Nationstar, Ocwen and Walter fight over ResCap: sources
Ocwen Financial Corp and Walter Investment Management Corp have teamed up to top Nationstar Mortgage Holdings Inc's starting bid for Residential Capital LLC's mortgage business , ensuring a bankruptcy auction goes ahead next week, two sources familiar with the matter said on Friday.
The consortium offered to buy the mortgage business for $40 million more than Nationstar's $2.45 billion opening bid, one source said. Nationstar was expected to make an updated bid, another source said.
Several other potential buyers that had shown interest in the business, including private equity firm Blackstone Group and technology company IBM Corp , were not expected to submit offers, one of the sources said, potentially leaving Nationstar and the Ocwen-Walter group as the main contenders.
ResCap, the mortgage unit of auto lender Ally Financial Inc, filed for bankruptcy in May in an effort to wipe out legal liabilities from mortgage-backed securities it sold during the housing boom.
Ally, which is 74 percent owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap's mortgages. It is also selling international businesses to help pay back taxpayers.
Residential Capital and Ocwen declined to comment. Spokespeople for Nationstar, Walter, Blackstone and IBM could not be immediately reached.
Bids were due by the end of business on Friday for ResCap's mortgage platform, as well as a portfolio of loans. The private auction begins on Tuesday at a New York hotel.
Warren Buffett's Berkshire Hathaway Inc has set the low bid for the loan package at $1.44 billion, topping Ally, which had said it would buy the loans if no one else did.
Berkshire also argued in bankruptcy court for the right to be the opening bidder for the mortgage business, but failed to unseat Nationstar. It did get Nationstar, majority owned by Fortress Investment Group LLC , to increase the opening bid by $125 million.
It was not clear whether Berkshire planned to submit another bid. Two other sources familiar with the auction, but not close to Buffett said they did not expect Berkshire to enter the fray for the mortgage business.
Berkshire "does not normally discuss our activities other than when we're legally required to do so," said Buffett's assistant, Debbie Bosanek.
The ResCap sale is expected to raise at least $4 billion, which will then become part of a pool of money used to pay back Ally and other investors, including those who bought mortgage-backed securities tied to ResCap home loans that went bad.
Nationstar, Ocwen and Walter have been building up their mortgage servicing businesses by buying assets shed by larger banks such as Goldman Sachs Group Inc , Morgan Stanley and Bank of America Corp . Ocwen also agreed this month to buy Homeward Residential Holdings from private-equity firm WL Ross & Co LLC for $750 million in cash and stock.
(Reporting by Rick Rothacker in Charlotte, North Carolina and Jessica Toonkel in New York; Additional reporting by Paritosh Bansal, Nick Brown and Caroline Humer; Editing by Gerald E. McCormick and Bernadette Baum)