When the bidding commenced for the mortgage servicing assets of Residential Capital Corp. on Tuesday morning just two firms showed up at the auction: Nationstar and Ocwen Financial which is working with Walter Investment Management Corp., according to industry advisors tracking the deal.
Late Tuesday the bid process was still active up until 8 p.m. and was being held at the Sheraton Hotel in lower Manhattan, said one source. ResCap is in bankruptcy. It services roughly $365 billion of MSRs.
A servicing executive familiar with the process, and requesting anonymity, said based on what he’s heard, the MSRs could wind up in the hands of Nationstar.
Also, according to a report from investment firm Sterne Agee, the Federal Housing Finance Agency—which likely will have a final say on the transfer of any GSE servicing rights controlled by ResCap—is making some noise about representations and warranties on the MSRs.
The FHFA apparently “will not automatically walk away from any unfunded rep and warranties related to its servicing assets, estimated at $74.5 billion,” the firm put out in a research note to clients.
Sterne Agee has ‘buy’ ratings on Ocwen and Walter, but a ‘neutral’ call on Nationstar, which was spun off by Fortress Investment Group earlier this year.
The research firm added, “The bidding is not over yet...and we do not know what resolution will be worked out with the FHFA.”
The MSRs alone could be worth north of $1 billion but the bidding “has driven that price up” said a source.