One Hand Washes the Other: GOLDMAN SACHS SELLING LITTON LOAN SERVICING TO OCWEN

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“Dealing with individual homeowners and individual borrowers just doesn’t fit the rest of Goldman’s business,” said Susquehanna’s Hilder. “The decline in home prices overwhelmed any benefit.”

 

EDITORIAL COMMENT: The most interesting part of this story is that for most people, it never occurred to them that Goldman Sachs owned Litton Loan Servicing. Litton has been the subject of repeated investigations into abuse of its position in servicing loans. But more than the fact that the complaints against Litton are really complaints against Goldman is WHY DID AN INVESTMENT BANK OWN A MORTGAGE SERVICING COMPANY AT ALL? The fact is that the investment banks actually owned the servicing companies. They were selling garbage to investors, while at the same time they were able able to keep the wraps on the fact that there were no mortgages in the pools, and that the mortgages and notes were nearly all defective without reformation (needing a signature by the Judge or the Borrower).

The bottom line is that the investment banks had the cash and the keys to your home before you even signed on the dotted line.

Goldman Sachs Will Sell Litton Loan Servicing to Ocwen for $264 Million

By Christine Harper – Jun 6, 2011

Goldman Sachs Group Inc. (GS) agreed to sell Litton Loan Servicing LP to Ocwen Financial Corp. (OCN) for $263.7 million in cash, ending the New York-based bank’s 3-1/2 year experiment in processing home-loan payments.

In addition to the cash payment, which may be adjusted at closing, Ocwen will pay about $337.4 million to retire some of Litton’s debt, according to a filing by West Palm Beach, Florida-based Ocwen. The sale of Litton comes two months after Goldman Sachs wrote down the value of the mortgage-servicing business by about $200 million.

“It really makes sense for them to sell it, and better for them to sell it sooner rather than later,” said David B. Hilder, a New York-based analyst at Susquehanna Financial Group LP who has a positive rating on Goldman Sachs. “They bought it at a time when the business was easier and it looked like there might be some insights to be gained in the mortgage market from having a servicer.”

Mortgage servicing firms send out bills, collect payments and handle foreclosures. Goldman Sachs acquired Litton, based in Houston, 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.

$41.2 Billion Portfolio

Ocwen is getting a portfolio of loans with about $41.2 billion in unpaid principal balance as of March 31, most of them non-prime home mortgages, the filing said. Ocwen agreed to finance about $2.47 billion of servicing advances associated with the business, the statement said. Advances include the principal, interest, taxes and insurance remittances that servicers must make to securities trusts even when homeowners fall behind on those payments.

Goldman Sachs will remain liable for fines and penalties that could be imposed by government authorities relating to Litton’s foreclosure and servicing practices before the deal closes, the statement said, and Goldman Sachs will share some of the losses arising out of claims from third parties, such as investors and borrowers, in connection to servicing agreements.

Fines and Penalties

Litton 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.”

Litton’s value has declined since Goldman Sachs purchased it in 2007. 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.

Keeping ‘Certain Assets’

“Goldman Sachs does not expect the sale to have any material impact on earnings in the second quarter due to the combination of the sales price and the impairment charge announced in the first quarter of 2011 primarily related to Litton,” the bank said in a statement today, adding that the company plans to retain “certain assets.”

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. (RDN), 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.

“Dealing with individual homeowners and individual borrowers just doesn’t fit the rest of Goldman’s business,” said Susquehanna’s Hilder. “The decline in home prices overwhelmed any benefit.”

Ocwen’s Advance

In contrast to Goldman Sachs’s falling stock price this year, Ocwen’s shares gained more than 30 percent in New York Stock Exchange composite trading through last week. The shares gained 7 cents to $12.57 as of 11:52 a.m. in New York. Goldman Sachs fell 72 cents to $134.61.

Ocwen agreed in May 2010 to buy HomEq Servicing, a mortgage-servicing business owned by London-based Barclays Plc (BARC), for about $1.3 billion in cash conditional on the value of certain assets at completion, according to a statement from Barclays at the time. Barclays also agreed to provide Ocwen with about $1 billion in secured financing in connection with the deal and offered assistance in raising more funds, the statement said.

Barclays advised Ocwen on the purchase of Litton and is one of the lenders, along with Bank of America Corp. (BAC) and Royal Bank of Scotland Plc, providing Ocwen’s new facility to finance Litton’s servicing advances. Ocwen has also received a commitment letter from Barclays to provide a senior secured term loan facility of $575 million to finance the transaction, the filing said.

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.”

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.

