Fannie Prefers Berkadia for Conseco

Even though CFN Investment Holdings was the winning bidder for Conseco Finance, the bankrupt manufactured housing and home equity lender, Fannie Mae prefers that losing bidder Berkadia take over the servicing portfolio for the government-sponsored enterprise's Conseco-related securities.

A Fannie Mae spokeswoman confirmed that it has reached an agreement with Berkadia to service the manufactured housing securities the agency owns or guarantees from St. Paul, Minn.-based Conseco Finance. Berkadia is a venture between Warren Buffett's Berkshire Hathaway, Omaha, Neb., and Leucadia National Corp., New York.

Berkadia agreed to use Fannie Mae's servicing protocol. In return, Fannie Mae agreed to waive the securitization adequate protection lien, to increase the servicing fee to 125 basis points and to designate only Berkadia as the successor servicer.

Attempts to reach an agreement with CFN were not successful, she added. CFN bid $700 million to acquire the assets of Conseco Finance, excluding Mill Creek Bank, which went to GE Consumer Finance, Stamford, Conn., for $310 million.

Fannie Mae owns or guarantees close to $10 billion in manufactured housing securities and Conseco Finance services 70% of those, the spokeswoman said.

CFN consists of J.C. Flowers & Co. LLC, Birmingham, Ala., Fortress Investment Group LLC and Cerberus Capital Management, both of New York.

The transaction still needs approval of the Bankruptcy Court for the Northern District of Illinois in Chicago.

According to a spokeswoman for Conseco Finance, the judge in the case, Carol Doyle, overruled Berkadia's objection to the sale. There was a hearing on the matter scheduled for Thursday, March 13th, after this newspaper's deadline.

Included in the Berkadia objection was a post-auction bid for Conseco Finance, but the spokeswoman did not know for what amount it was.

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