Fannie Mae denies report of C-BASS servicer bid

NEW YORK (Reuters) - Mortgage finance company Fannie Mae (FNM.N) on Tuesday denied a report that it is considering a purchase of the residential loan servicing unit of C-BASS LLC, a joint venture of Radian Group Inc. and MGIC Investment Corp.

The American Banker newspaper on Tuesday said Fannie Mae, a government-chartered company, and investment bank Goldman Sachs Group Inc (GS.N) were seen as top bidders for the unit of C-BASS, which packages risky loans for sale to investors.

"We are not pursuing such an acquisition," Fannie Mae spokesman Brian Faith told Reuters.

A source familiar with the situation said Washington-based Fannie Mae abandoned talks that began several months ago.

C-BASS' servicing business, Litton Loan Servicing LP, collects payments on about $58 billion of mortgages, the American Banker said.

Fannie Mae, which has been making inroads with riskier mortgages, would view the purchase as a way of protecting its exposure to subprime, the newspaper said. A purchase by Goldman Sachs would give the New York-based company a greater presence in the industry, it added.

Goldman Sachs spokesman Michael Duvally declined to comment on a potential bid.

Radian (RDN.N) and MGIC (MTG.N) have said their $1.03 billion investment in the company could be worthless. MGIC had been counting on the sale of C-BASS, which pooled risky loans for sale to investors, before abandoning its proposed acquisition of Radian last month.

(Additional reporting by Patrick Rucker in Washington)