Bloomberg News

Goldman Sachs Said to Be Poised to Sell Litton Unit to Ocwen

June 02, 2011

June 3 (Bloomberg) -- Goldman Sachs Group Inc. is closing in on the sale of Litton Loan Servicing LP to Ocwen Financial Corp., two months after writing down the value of the mortgage- servicing business by about $200 million, according to a person briefed on the negotiations.

The sale of the unit to Ocwen, a mortgage servicer based in West Palm Beach, Florida, may be announced within days, said the person, who spoke on condition of anonymity because the talks are private.

Litton, based in Houston, is among the mortgage-servicing businesses cooperating with investigations by 50 state attorneys general into foreclosure practices. The probe began after authorities discovered some firms used faulty paperwork to seize homes.

The inquiries “may result in the imposition of fines or other regulatory action,” Goldman Sachs said in its quarterly regulatory filing with the U.S. Securities and Exchange Commission on May 10. “As of the date of this filing, the firm is not aware of foreclosures where the underlying foreclosure decision was not warranted.”

Michael DuVally, a Goldman Sachs spokesman in New York, said he couldn’t comment. John Britti, executive vice president at Ocwen, didn’t return telephone and e-mail messages left after regular business hours yesterday.

The potential sale was reported earlier by the Financial Times.

Impairment Charge

Litton’s value has declined since Goldman Sachs purchased it in 2007 for an undisclosed sum. Most of a $220 million impairment charge that Goldman Sachs took on assets held for sale in the first quarter was related to Litton, the bank said. Litton’s mortgage-servicing rights were “not material” to Goldman Sachs as of March, having dropped from $283 million at the end of February 2008, filings show.

Goldman Sachs acquired Litton and 1,000 employees at a time when investors including billionaire Wilbur Ross and Centerbridge Capital Partners LLC purchased mortgage servicers to help them better understand the market, and profit from buying discounted loans. Goldman Sachs said in March that it was considering selling Litton, and a person familiar with the matter said the firm had failed to find enough distressed mortgage loans to buy.

Goldman Sachs never disclosed how much it paid to acquire Litton from Credit-Based Asset Servicing and Securitization LLC, or C-Bass. Radian Group Inc., the second-largest U.S. mortgage insurer and a part owner of C-Bass, disclosed a month before the sale was completed that the unit would be sold for about $467.9 million to an unnamed buyer.

Before buying Litton, Goldman Sachs had tried to avoid businesses that involved the mass-market or “retail” customer. David Viniar, Goldman Sachs’s chief financial officer, told analysts in September 2006, more than a year before the company bought Litton, that the firm was reluctant to buy a lender because of the “retail concern.”

“Goldman Sachs is largely an institutional business,” Viniar said at the time. “There are different risks when you’re touching the retail customer.”

--Editors: Peter Eichenbaum, David Scheer

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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