This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

ResCap Bidders See Opportunity Where Buffett Wants Probe

NEW YORK ( TheStreet) -- Ocwen Financial (OCN - Get Report)'s CEO sees "plenty of room to participate" in bidding on ResCap's $2.6 billion mortgage origination and servicing business, though creditors including Berkshire Hathaway (BRK-B) are seeking a broad-ranging investigation that could torpedo the sale process.

ResCap, the long-struggling mortgage division of Ally Financial and the nation's fifth-largest mortgage servicer behind Wells Fargo (WFC), Bank of America (BAC - Get Report), JPMorgan Chase (JPM) and Citigroup (C), filed for Chapter 11 bankruptcy protection May 14. Simultaneous with the filing, ResCap proposed to sell its "primary and most valuable assets," for a total of $3.9 billion, including a legacy loan portfolio valued at $1.3 billion in addition to the origination and servicing business.

Berkshire Hathaway Chairman Warren Buffett. Berkshire's attorneys say Ally may be open to claims it wants a "quick and easy divorce through bankruptcy" from ResCap and its mortgage liabilities.

ResCap selected Nationstar Mortgage Holdings (NSM - Get Report) as a "stalking horse bidder" for the origination and servicing assets, essentially meaning it is the bid backed by ResCap's management. Meanwhile, it proposes to sell the legacy loan portfolio back to Ally.

But speaking to investors Tuesday at the KBW Mortgage Finance Conference in New York City, Ocwen CEO Ron Faris made it clear he hasn't given up on the origination and servicing assets, which include servicing rights for 2.4 million homes.

"I don't think I've had one person talk to me in the last few days without asking about ResCap," Faris told the audience, comprised largely of institutional investors. "It looks like the deal on the table is at a level where other players-- Ocwen, potentially others--are likely to come in and try to participate in the process. We think there's plenty of room to participate in that process and we anticipate spending time on that. I think there's also a possibility, albeit just my own opinion--speculative--that somehow some way the portfolio gets broken up into pieces because it's such a large portfolio."

Faris added he believes owners of the loans, including U.S. government agencies Fannie Mae (FNMA.ON), Freddie Mac (FMCC.OB), Ginnie Mae as well as other holders of residential mortgage backed securities containing loans serviced by ResCap "may feel more comfortable if the portfolio gets split up amongst a few different parties."

A competing bid from Ocwen, which became the nation's largest subprime mortgage servicer after acquiring Litton Loan Servicing from Goldman Sachs (GS) last year, should hardly come as a surprise. Ocwen has repeatedly been flagged as a potential bidder for ResCap's mortgage servicing portfolio, and Ocwen CFO John Britti said on the company's May 3 earnings call ResCap was "certainly that's something that's in our sights."

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.70 0.42%
FNMA $2.68 -1.11%
NSM $25.47 0.35%
OCN $7.96 2.80%
AAPL $132.72 1.90%

Markets

DOW 18,130.02 +49.88 0.28%
S&P 500 2,121.67 +3.98 0.19%
NASDAQ 5,102.6690 +10.5840 0.21%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs