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Recent law school graduates and attorneys with experience in bankruptcy, litigation, ethics and corporate governance could find a silver lining in the clouds of the subprime credit crisis with more than half of law firms and corporate legal departments expecting to increase their staffing in the next 12 months, according to a new report from legal staffing giant Robert Half Legal.

The study shows that 45-percent of the surveyed law firms and legal departments anticipate new hires, with only 3-percent of those interviewed expecting staff reductions.

The areas that are in highest demand include bankruptcy, followed by litigation, ethics and corporate governance and intellectual property, the study concluded. The survey includes the opinions of 300 attorneys who were interviewed by an independent research firm.

“Caseloads are rising, both in corporate legal departments and within law firms,” said Charles Volkert, executive director of Robert Half Legal. “A higher volume of litigation and an ongoing focus on corporate governance mandates continue to drive legal hiring activity.”

Volkert believes the attorneys interviewed were basing their staffing predictions on past market history.

“Attorneys surveyed may be reacting to recent economic reports and the possibility of slower growth -- leaner times have historically led to increases in bankruptcy proceedings and, with it, higher demand for specialists in bankruptcy law,” he said.

Below are the Survey Results from Robert Half Legal:

The attorneys were asked about their expectations for staffing levels in the next 12 months:

45-percent expect increases
50-percent expect it to stay the same
3- percent expect decreases
2- percent were uncertain

The following are their votes on what practice areas will expand:

25-percent expect bankruptcy
24- percent said litigation
17-percent said ethics and corporate governance
16-percent said intellectual property
6-percent said real estate
2-percent said corporate/commercial
2-percent said healthcare
1-percent said mergers and acquisitions
1-percent said labor and employment
3-percent said other
3-percent said uncertain

If you thought “The War of the Roses” was just a movie, think again. Apparently, a couple fighting over assets—namely a house—and doing so at the detriment of their own health, or the health of their real estate, is not fiction after all.

Just ask Reggie McMullin with Keller Williams Realty in Hurst, Texas. Reggie remembers one couple that let a divorce linger so long that it cost them the value on the very asset they were fighting for.

McMullin said the home in question had a flat roof and was built in a neighborhood that was considered posh in the 1960s.

Reggie received the call to do the BPO once the property hit foreclosure. Three years later, he still can't forget the rotting home he found.

Once he stepped in, he found the roofs rotting from all the water that had entered the property, mold on every wall board and a hole in the roof of a closet that was so deep you could see the blue sky above. Because of excessive water leaks, the home's electrical box was completely rusted, which is almost unheard of.

Reggie says what followed was a “nightmare.” The original goal was to re-sell the home, but with mold everywhere and roofing problems that needed serious care, the loan holder eventually realized it was time to just sell.

Reggie says the morale of the story is simple: “It's better to sell a home, as is, than to rehab it, and then deal with legal liabilities later on.”

The other morale may go something like this: It's better not to go to war like the Roses, or you'll end up losing the very thing you've been fighting for, and leaving a rather inconvenient mess behind.

The 2008 Foreclosure Prevention Act (Senate Bill 2636) passed the U.S. Senate after Senators voted 84 to 12 Thursday in favor of the legislation.

The bill passed despite opposition from various industry and consumer advocacy groups, as well as the White House, which claimed earlier in the week that the bill favors the use of taxpayer money to bail out investors and lenders over solutions that would support additional aid for distressed borrowers.

Senate Bill 2636 also passed without a controversial measure that would have allowed judges to adjust existing principals on mortgage loans to aid borrowers. The Mortgage Bankers Association (MBA) criticized this provision heavily, saying new home buyers would end up footing the bill if property values were subjected to the whims of judges adjusting loan terms from the bench.

The MBA gave the revised Act its stamp of approval on Thursday.

“The bill contains a number of critically important provisions to help stabilize the mortgage and real estate market,” Kieran Quinn, chairman of the Mortgage Bankers Association said. “We support many of those, including the modernization of FHA, the expansion of mortgage revenue bond programs and additional funding for housing and credit counselors to help those borrowers who are facing difficulties making their mortgage payments.”

Consumer and affordable housing advocacy agencies, like the Association of Community Organizations for Reform Now (ACORN), stand in direct opposition to the MBA when it comes to the issue of loan modifications from the bench. ACORN expressed its displeasure Thursday when the bill passed without the cram down loan provision.

“ACORN members are disappointed by the Senate’s vote last week to kill a provision that could help 600,000 families facing foreclosure save their homes,” the association said in a press statement. “The Durbin amendment, which was offered to the Foreclosure Prevention Act, would have allowed bankruptcy judges to modify the terms of the mortgages of primary residences to achieve an affordable monthly payment when mortgage servicers refuse or are unable to make such modifications. Bankruptcy judges already have this power for second homes, vacation homes, yachts, and other major purchases, and the Durbin amendment would close the loophole preventing modifications on primary residences.”

Click here for more information about what's included in the Foreclosure Prevention Act

Seattle, Washington-based Washington Mutual, Inc., has announced plans to raise capital by allowing TPG Capital (TPG) and other investors to acquire $7 billion in WaMu equity securities and by closing the company's freestanding home loan offices.

In a statement about the transaction, WaMu added that TPG will acquire $2 billion in newly-issued securities, allowing the company to maintain the capital ratios needed to grapple with losses related to the company's home loan portfolios over the next two years.

In addition, WaMu's plan to provide capital security includes an executive decision to exit the wholesale lending business and an initiative to invest in retail bank branches and call center production, the company said in a statement. David Bonderman, a founding partner of TPG, has been appointed to WaMu's Board, and former Continental Airlines chairman and chief executive officer Larry Kellner will serve as a Board observer.

Along with TPG, WaMu says other investors are purchasing  securities, including some of the company's notable institutional shareholders.

“We're very pleased that TPG and these major investors have expressed their confidence in WaMu's underlying value and its growth potential,” said chairman and chief executive officer Kerry Killinger. “This substantial new capital – along with the other steps we are announcing today – will position us for a return to profitability as these elevated credit costs subside. With the support of these investors, we have every confidence in our ability to deal with today's market conditions and restore shareholder value.”

Property damage, a lack of funding on the seller's part and servicer hesitation are some of the chief reasons why short sales on pre-foreclosure homes fail, according to a recent study of real estate agents conducted by Campbell Communications.

Campbell Communications received 3,000 responses during its recent study—many of which placed some of the blame on servicers who are not willing to take losses on property values early on. Pre-foreclosure sales are significant in today's foreclosure-riddled marketplace with early sales having the potential to save a borrower from foreclosure via a transaction where the price is subsequently lower than the original value.

“One of the biggest obstacles cited by real estate agents in completing short sales is the delay in hearing back from mortgage servicers regarding a potential short sale,” the Campbell Communications Survey concluded. “On average, home listing agents reported it takes servicers 4.5 weeks to provide an answer on a potential short sale, resulting in many potential buyers simply walking away while awaiting a response to their offer. In contrast, mortgage servicers are much faster in providing a 'yes' or 'no' on REO sale offers as survey respondents reported a response time of less than two weeks on average.”

Despite experiencing problems with delays, Campbell Communications says in today's marketplace, pre-foreclosure short sales represent one in five transactions. The majority of these pre-foreclosures and short sales—approximately two-thirds—are initiated by the homeowner, while only one-third is prompted by the actions of mortgage servicers.

“Some of the delay in approving short sales appears to stem from a general reluctance by mortgage servicers to accept an up-front loss on a loan,” the Campbell study asserted.

A survey respondent elaborated on this by saying, “With rapidly declining prices, combined with 100-percent or greater financing, many of the sellers are so far in the hole that the mortgage companies are hesitant to accept what the market will bear, and end up forcing these [would-be] sellers into foreclosure. This results in months of lost time, huge legal fees and, in most cases, they get a home back in a much deteriorated condition, resulting in a net loss of thousands more than they would have had by agreeing to a short sale.”

The Campbell Survey also asked agents to rate the responsiveness of mortgage servicers when it comes to pre-foreclosures and short sales. The respondents gave favorable remarks to National City, HSBC Mortgage and Wells Fargo Home Mortgage, while the “lowest grades were given to Washington Mutual, American Home Mortgage and Aurora Loan Services," the Campbell study concluded.

Additional Data from the “Loss Mitigation in 2008: Real Estate Agents Report on Lender Practices”
(Source: Composed by Campbell Communications)

Significant Reasons Why Pre-Foreclosure/Short Sales Fail

- Home inspection/damage to property

- Seller would not sign deficiency note on short of mortgage balance

- Seller cannot pay real estate commission and/or HUD-1 closing costs

- Mortgage servicer attempted to reduce real estate commission

- Appraisal for buyer’s lender lower than contract price

Banking is no longer a local business, but an international one that is feeling the weight of the U.S. subprime credit crisis, the International Monetary Fund concluded in its latest Global Financial Stability Report (GFSR).

IMF says a convergence of factors—namely a failure to recognize the risks taken on by financial institutions, a lack of oversight among private managers and the weight banks are now feeling from write-downs on balance sheets—have raised concerns about the overall international economy.

“In sum, the global financial system has undoubtedly come under increasing strains since the October 2007 GFSR, and risks to financial stability remain elevated,” the GFSR said.

The report added that the private sector should respond by increasing transparency in lending, standardizing structured finance products, revamping rating systems, tightening oversight of originators, adding incentives for risk detection and financial instability prevention, encourage fair accounting, and strengthen international liquidity by analyzing the current use of multiple currencies and searching for a more unified form of currency.

IMF added in its GFSR that losses related to the U.S. subprime mortgage market and related securities could hit $565 billion, while other loan categories and originations could experience losses reaching as high as $945 billion.

While the markets begin the long work-out process, IMF warns policy makers about a “rush to regulate,” but definitely sees a larger role for itself when it comes to overseeing the international banking system.

“For its part, there is room for the International Monetary Fund to more actively promote best practices for financial crisis and central bank liquidity management,” the IMF asserted in the report. “These issues are covered in IMF Financial Sector Assessment Programs, and even greater efforts will be made to apply them in the IMF's bilateral and multilateral policy advice.”

The National Association of Realtors (NAR) said this week that its Pending Home Sales Index—which measures the number of housing contracts signed—dropped 1.9-percent between February and January of this year and was down 21.4-percent when compared to the same month last year.

“The slip in pending home sales implies we're not out of the woods yet, though an era of successive deep sales declines appears to be over,” said NAR's chief economist Lawrence Yun.

Despite the decrease, Yun predicts existing home sales will increase to a pace of 5.9 million by the fourth quarter of this year. He also expects activity to pick up this summer as improvements are made in the jumbo-loan market and new additions like the economic stimulus packet take effect.

“Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” said Yun. “We're looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”

According to NAR, housing conditions vary depending on market, with certain parts of the Southwest region standing out.

“Some parts of the country that can expect improvement include the Northeastern region and the oil-patch states of Texas, Oklahoma, Louisiana and Arkansas,” he added. “With lower interest rates and flat home prices in many areas, NAR's housing affordability index is forecast to rise 14-percentage points to 127.0 in 2008.”

Click here to read the full report.

With loss mitigation now the primary focus of many financial institutions and investors, Plano, Texas-based Strategic Recovery Group, LLC, has launched its Acqura Loan Services unit—a platform that will help lenders, hedge funds and investors find quality solutions for financial institutions and borrowers.

With expertise in loss mitigation, collection services for hedge funds, and risk-management technology, Acqura hopes its management team will benefit financial institutions and investors by giving them easy access to quality asset managers and risk assessment providers.

In a press statement, Acqura promotes its ability to provide analytics that detect underlying loan risk.

“The company has developed proprietary borrower risk modeling, known as Borrower Risk Factors (BRF) to score loans as they are boarded,” Strategic Recovery said in a statement. “This scoring is used to predict the level of loss mitigation that will be required and to assign the loan to the best team to handle it. On an ongoing basis, the entire population of loans is re-scored nightly to give the lender or investor insightful, up-to-date information. The company is also developing new more advanced predictive consumer behavior models tied to the underlying risks associated with borrowers and properties.”

David Vida, chief executive officer of Acqura and its parent company Strategic Recovery Group, says loss mitigation is one area where his company's new platform can find its niche.

“Typically, loss mitigation begins when something bad happens,” Vida said. “Our approach will allow us to be more proactive in anticipating events, such as resets or deteriorating credit, and to establish a profile and, hopefully, a dialogue with the borrower before the situation escalates. Our high-touch approach is designed to encourage cooperation from the borrowers, and to offer them customized payment plans and loan modification options to help them stay in their homes, if they want to and can afford their payments.”

Larger banks seem to be suffering more from subprime-related write-downs when compared to other smaller-to-mid sized banks, according to a new A.M. Best analysis report released this week.

A.M. Best Co. is a credit rating organization that evaluates the financial services, healthcare and insurance industries. In its latest report, A.M. Best added that “smaller banks are directly or indirectly facing credit problems with consumer mortgages similar to the largest 200 banks.”

The report also recognizes a dangerous trend, similar to the 1980s, where there seems to be a regional pattern to the credit crunch, with Texas being a noted exception, A.M. Best asserted.

In addition, A.M. Best data concludes that a survey of smaller banks ranking under the top 200 institutions showed Midwestern, Central, Southeastern and West Coast states as having the highest concentration of high non-performing asset rates, the report concluded.

The states with the worst asset quality include Alaska, Arizona and Arkansas, according to the report.

The Foreclosure Prevention Act of 2008 continues to generate buzz—this time from the Center for Responsible Lending (CRL), a consumer advocacy group that says leaving out loan modification provisions for judges is a big mistake.

This week, the Senate agreed to move forward with a bipartisan version of the bill—one that leaves out a controversial cram down solution that would have allowed judges to adjust loan terms from the bench.

The Mortgage Bankers Association (MBA) issued a statement supporting the removal of the provision and encouraged legislators not to move in that direction again.

MBA Chairman Kieran Quinn said, “I hope that Senators will keep their eye on that goal (the struggle of homeowners) and not attempt to attach to the bill partisan provisions such as bankruptcy cram down that would increase borrowing costs on all future borrowers and delay progress on this important bill.”

The CRL, on the other hand, says without the ability to help borrowers from the bench, the bill does little for homeowners who are now facing default.

“We are left with a bill loaded with special considerations for mortgage companies and builders that does very little for homeowners who were sold predatory loans by mortgage lenders,” said Quinn. “Any final bill hammered out between the U.S. House and Senate that is a serious effort to stem the foreclosure crisis must include meaningful relief to families to modify their mortgage in bankruptcy. Bankruptcy relief will stabilize communities, keep more than half a million families in their homes and provide lenders at least as much income as they would receive through foreclosure.”