There aren’t many Americans who are aware of this fact, but the truth is that Berkshire Hathaway has been steadily and quietly putting themselves in a position where they will play an important role in the mortgage market that Bank of America, and others, are currently shying away from at this time.
Did you know that Berkshire Hathaway is actually in a bidding war with Nationstar Mortgage Holdings? They are bidding to receive the assets of ResCap, which is actually the fifth-largest mortgage servicer in the nation, behind such major financial institutions as Citigroup, J.P. Morgan Chase Bank, Bank of America and Wells Fargo.
Whoever wins this bid is going to instantly become a large player in the mortgage servicing industry, and they will have the ability to collect the debts of 2.4 million home loans once this deal is complete. The significance of the move they’re trying to make is that many of the other larger banks, with the one exception being Wells Fargo, is that they are all choosing to pull out of this facet of the financial services industry. In particular, Bank of America has been regularly selling off the rights to their mortgage servicing business.
This week is very important for the United States housing market, and we are looking for a quiet shift in this industry as new details come about. How is this going to happen? Ocwen Financial Corp., which happens to be the 13th largest mortgage servicer, and Fortress Investment Group, the company that owns a Nationstar, are going to be reporting the results of their second quarter earnings this Thursday in the morning.
You can definitely expect that Fortress is going to be asked plenty of questions about Warren Buffett’s battle for ResCap, and I wouldn’t be surprised if Ocwen management also gets questions about the specific topic, since they have expressed their own interest in purchasing the assets of ResCap.
Another potential area you might want to find out more details is with Bank of America selling off their mortgage servicing rights. They have sold the rights to over 15,000 loans so far, even though the United States Justice Department is currently reviewing them which is holding up the sales. This is according to the CFO of Bank of America, Bruce Thompson, on July 18 when his company reported their earnings.
When asked about the delay in loan sales, Thomas predicted that it would last between one to two quarters. What would really be interesting is finding out what Fortress and Ocwen have to say in regards to purchasing MSRs from Bank of America.