Goldman Sachs to Cash in Big Time With the Litton Loan Servicing Purchase

This is a very interesting purchase by Goldman Sachs. The question that many people will ask is “why the hell would anyone want to buy a company that services a tremendous amount of  adjustable rate mortgages; AKA, suprime slime?”

Because servicing subprime mortgages is a very profitable business, that’s why!

Take this quote for Bloomberg;

Subprime loans are made to people who have weak credit. With home lenders refusing to refinance borrowers who might default, “the loans stay in the portfolio longer, making them more valuable,” Richard Bove, an analyst at Punk, Ziegel Co., said in an interview last month when the Litton sale was announced.

What he is essentially saying is that borrowers are “trapped” in these loans and they will not be going anywhere anytime soon. So, we are going to capitalize on these “weak” and less credit “worthy” subprime borrowers because they can’t refinance, thus we can milk every damn dime we can to increase our bottom line before they default and eventually we foreclose on them.

It’s not over yet, boys and girls.

Then we’ll send it to our REO servicing division, where we will continue to make big money because that property is sure not going to sell anytime soon and in fact, it may be years before that over priced home sells. Thus, the money wil be rolling for years to come.

Money was made by the truck loads when these toxic loans were originated by lenders and then packaged and sold on Wall Street. There’s not a whole lot of that happening right now, so now, the money is in servicing them.

That’s an easy prediction, given today’s current real estate market, that is only getting worse by the second.

Remember Moe, tells it like it is. In middle class layman’s terms. This is just a simple capitalistic business formula and these guys sure are capitalists. Right? Their business is to make money, regardless of how it’s done, as long as it’s all withing the scope of the law and to be honest, that is being questioned by many mortgage servicing industry watchdogs like myself.

More from Bloomberg;

Credit-Based Asset Servicing and Securitization LLC, a subprime mortgage investor written off by its owners, completed the sale of its Litton Loan Servicing business and named Goldman Sachs Group Inc. as the buyer.

The sale allowed C-Bass to reach an out-of-court restructuring with its creditors, the New York-based company said in a statement today. Litton deals with homeowners on behalf of mortgage companies if the borrowers don’t pay their bills on time. While terms weren’t announced today, Radian Group Inc., part owner of C-Bass, said last month the unit would be sold for about $467.9 million to an unnamed acquirer.

Goldman, the world’s largest securities firm, may be betting it can pick up Litton at a depressed price. C-Bass’s owners wrote off their entire equity investment of more than $900 million this year, even while Litton continued to operate. Chief Financial Officer David Viniar said in September that his firm was hunting for “distressed assets.”

The reason why Goldman bought Litton Loan Servicing;

Goldman bought the company “because it’s a recognized leader in the loan-servicing sector,” said Michael DuVally, spokesman for the New York-based securities firm. “Given the stress in the residential mortgage market, a premium is being placed on quality workout-servicing capabilities, for which Litton is very well-known.”

C-Bass was among more than 100 mortgage lenders and investors forced to halt operations or find buyers in 2007 amid the worst housing slump in 16 years. Its majority owners were MGIC Investment Corp. and Radian, the nation’s No. 1 and No. 3- ranked mortgage insurers.

Blackstone Group LP advised C-Bass, which received legal counsel from Hunton and Williams.

Katie Monfre, a spokeswoman for Milwaukee-based MGIC, Tim Lynch a spokesman for Philadelphia-based Radian, and Peter Cerwin, a spokesman for New York-based C-Bass, didn’t return voicemail messages left after business hours.

I suspect will see many more acquisitions, massive consolidations and some very unlikely alliances forming in the near future.


Posted in Mortgage News | 27 Comments

27 Responses to “Goldman Sachs to Cash in Big Time With the Litton Loan Servicing Purchase”

  1. [...] unknown wrote an interesting post today onHere’s a quick excerpt… company that services a tremendous amount of adjustable rate mortgages; AKA, suprime slime?” Because servicing subprime mortgages is a very profitable business, that’s why! Take this quote for Bloomberg; Subprime loans are made to […] [...]

  2. JacMac says:

    This NY Times Article appears online today: “Central Bankers to Lend Billions in Credit Crisis”

    “A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.”

    “Economists said the move was intended to deal with specific problems in the interbank lending market and would not allay the biggest problems in the credit markets related to the weakening American housing market, where prices are falling and defaults and foreclosures are rising.”

    “Central bank officials first discussed the plan as early as September, but discussions were put aside when markets appeared to stabilize in October. They were revived this month in conference calls among officials of several nations.”

    THIS PART IS VERY INTERESTING:

    “When markets are functioning properly, banks easily and regularly borrow money from each other at rates that are only slightly higher than what the United States government, considered one of the world’s safest borrowers, pays when it issues Treasury bills. Like homeowners who borrow against the value of their property, banks borrow against the securities they own. But with markets increasingly uncertain about the quality of banks’ holdings, lending between banks has slowed and become more expensive. Banks are also less likely to extend loans because they need to hold more capital on their books.”

    Read the full article here:

    http://www.nytimes.com/2007/12/13/business/13fed.html?pagewanted=1&th&emc=th

  3. Moe says:

    All I can say is that this is a sign of the times.

  4. Heather says:

    For those of you needing info for HomeQ, visit loansafe.org…Many of us have posted KEY contact information to reach them…You can also message me there VIA momof3boys…Best of luck to you all!

  5. Moe says:

    Thanks Heather!

  6. lookoutdownbelow says:

    I cannot believe the comments I am reading above.
    Are you all stating that you had no idea that your loan rates would adjust? That you did not know what you signed?
    If I were a servicer, I would ask you all if the income you put down on the applicantion and/or signed off on was correct(?)

  7. Larry says:

    I need a forbearance lender ASAP, property is located in Albany, NY; that will do a refi/rate & term, value is $100k, need 85%-65% ltv, if you can help or no of anyone please contact me at: 800-963-2603 x117!

    Thanking U N Advance,
    Larry!!

  8. sswiz says:

    Lookoutdownbelow,
    Yes we knew our rate would adjust. And yes the income did match what was put on my application at the time. But Last January My wife was put on medical bedrest. And we lost a significant amount of income after that. And she has been unable to return to work. So before you make silly comments you should know the truth.

  9. marcy says:

    I have been trying to get a modification with INDYMAC for over 3months and they have been giving me a run around. recently, i found that they are a part of the HOPE NOW ALLIANCE and so is my PMI company. I made contact with the PMI group and they since contacted indymac to try to work out a modification and now they are telling me i need to consider a short sale instead. I spoke to management at PMI group and they told me they had given INDYMACE some options for me previously, I think that INDYMAC is really not trying to work with me to keep my home. I am now waiting to hear back from the PMI company and INDYMAC to find out the results. Has anyone had good experience with Indymac? I’ve heard lots of bad things about this lender

  10. Tom says:

    Marcy,

    What contact info did you use for the PMI Group and how did you find out they hold your insurance. I asked my services who my PMI was with and they wouldn’t tell me, I have searched all my docs and can’t find that out. The mortgage servicer told me that PMI is strictly for the lender and does not communicate with borrowers, is that not the truth?

    Thanks,

    Tom

  11. marcy says:

    sure, your lender will tell you that. they told me the same thing. I went to the Hopenow.com site and checked to see what lenders were under their alliance. surely, my lender, Indymac was and I saw PMI group.
    I then went to pmigroup.com and found a contact and emailed them. 2days later someone called me and when i gave them my name at first they seem not to know anything, I stated my situation and the person took my social security number and some other information, put me on hold for around 15mins. when he came back he asked me some pertinent questions and told me that they are my pmi carrier.
    try going to the website pmigroup.com and call or email them, if they are not the carrier, i am sure they can advise you. Your lender should tell you who is you carrier ( now i know that)

  12. Virginia says:

    The borrower pays the “private mortgage insurance” but it is for the benefit of the lender. If the loan defaults, the private mortgage insurer pays the percentage of coverage that was taken out on the loan with the lender as the beneficiary. FHA loans have MIP which is similary. I am curious as well how Marcy got in contact with the PMI company that insured her loan OR maybe she is talking about something else? Tom, your servicer was correct in a typical situation. With these loan modifications, I’m not sure but would like to know.

