This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Warren Buffett's Next Big Investment Idea Has Everyone Baffled

Stocks in this article: BRK-B NSM WFC OCN

NEW YORK ( TheStreet) -- Warren Buffett and Berkshire Hathaway (BRK-B) aren't exactly unknowns in the business community, so it is odd that their bid for Residential Capital LLC appears to be attracting relatively little attention in the mortgage servicing industry, where ResCap is the fifth-largest player in the U.S.

Buffett seems to want to keep the low profile going. Reached on his office phone, Buffett said, "I really can't help you. Thanks anyway," before hanging up.

Servicers act as middlemen in the mortgage business, collecting payments from borrowers and passing them on to lenders. Typically, they are the first point of contact for homeowners who have an issue with their mortgage, though homeowners often don't have a very clear understanding of who servicers are or what their role is.

The four largest U.S. banks are still the largest mortgage servicers, though with the exception of Wells Fargo (WFC), they are exiting the business as little-known names like Ocwen Financial (OCN) and Nationstar Mortgage Holdings (NSM) look to grow.

And then there is Berkshire, which lost out to Nationstar in a contest to be the opening--known as the "stalking horse"--bidder for ResCap's mortgage servicing portfolio on Tuesday. However, Berkshire succeeded in lowering the breakup fee that will be paid to Nationstar if it is not ultimately selected to acquire the portfolio, thereby increasing Berkshire's chances of winning it.

Berkshire came virtually out of nowhere this month to enter the bidding process, and it still seems to be having trouble being taken seriously by the mortgage servicing industry.

For example, Keefe Bruyette & Woods analyst Bose George expressed surprise in a note published late Monday after Berkshire raised its bid for the ResCap platform, which includes mortgage servicing rights on 2.4 million homes.

"The increased Berkshire bid suggests the company might be genuinely interested in purchasing this platform, which if successful could create a strong competitor. We originally assumed that Berkshire's only interest was in protecting its bond position," George wrote.

But Buffett's sudden interest in mortgage servicing still went unmentioned at a panel discussion in New York on Tuesday about investment opportunities in the industry at a conference hosted by National Mortgage News. Rather, the panelists appeared to be in agreement that interest in mortgage servicing rights (MSRs) is quite limited.

"Obviously supply is going to outstrip the demand from the seller's perspective on MSRs," said Rudy Orman, an executive at Residential Credit Solutions, a mortgage servicer that specializes in nonperforming loans. Orman made the statement matter-of-factly, as the preface to a question for fellow panelist Tom Piercy of Interactive Mortgage Advisors, about when pricing would "hit bottom."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs