Goldman moves closer to selling Litton: sources
NEW YORK |
NEW YORK (Reuters) - Goldman Sachs Group Inc's (GS.N) mortgage servicing unit, Litton Loan Servicing, has attracted bidders including Ocwen Financial Corp (OCN.N) 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 (JPM.N) 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 (MS.N) Saxon Mortgage Services. Ocwen also bought Barclays (BARC.L) 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 (WAC.A) in a $1 billion deal.
(Reporting by Paritosh Bansal; additional reporting by Al Yoon and Lauren LaCapra, editing by Dave Zimmerman)
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But life happens and somethings you just can’t control. I fell behind on my mortgage and I was determined that I would keep the family home. But I went through leaps and bounds to get my loan modified in 2007 to only get the modification finalized at the end of 2009 or early Jan 2010. They lost documents, I kept resending information that I already sent ie bank statments, check stubs, hardship letters etc…. By the time they finally got it all approved I feel I was forced to sign the aggreement to keep my home. Why was I forced you asked. The modification was now set at 4% from 7% on a $100,000 loan that didn’t originally escrow for property taxes or insurance which was an additional $3500-$4000 yr. Well by time they realized that the house wasn’t worth the $125,000 I paid for it, oh I forgot to mention that I had to take a second $25,000 mortgage through another lender (SLS) to buy the house. While working through the modification process, they realized that the property taxes and insurance wasn’t included, I was paying for that seperately. So as I continuouly called them to see where I stood in the finalization process the lady I spoke to told me they set up the new payment to escrow taxes and insurance, and that I should sign the last page and send the documents in right away once I received them….Fed-EX. Well I read over everything they sent only to find out that because of me falling behind and them adding in the escrow for property taxes and insurance they had to redo the loan for only $80,000. Essentially they told me that my new loan is 4% 30yr for $80,000 and that the remaining balance of $25,000+ that I owe would be due after the 30 year has been paid off. I’m like WHAT? I don’t understand. The lady told me that in order for the investor to approve my modification is for them to put that stipulation in so they could recoup all there money. I said are you kidding me, she said no, that if I didn’t sign they would essentially end up forclosing on my loan. I asked well once I pay off the $80,000 would you all finance this balance she said no, I asked why not she said that wasn’t there responsibilty it was mine. I was like OMG, I’m caught in a no win situation. I signed the papers and I pray for a miracle.
So for Goldman Sachs to own Litton then sell if off explains why Litton has such shady practices. I wonder how many other loan modifications have stipulations like mine (I have the copies of the original document to prove it anyone wants to see). They don’t care about the average Joe who just want to live the american dream of owning a home and keeping it. It makes me think that Litton has some shady accounting practices going on.
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