  13. marcy says:

    Tom, I am sorry
    I did answer your question, see above i just forgot to put your name.
    hope it was helpful
    http://www.pmigroup.com

  14. marcy says:

    virginia,

    I called PMI group and spoke to someone there, they asked me for information and then told me they are my pmi company, Yes, i know that it is insurance for the lender and it benefits the lender, however, The manager of loss mitigation at PMI group asked me “did I get a certificate?” of course i never got one but at the end of our conversation, he gave me my certificate number. And no my loan is not fha.

  15. marcy says:

    tom

    I am not saying that your pmi company may be the same as mine but hell its worth a shot.
    you have nothing to loose by making a call
    you have everything to gain

  16. marcy says:

    virginia,

    I went to http://www.pmigroup.com
    it was luck, trust me because my servicer did not give me any information.

  17. Tom says:

    Thanks, that works for me – I’ll try the same route.

    Appreciate the assist.

    Tom

  18. Virginia says:

    Marcy~

    I have no knowledge of loss mitigation and that end of the mortgage industry, so please bare with me……what benefit does contacting the PMI company have for you? Will it help with the negotiation because they are picking up a percentage of the loss? I am truly interested on how that works.

  19. Tom says:

    For a modification to occur, the investors and the PMI Co have to agree to any modification, short sale, short refi, deed in lieu, etc. proposed by the loan servicer for these events to occur. That is my understanding, but it is solely what I have read on sites such as these. Would be interested in finding more about how this works myself and have done searches on the internet but have found very little on the subject. I’m sure each set of investors, servicer, and insurance company has different requirements though. For example, if the PMI will only pay in the case of a default, the lender/investor won’t work with the borrower because then they wouldn’t be able to make a claim against the PMI company. Some have said this is why some lenders and servicers prefer to go to foreclosure rather than cooperate with buyers for modifications. Although, I’m not real sure one way or another. Perhaps someone else in the business or Moe can interject more.

    Tom

  20. Susan says:

    Any information for HOMEQ SERVICING on LOAN MODIFICATIONS. We had issues with taxes being paid and now a 300.00 increase in payment and a reset in June coming, will make payment 800.00 more. WE NEED A LOAN MODIFICATION…any help? Please email us for those who are going thru this with HOMEQ

    dcgames4sale@hotmail.com

    Thanks
    Susan

  21. R. Whelan says:

    Hi,

    I’m also looking for some advice & guidance. My situation is the following:
    We missed last month’s mortgage payment of $2500.00 (almost $300 of this payment is PMI)
    We called Countrywide and they told us we could do a repayment plan , they also referred us to some other dept. and told us they would be in contact in a few week.
    We are making last month’s payment (April) this month. And will attempt to pays this month’s payment by the end of the month which will be extremely difficult, nothing like 2 30 day late payments in a row on your credit report….
    We also have an equity loan payment of 600.00 a moth which we always make on time.
    The bigger problem here is that the total amount owed on both the 1st and Second Mortgage is approx $300,000. My home at this point is probably been devalued to about 260,000 if I am lucky even though we’ve made numerous improvements… What can I do???? We don’t want to foreclose, we don’t want to sell, we don’t want to claim bankruptcy. I just want to get my payment lower if possible…. Please help!

  22. Carrie says:

    Hi R. Whelan,

    I feel for you, and I know how difficult dealing with COUTNRYWIDE can be. I found this awesome forum:
    http://www.loansafe.org more specifically:
    http://www.loansafe.org/forum/countrywide-home-loans-tell-us-your-countrywide-story/
    this forum is dedicated to help homeowners and the specific part of the site only to CountryWide homeowners. This site has been a blessing for me and my family and you will see that you are not alone !!!!
    People on this site will help you and guide you through the right departments etc to get you the help you need to modify your loan since you are not able to refi as I was.
    GOOD LUCK on your CW journey and wish you success.
    Carrie
    Miami, FL

  23. Rich Blake says:

    I am a freelance journalist working on a story for ABC News.com and Institutional Investor magazine, about Goldman Sachs and risk taking. Would like to interview someone re more on why Goldman is in the subprime servicing business, if possible, email me back and we can set something up. I will give LoanWorkout.org a mention. Thanks.
    Rich Blake

  24. [...] What we do know is that at the end of the day, the remains of C-BASS were sold off to the Archon Group umbrella, owned by… Goldman Sachs. [...]

  25. [...] What we do know is that at the end of the day, the remains of C-BASS were sold off to the Archon Group umbrella, owned by… Goldman Sachs. [...]

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