(Reuters) - Nationstar Mortgage Holdings Inc (NSM.N) and a team of Ocwen Financial Corp (OCN.N) and Walter Investment Management Corp (WAC.N) are the only bidders competing at an auction on Tuesday for Residential Capital LLC’s mortgage business, a source familiar with the situation said.
Other possible buyers had previously expressed interest in ResCap’s mortgage servicing and lending business, including Warren Buffett’s Berkshire Hathaway Inc (BRKa.N).
Reuters reported on Friday that Nationstar and the Ocwen were bidding for the mortgage business and that they were emerging as the leading contenders.
Nationstar’s $2.45 billion offer was the opening bid in the auction. But the Ocwen-Walter consortium last week bid about $40 million more to move the process forward to Tuesday’s auction, another source told Reuters. The bidding process started at 10 a.m. at a New York hotel.
Nationstar’s shares closed up 1.5 percent to $34.86 on Tuesday. Ocwen’s fell 1.7 percent to $36.20, while Walter’s were down 2.1 percent to $40.69.
ResCap and Nationstar declined to comment. Ocwen and Walter could not be immediately reached.
ResCap, the mortgage unit of auto lender Ally Financial Inc, filed for bankruptcy in May in an effort to wipe out legal liabilities from mortgage-backed securities it sold during the housing boom.
Berkshire argued in bankruptcy court for the right to be the opening bidder for the mortgage business, but failed to unseat Nationstar. It did get Nationstar, majority owned by Fortress Investment Group LLC (FIG.N), to increase the opening bid by $125 million.
Nationstar and Ocwen are growing non-bank mortgage servicers that have been buying operations shed by larger banks such as Goldman Sachs Group Inc (GS.N), Morgan Stanley (MS.N) and Bank of America Corp (BAC.N).
Mortgage servicers collect payments from borrowers and help modify loans when borrowers fall behind. Banks are pulling back from the business because operating costs have soared since the housing bubble burst. New capital rules have also made it less favorable for banks to hold onto mortgage servicing assets.
Ally, which is 74 percent owned by the U.S. government after a series of bailouts, is looking to focus on U.S. auto lending and banking after taking huge losses on ResCap’s mortgages.
The former lending arm of General Motors Co (GM.N) on Tuesday agreed to sell its Canadian operations to Royal Bank of Canada as it sells international businesses to speed up repayment to taxpayers. <ID: nL1E8LN21R>
Berkshire Hathaway has set the low bid for a loan package that ResCap is also selling at $1.44 billion, topping Ally, which had said it would buy the loans if no one else did.
Reporting By Rick Rothacker in Charlotte, N.C.; Editing by Leslie Gevirtz