a discussion on his compensation package.
Council member Larry Honig began the discussion and outlined his review of the manager and compensation plans that compare with similar packages throughout the area.
Four out of the seven members on the board had nothing but praise for the manager and the way he has conducted himself and begun to rebuild what many have said was an organization in turmoil.
Councilman Ken Honecker praised Hernstadt after the meeting.
“Roger has done what was needed to turn things around for the good of the whole community,” said Honecker.
Councilman Amadeo Petricca criticized the city manager’s management style and has been a critic of the plan to eliminate debt that was created and implemented by council. He said he could work with the manager, but couldn’t support a raise.
Councilman Victor Rios also criticized the manager, his style and alleged a number of irregularities.
Joe Batte, senior member on council and the only one who had been through the process of voting for a pay increase for a sitting manager, said he didn’t have enough “input” on the subject from his fellow councilmen, even though past practices saw a similar process during his first four years as a councilman during the Jim Riviere tenure as manager.
Batte said he had nothing but “high praise” for the manager, but in the end did not vote for the 4.7 percent increase in Hernstadt’s compensation package.
Councilmen Bob Brown and Larry Sacher also praised Hernstadt and in the end, only Petricca, Batte and Rios chose not to reward the manager with an increase in pay.
Hernstadt will now be paid an annual salary of $167,500.
“This will place Roger in the upper end of the mid-range of compensation paid to managers in communities of our size,” said Sacher.
The change to his compensation amount left his benefit package the same.

Supreme Court Weighs Power of Bankruptcy Judges

  • By

The Supreme Court appeared open Wednesday to clarifying the powers of nearly 1,000 judges in the federal court system, a group whose constitutional authority has come into question since a 2011 high-court decision involving the late Playboy playmate Anna Nicole Smith.

Depending on how the court rules in a case argued Wednesday, the bankruptcy-court system could remain mired in confusion over when it has the power to offer final judgments on certain issues. By extension, the ruling could also curtail the ability of the federal magistrate system to handle some of the work of district-court judges.

“This case is enormously important for the workload of the federal district courts,” said Erwin Chemerinsky, a constitutional scholar and dean of the law school at the University of California, Irvine.

Bankruptcy-court judges have worked under a cloud of uncertainty since a 2011 Supreme Court decision that found bankruptcy judges only have the authority to offer a final ruling on a dispute that stems from the bankruptcy itselfa phrase whose definition has become cause for much debate. Other issues, the court ruled, must be decided by the district court.

During arguments Wednesday, the justices questioned why the court should limit the powers of the bankruptcy court when district-court judges routinely sign off on decisions reached by arbitratorsindependent parties not affiliated with the court systemthat litigants use as an alternative to the courts to settle disputes.

“The arbitrator case seems to me much more threatening to the integrity of the federal judicial system than a system of bankruptcy courts which are, from the very beginning all the way through, supervised byby district courts,” Justice Elena Kagan said.

Unlike district-court judges, who are confirmed by the Senate and who serve for life under Article III of the Constitution, bankruptcy judges are appointed by the federal appellate courts and serve 14-year terms.

Until the 2011 case, an inheritance dispute between Anna Nicole Smith and the son of her deceased husband known as Stern v. Marshall, courts relied on a division of labor laid out by Congress that differentiated between “core” and “non-core” bankruptcy matters.

Stern’s new dividing line caused confusion over what can and can’t be decided by the courts. “Now they’ve seen they left too many open windows and they need to close some,” said Melissa Jacoby, a bankruptcy professor at University of North Carolina School of Law. “If they’re serious about not having major constitutional concerns about the bankruptcy court, this is the time to do it.”

The high-court appeal stems from the Chapter 7 bankruptcy of Chicago resident Richard Sharif. Wellness International, a company to which Mr. Sharif owed a half-million dollars, sued him in bankruptcy court, claiming that assets in a family trust tied to Mr. Sharif should be used to pay off his debts.

The Seventh US Circuit Court of Appeals sided with Mr. Sharif, finding the bankruptcy court didn’t have the constitutional authority to decide whether the property in question belonged to the bankruptcy estate because the dispute also involved state law issues.

Apart from settling whether the bankruptcy court can rule on the type of property-law issue that came up in Mr. Sharif’s case, the court could also rule on whether the bankruptcy court can be the final arbiter of disputes if everyone involved consents to the arrangement.

The court punted on the consent question in two previous cases, and could do so again here. The justices Wednesday turned to the lawyers arguing both cases to ask which of the two questions before them they thought were more important.

