Ocwen Loan Servicing, LLC and Walter Investment Management Corp. outbid Nationstar Mortgage Holdings and received preliminary approval for the purchase of Residential Capital's (ResCap's) mortgage servicing and origination assets.
Ocwen's $3 billion was the highest bid for the assets, which went to auction Tuesday. The final sale is contingent on approval in Bankruptcy Court November 19.
ResCap, a wholly owned subsidiary of Ally Financial, now owned by the government and taxpayers, is one of the nation's largest mortgage originators and servicers. ResCap filed for Chapter 11 bankruptcy in May.
According to Ocwen, ResCap was servicing over 2.4 million loans with an unpaid principal balance of approximately $374 billion at the end of March. Of those loans, about 68 percent were owned, insured, or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae.
Walter Investment Management will acquire the Fannie Mae mortgage servicing rights (MSR) portion of ResCap's portfolio, which represents a balance of about $50.4 billion.
In a statement, Mark J. O'Brien, chairman and CEO of Walter Investment said, ""We are quite pleased to have won the joint bid with Ocwen to acquire these assets on what we believe are very attractive terms. We believe our long-established relationships with Fannie Mae and history of driving strong performance from their portfolios makes us ideally suited to acquire the Fannie MSR portfolio from ResCap.""
Ron Faris, CEO of Ocwen commented, ""ResCap has been an outstanding performer in the mortgage industry. We share a common philosophy of foreclosure prevention through loan modifications that are net present value positive for investors.""
After being outbid by Ocwen, Nationstar declined to submit a higher offer.
Nationstar's final bid was $2.91 billion, according to the _Wall Street Journal._
While admitting disappointment, Nationstar CEO Jay Bray said, ""Price matters.""
""[I]n the end our judgment was that the price of the assets would not represent a compelling investment opportunity for us,"" Bray continued.
""ResCap will continue to work with all parties involved to ensure the best possible outcomes for its creditors and other stakeholders in its Chapter 11 cases,"" the company said in a brief statement Wednesday.
Ocwen and Nationstar were the only two bidders for ResCap's portfolio, according to the _Wall Street Journal._ Both servicers have been aggressive in growing their presence in the mortgage servicing sector as many large banks now look to exit the business.
Market reaction to the Ocwen deal has been strongly favorable,"" said Wilbur Ross of WL Ross & Co., which sold Homeward Residential Holdings Inc. for $750 million in cash and convertible preferred stock earlier this month, according to ""_Bloomberg Businessweek._