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ResCap to Pay Fannie Mae $298 Million to End Sale Objection

JAN 24, 2013 12:09pm ET
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Residential Capital LLC, the mortgage company liquidating assets in bankruptcy, agreed to pay $297.6 million to end opposition by government-run loan investor Fannie Mae to the sale of ResCap’s main business.

The Federal National Mortgage Association agreed to drop its objection to the $3 billion sale of ResCap’s mortgage servicing unit to Ocwen Financial Corp., according to a court filing last night in U.S. Bankruptcy Court in Manhattan.

Fannie Mae, as Federal National is known, is the biggest owner of loans generated by ResCap. Fannie Mae had demanded the so-called cure payment as compensation for any losses that may be caused by ResCap’s bankruptcy filing.

Other investors that bought ResCap-generated mortgages are still negotiating with the company on the size of their potential cure payments. The sale to Ocwen can’t close until those objections are either overruled by the court or settled.

Once Fannie Mae gets the money, its objections “shall be deemed to be fully and finally resolved and/or satisfied,” lawyers Todd Goren for ResCap and David Neier for Fannie Mae said in the filing.

The payment has two parts, according to the filing: $265 million will be considered a cure payment and $32.6 million will cover a debt owed to Fannie Mae under its agreements with ResCap.

Ocwen Financial won an Oct. 24 auction for the loan servicing unit with a bid of $3 billion. The next day, Berkshire Hathaway Inc. won an auction for a portfolio of ResCap’s loans with a $1.5 billion offer.

New York-based ResCap filed bankruptcy in May to with plans to sell its major assets and resolve legal claims related to mortgage loans. The company is owned by Ally Financial Inc., a Detroit-based auto lender majority owned by U.S. taxpayers.

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