Catherine Steege, a Jenner amp; Block partner arguing for Wellness International, said both were important but that the consent question has left bankruptcy practitioners with concerns.

“The situation that you have today is that both parties could consent, and the bankruptcy judge could enter a judgment, and then the party who loses can turn around and say, well, theres a question about whether I really consented or not or whether it was appropriate,” Ms. Steege said.

The Supreme Court is expected to issue a decision in Wellness International Network Ltd. v. Sharif by the end of June.

Help is at hand

I would like to provide some facts about debt advice provided by Wiltshire Citizens Advice (CAB) in response to the letter by D Thomas of Hisomley (January 2).

We provide free debt advice and one-to-one budgeting help. Last year we helped 4,000 people across Wiltshire with nearly 14,000 debt problems. We also provide financial capability education to groups and individuals to help them develop skills, knowledge and confidence to manage their money better.

Better Putin Than Weimar Russia

The western meddling was very very blatant, (although Stratfor oversells it by calling it the most obvious coup of history, quite a number of Soviet coups, 2 times in Czecheslovakia for example, were more blatant) Nuland was caught on the phone hand picking future leaders, and color revolutions against comparably open nations is something the US has become pretty good at. As I understand, the actual CIA does not like the color revolutionaries very much.

One can also often guess who is behind an action by looking at its effects. An American finance minister for Ukraine speaks (who worked for the US state department btw.) pretty drat loudly in this regard.

The utter puppetization of Ukraine has a good side too though. Because the Georgian imported health minister (some Georgians I know are just glad the guy is now messing up someone elses country) does not speak Ukrainian, some of Ukraines giant 21 ministries cabinet dont speak English, so Russian (which everyone speaks) had a comeback as Ukraines cabinet language.

From Russias pov, the blatant western interference also killed the Budapest Memorandum. The West completely ignored its written commitments to not interfere in the internal affairs of Ukraine. Russia felt, since the West was shredding the memorandum, that obliging to it while the west does not was a suckers game.

What is unique is that the thing is so incredibly obvious. The US used to care for having at least somewhat plausible deniability in its subversive actions, in Ukraine they completely did away with that.

Chattanooga seeks to limit payday lending and title pawns

Chattanooga is taking a preemptive strike to stem a tide of payday lenders and similar businesses moving into the city. But lenders themselves are scratching their heads. They say there is no tide coming.

The Chattanooga-Hamilton County Regional Planning Commission unanimously approved a proposed zoning amendment Monday that would prevent alternative financing businesses — such as check-cashers, payday lenders and pawn brokers — from condensing in an area. The City Council will have final approval on Feb. 10.

And City Council members Carol Berz and Russell Gilbert, who wrote the proposed ordinance with the city attorneys office, say it would bar such businesses from opening within 500 feet of residential areas or within a quarter-mile of other similar lenders.

Citing studies by George Washington University and California State University, Assistant City Attorney Keith Reisman told planning commissioners that high concentrations of payday loan, title pawn or other alternative financing businesses are directly related to increased crime, lower property values and a reduction in safety.

However, Reisman said the businesses did provide a needed service.

The services need to be provided. But we just dont want to have the concentrations that increase crime and reduce the property values, Reisman said.

Berz agreed.

The concentration of these businesses is detrimental. We would ask that you seriously, seriously consider passing this, Berz said told the planning commission.

But Mayor Andy Berke said he would also like to curb what he called predatory lending practices.

Alternative lending institutions exist for those in the population who cant get loans from traditional banks. And interest rates for such unsecured loans can be sky high, he said.

We know that predatory lending leads to a decrease in capital investment, hurts neighborhoods and has even been linked to increases in crime. It just seems like a good step that we can legally take at the local level to prevent the concentrations from increasing, Berke said.

But Jabo Covert, senior vice president of government affairs for Check Into Cash, the largest alternative finance company in the state — and one of the largest in the nation — says hes left wondering what businesses the city is going after.

Ms. McNeal Goes to Washington

For those of you who have followed our blog since its inception, you will know that one of our most discussed opinions is that of In re McNeal, in which the Eleventh Circuit held that a debtor may strip a wholly unsecured junior mortgage in a Chapter 7 proceeding. Although the decision is anathema to every other federal appeals court decision in the country, McNeal has been controlling law in the Eleventh Circuit for over two years and has affected thousands of residential loans.

Late last year, the Supreme Court finally agreed to hear Bank of Americas appeal of a case involving lien stripping in Chapter 7 bankruptcy. McNeal and the BOA case up on appeal are practically identical, insofar as they involve a debtor whose second mortgage is wholly underwater that is the value of the home is less than the first mortgage, rendering the second mortgage valueless.

As you may remember, McNeal and its Eleventh Circuit progeny relied upon the previous precedent set forth in the Folendore case, which allowed lien stripping in Chapter 7 cases. Between Folendore and McNeal, however, the Supreme Court decided the seminal case of In re Dewsnup, which every other federal circuit court of appeals has interpreted as prohibiting the stripping of wholly unsecured loans in Chapter 7 proceedings.

Once McNeal was decided, a clear circuit split was established. It was only a matter of time until the Supreme Court was forced to reexamine the issue. As such, the BOA case has the potential to be one of the most influential Chapter 7 cases decided in the last twenty years, because the Supreme Court could, once and for all, eliminate any doubt as to whether an underwater debtor may eliminate a wholly unsecured junior mortgage on its property.

Many commentators have noted that McNeal was a sympathetic response to the inequitable position in which debtors found themselves as a result of the lending bubble and subsequent downturn of the economy. By allowing the unfortunate debtor to set aside a junior loan, which has no value, the court attempted to rehabilitate the debtor by unsaddling a heavy debt. Unfortunately for the debtor, such practices are disfavored throughout the rest of the country and could be overturned upon review by the Supreme Court.

Fitch Affirms Regatta II Funding LP

NEW YORK Fitch Ratings has affirmed the class A-1 notes issued by Regatta II Funding LP (Regatta II) at AAAsf. The Rating Outlook remains Stable.


The affirmation is based on the stable performance of the underlying portfolio since Fitchs last review in February 2014 and the sufficient credit enhancement available to the notes. As of the Dec. 5, 2014 trustee report, the transaction continues to pass all coverage tests and collateral quality tests, and there have been no defaults in the underlying portfolio to date.

The loan portfolio par amount plus principal cash is approximately $411.8 million, compared to the effective date target balance of $400 million. The current weighted average spread (WAS) is reported to be 4.56%, versus a minimum WAS trigger of 2.70%. Additionally, the weighted average rating factor is at B compared to B/B- at the last review. Fitch currently considers 2.8% of the portfolio (excluding cash) rated in the CCC category or lower, decreased from 3.3% at the last review, based on Fitchs Issuer Default Rating (IDR) Equivalency Map. The portfolio is diversified with 201 obligors, and invested in 95.41% senior secured loans, 4.56% second lien loans, and 0.03% senior unsecured loans. Currently, 89.4% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of RR2 or higher.

The Stable Outlook reflects the expectation that the class A-1 notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio based on the results of the Fitch sensitivity analysis described below.


The ratings of the notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to CCC, portions of the portfolio being placed on Rating Watch Negative, breaches of concentration limitations or portfolio quality covenants, and overcollateralization (OC) or interest coverage (IC) test breaches. Fitch conducted rating sensitivity analysis on the closing date of Regatta II, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities.

Regatta II is an arbitrage, cash flow collateralized loan obligation (CLO) managed by Napier Park Global Capital. The transaction remains in its reinvestment period, which is scheduled to end in January 2017. During the reinvestment period discretionary sales are permitted up to 30% of the portfolio balance during any rolling 12-month period. Sales of defaulted, credit-risk and credit-improved securities are permitted at any time, including after the reinvestment period, with the sale of credit-improved assets subject to certain restrictions. The manager also has the ability to reinvest unscheduled principal proceeds and sales proceeds from the disposal of credit risk assets after the reinvestment period, subject to certain conditions.

This review was conducted under the framework described in the report Global Rating Criteria for Corporate CDOs using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. Given the stable performance of the deal since closing in February 2013, no cash flow modeling was conducted.

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report published on February 22, 2013. A comparison of the transactions Representations, Warranties, and Enforcement Mechanisms (RWamp;Es) to those of typical RWamp;Es for that asset class is also available by accessing the reports and links indicated below.

Fitch has affirmed the following rating:

–$256,500,000 class A-1 notes at AAAsf; Outlook Stable.

Fitch does not rate the class A-2, B, C, D, and LP Certificates.

Additional information is available at

The information used to assess these ratings was sourced from periodic servicer reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:

–Global Structured Finance Rating Criteria (Aug. 4, 2014);

–Global Rating Criteria for Corporate CDOs (Jul. 25, 2014);

–Counterparty Criteria for Structured Finance and Covered Bonds (May 14, 2014)

–Regatta II Funding LP New Issue Report (Feb 22, 2013);

–Regatta II Funding LP – Appendix (Feb 22, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

Global Rating Criteria for Corporate CDOs

Counterparty Criteria for Structured Finance and Covered Bonds

Regatta II Funding LP — Appendix

Regatta II Funding LP

Additional Disclosure

Solicitation Status


Connell files for bankruptcy

Unlike most companies that claim bankruptcy, the firm has no bank debt and no unsecured loans.

The statement filed in court by Richard S Hayden, who owns two thirds of the business, cites a slowdown in the economy and new projects as the reason it can no longer pay its creditors.

Swanke Hayden Connell, whose portfolio also includes the revival of Central Parks Tavern on the Green and the New York City Office of Emergency Management, has worked on several projects in Russia in recent years, most notably the Eurasia Tower for the Russian Federation.

Haydens statement does not disclose the identity of the Russian client, who claims to have suffered damages as a result of alleged delays and omissions from the architects.

There are also unresolved political and economic issues which may play a role in the outcome, it reads.

The firm was once one of the worlds largest practices and was ranked as the 53rd biggest employer of architects internationally in 2001, but is believed to have suffered a significant drop in income over the last five years. Two of its principals left in 2014 and, at the time of the bankruptcy filing, it was down to just 32 employees.

The main creditors listed are M-E Engineers, owed $632,000 (£416,000); United Reprographic Services owed $499,000 (£329,000); and consultant Hankins amp; Anderson, owed $294,000 (£194,000).

Image of the Statue of Liberty courtesy of Shutterstock.

Freeze Hits Local Pinkberrys as Franchisee Files for Chapter 7

According to court records uncovered by the Washington Business Journal, the local franchisee for local Pinkberry frozen yogurt shops has filed for Chapter 7 bankruptcy.

The future of Pinkberry Mid-Atlantic LLCs frozen yogurt outlets in the area, including shops in Georgetown, Dupont, Arlington, Fairfax, Tysons Corner and National Harbor, is in question and a Pinkberry store in Leesburg closed in 2014.

In court documents, the company lists debts at over $1.2 million and assets at around $820,000. Mid-atlantic banking behemoth BBamp;T is the largest creditor, with claims upwards of $500,000. Pinkberry also owes tens of thousands of dollars to Sysco Food Services and area utilities. The company also owes close to $100,000 to Arlington County and Virginia state each in back taxes.

The Chapter 7 filing could mark the end of DCs expanding frozen yogurt trend, which began with a bang including an onslaught of openings 2009 and 2010 but has since petered out. Pinkberry arrived in DC in 2010.

Demand for credit card debt soars at fastest pace since the recession

The survey comes days after the Bank revealed that consumers borrowed a net
pound;1.25bn in November, another post-recession record, while gross consumer
credit reached almost pound;19bn.

The UK economy was driven by rising consumer spending in 2014, according to
the latest data from the Office for National Statistics. Household
expenditure was at its strongest for four years in the third quarter of the

The Bank survey yesterday showed that fewer customers were defaulting on their
debts during the quarter. A net 19.6pc of lenders said the default rate on
unsecured debt had fallen in the past three months.

However, same proportion of firms reported an increase in the amount of money
they had lost through default.

Gillian Guy, chief executive of Citizens Advice, said: Many families are
starting the year in the red. Credit card debt is the second most common
debt problem brought to Citizens Advice Bureaux. Demand for credit cards and
unsecured loans at its highest point for seven years is a warning that
people are struggling to pay everyday costs.

Meanwhile, demand
for mortgages has dropped at the sharpest rate since

For small businesses, credit continued to evaporate over the final months of
2014. Lenders said credit availability was flat, after a net 9.4pc reported
a fall in the prior quarter, while a net 14.6pc said overall demand for debt
was falling among small firms.

With credit availability to small firms expected to weaken in the coming
months, the findings from the latest credit conditions survey reinforce the
case for more radical action by financial institutions, the regulators,
the ministers building up the British Business Bank and the Bank of England
itself, which must do so much more to build up a liquid market for SME
debt, said Adam Marshall, director of policy and external affairs at the
British Chambers of Commerce.

Meanwhile, more than 30pc of lenders said demand was increasing among
medium-sized businesses and a net 5.8pc said that large firms were
increasingly keen to take on debt.