Report: Goldman Mulls Sale of Litton

Published April 14, 2011

| Reuters

Goldman Sachs Group Inc's mortgage servicing unit, Litton Loan Servicing, has attracted bidders including Ocwen Financial Corp and Carrington Holding Co, sources familiar with the matter said.

Litton could fetch up to $500 million or so in the auction, which has advanced to the second round, the sources said, declining to be named because the sale process is not public.
Goldman is offering 85 percent financing for the deal, which would be used to finance roughly $2.5 billion of "advances."

Goldman spokesman Michael DuVally and Carlington spokesman Chris Orlando declined to comment. Ocwen did not return a call seeking comment.

Companies like Litton, which collect mortgage payments from borrowers and foreclose on properties, make advances to mortgage owners when a loan goes bad, to cover things like principal and interest payments.

Goldman bought Litton in 2007 for about $430 million. At the time, many banks looked at buying servicing arms to gain useful information about home loan performance for their mortgage bond trading businesses.

Those acquisitions did not look as attractive a few years later, as high delinquencies and foreclosures have cut into profits of many servicing businesses. In recent months foreclosure practices have also attracted regulatory attention and bad publicity.

Ocwen is a mortgage servicer that has been buying businesses from banks in recent months. Carrington is the parent of a family of real estate-related companies, including investment management and residential mortgage lending businesses.

On Wednesday, major housing lenders agreed to costly fixes to their foreclosure practices as part of a settlement with a group of U.S. bank regulators including the Office of the Comptroller of the Currency and the Federal Reserve

JPMorgan Chase & Co said on Wednesday that it could be forced to hire up to 3,000 new staff members to comply with the settlement, and the bank took a $1.1 billion charge to reflect its extra expenses.

"PROCESS ISSUES"

Goldman began considering a sale of Litton late last year, as the mortgage-servicing industry began facing greater scrutiny for its foreclosure practices.

Federal and state authorities launched probes into mortgage servicers' practices after they discovered employees had been foreclosing on homes without the right documentation.

Although regulators settled with big banks this week, parties including state attorneys general, the Housing and Urban Development Department, and the Department of Justice are still investigating foreclosures.

Goldman acknowledged it was reviewing Litton's practices in October because of what Chief Financial Officer David Viniar characterized as "process issues."

The auction is advancing quickly now, with Goldman holding management meetings this week for the potential buyers, the sources said.

Last May, Ocwen bought a $6.9 billion servicing portfolio from Morgan Stanley's Saxon Mortgage Services. Ocwen also bought Barclays U.S. mortgage servicing business HomEq for $1.3 billion last year.

The auction follows last month's sale of servicer Green Tree Credit, partly owned by private equity firm Centerbridge Partners, to mortgage portfolio owner Walter Investment Management Corp in a $1 billion deal. 1/8ID:nASA01TN1 3/8

(Reporting by Paritosh Bansal; additional reporting by Al Yoon and Lauren LaCapra, editing by Dave Zimmerman)

((paritosh.bansal@thomsonreuters.com +1 646 223 6113; Reuters Messaging: paritosh.bansal.reuters.com@reuters.net))

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