New Lease on Life for Lenders

Goldman Sachs(GS Quote) is the latest in a string of buyers interested in acquiring mortgage-servicing businesses.

The New York brokerage titan is reportedly in acquisition talks with Litton Loan Servicing, the Houston-based residential subprime mortgage servicer that is a subsidiary of Credit-Based Asset Servicing & Securitization, more commonly called C-Bass.

Litton specializes in servicing the most troubled loans, defined as "seriously delinquent mortgage loans." The firm has a loan portfolio of approximately $55 billion, according to its Web site.

Goldman's interest comes as more companies and private investors are eyeing what is perhaps a nugget of gold in the messy heap of the U.S. mortgage industry -- the servicing of mortgage loans.

Wilbur Ross, the 69-year-old billionaire turnaround investor, plans to acquire the mortgage-servicing business of now-bankrupt American Home Mortgage. Private equity behemoth Cerberus Capital is buying the servicing business of H&R Block's(HRB Quote) struggling subprime lender Option One. It also owns a 51% stake on General Motors' financing business GMAC, which services both mortgages and auto loans. Dallas-based private equity firm Lone Star is buying servicing assets in its renegotiated purchase of Accredited Home Lenders(LEND Quote).

Part of the strategy in buying a servicing business is that firms are also purchasing distressed assets at steep discounts, observers say. Companies have the ability to profit if they can work out better loan terms for borrowers in trouble -- therefore avoiding foreclosure -- and eventually selling or securitizing the mortgages.