Goldman's Litton purchase seen closing in 60 days
By Joseph A. Giannone and Al Yoon
NEW YORK, Oct 16 (Reuters) - Goldman Sachs Group Inc (GS.N) has emerged as the final bidder for Litton Loan Servicing LP, the subprime mortgage servicing unit of Credit-Based Asset Servicing and Securitization LLC, and a deal could close in 60 days, people familiar with the situation said Tuesday.
Goldman Sachs, the world's largest investment bank by market value, has been in talks with C-BASS, a subprime mortgage investment venture jointly owned by MGIC Investment Corp (MTG.N) and Radian Group Inc (RDN.N), for about a month.
Negotiations surrounding the complex transaction could still break down. Obstacles to reaching the finish line include getting approval from C-BASS creditors and ultimately from every state mortgage regulator where Houston-based Litton does business, the sources said.
Litton, which serviced $6.58 billion of loans at the end of June, is expected to fetch $400 million to $500 million in a sale, one person familiar with the matter said.
Goldman Sachs and C-BASS declined to comment.
Goldman Sachs Chief Financial Officer David Viniar said last month that the recent turmoil had created opportunities to buy mortgage assets. Previously Goldman Sachs had shied away from mortgage accusations. Viniar also predicted the beaten down U.S. mortgage market "was closer to a bottom."
MGIC in September terminated a merger agreement with Radian, citing weakening conditions in mortgage markets. At the time, the companies said they were still pursuing a previously announced sale of C-BASS, though the venture had plunged in value.
Servicing businesses remain in demand because they are less vulnerable to swings in credit cycles and tend to produce steadier results. Litton sends out bills, collects payments and handles escrow accounts for home borrowers.
Servicing companies can be a counter-cyclical business. The 12th-largest U.S. subprime servicer also negotiates changes to mortgages, helping struggling borrowers pay their debts, and handling foreclosures.
Morgan Stanley's (MS.N) Saxon Mortgage Services on Tuesday acquired the mortgage servicing rights and advances of NovaStar Financial Inc NFI.N, a residential mortgage lender that has been scrambling to stay afloat, for $175 million in cash, subject to closing adjustments.
That transaction, which does not include NovaStar's servicing business itself, is expected to close Nov. 1
Morgan Stanley acquired Saxon Capital last year as the platform for building a larger residential mortgage business. After this summer's meltdown, Morgan said it would cut 600 origination jobs, though it expanded servicing.
Investor Wilbur Ross last month offered to pay $435 million for the servicing business of American Home Mortgage Investment Corp (AHMIQ.PK), which is in bankruptcy. Hedge fund Carrington Capital Management bought the servicing business of bankrupt New Century Financial Corp NEWCQ.PK for $184 million.
Goldman bought residential servicer Avelo Mortgage, and in February acquired South Carolina lender Senderra Funding.
C-BASS, which buys subprime mortgages and repackages them into securities, in August hired Blackstone Group (BX.N) as its financial adviser. MGIC and Radian on Sept. 5 warned that their C-BASS stakes worth $1 billion in June, probably had no value.