20 Responses

  1. I filed a 500 page complaint (1000 if you count the exhibits) against Litton, OCWEN, Goldman, Washington Mutual Bank, FA, JPMorgan Chase & Co, Debra Lyman, Stephanie Jackson, Ally, & Gmac. Allegations include FDCPA, Breach of HAMP and the 9/1/2011 agreement to withdraw cases with fraudulent affidavits, RICO, Mail Fraud, Bank Fraud, and FL estoppel statute. 11-CV-23267 US Dist Court, S. Dist of Florida. All out for service today.

  2. Reconstruct is made up of the old Countrywide employees according to a source from that agency and that does work in the scheme of things when BOA took over countrywide and is now both the owner of the note and owns the servicing group as well.

  3. […] See the rest here: One Hand Washes the Other: GOLDMAN SACHS SELLING LITTON LOAN … […]

  4. I read somewhere that the Marti Noriega of Litton Loan )CBASS, was marrying a Mark Goedicke, son of Judy (Jewel) Sheffield, (Barclays) and it seems that Barclays is assisting Ocwen with some sort of financing, for this purchase from Goldman. Just found this information could be of some help to others in one way or another.

  5. Exactly BSE. I’ve said time and time again how we’ve been sold down the river like slaves of old.

    If the government of the United States wanted to fix this problem, they could. Easily.

    But the true problem is that the government of the United States has been captured.

    A foreign entity couldn’t have possibly done the damage to our country and our myriad systems that were in place prior to the securitization of each and every soul’s value in this nation. By securitizing our current and future capabilities, based upon past, present, and implied future performance i.e. FICO scores, they’ve in essence reduced each and every one of us to chattel, we might as well have yokes around our necks pulling plows, while they toss down wine and mutton like a Caligula of old.

    No More. This is a class war. It’s them against us. So many here on LL want
    to come to peaceful conclusions…..like getting modifications and debt reductions….that kind of solution is just not possible. It’s either CORRECT the illegalities, or slog through them for generations to come.

    Wake up folks! It’s either them or us inhabiting this realm. IMHO, there’s no room whatsoever for them. Plenty for us. We need to get back the garden. Screw Wall Street. Death to Wall Street.

  6. Your neighborhood raped, ravaged, your equity vaporized, your savings fleeced and now your future gone forever. The criminals are clean and you are now enslaved to their wrong doings. .Remember who sold out the Red, White & Blue. Remember who created and promoted the mess. The government and enslaved us once again. Not my government but this is my country. Never again !

    Be a patriot – Stop your mortgage payment !

  7. What does it matter who in the administration is overseeing Mers? None of them are performing the tasks as appointed to them. The Mers consent order filed by the OCC simply says,”Please let us know that what you do is according to your rules and that everything is Kosher. Please do so within 60 days, unless you need more time, which will be granted at your request. Please assure us that what you’re doing is cool, so that we appear to be doing our jobs and won’t get called out by anybody anywhere for anything. You have been warned.

    Signed,

    Your Humble Servants,

    OCC
    FED
    FDIC
    OTS
    FHFA

  8. To SaveAmericaOne:
    Been wondering the same thing , and I find it strange, since OCC has been defending the banks. What skulduggery is afoot???

  9. BOA owns their servicing company and they also own ReconTrust who is the company that sends out the foreclosure notices for BOA. Sounds like there aren’t any checks & balances if they basically own the entire process. They can do what ever they’d like, charge whatever they’d like, and no one is there to stop them. What a nice little scheme… It should be against the law for the big banks to make another profit by dumping the servicing companies on someone else after they’ve made their illegal millions. Kind of like selling a lemon car to your mother. No scruples.

  10. Does anyone else wonder why OCC given Supervisory powers over MERS?
    Why was not the FTC in charge?

    ———————————————————————————————–

    Litton Mortgage Servicing LLC (Salt Lake City) UT Established 11/28/2008 flows up to Goldman Sachs Bank USA 2182786) (2008)

    Litton Consumer and Corporate Servicing LLC (3957534) Est11/28/2008 (flows to Goldman Sachs Bank USA#1 on 12/31/2008

    Litton Loan Servicing LP (3796180) flows up (2008)

    LLS Commercial Servicing LLC (4012971) flows up (2008)

    —————————————————————————————-
    12/31/2010 HDMA Characteristics:
    Note: Goldman Sachs Mortgage Company (2476195) flows to Goldman Sachs Bank USA #1.

    #1 Parent Goldman Sachs Group #1 – Financial Holding Company (2380443) NY

    (Flows to #1) Goldman Sachs Bank USA #7 (2182786) (0002182786 FRS Goldman Sachs BK USA) New York (State Member Bank)

    (Flows to 31) Archon Group LP #2 (3982947) Irving TX

    (Flows to #2) Avelo Mortgage LLC #3, (3983047) Wilmington DE

    (Flows to #1) Archon Gen-Par, Inc. #4 (3982983) New York

    (Flows to #4) Archon Group LP #5 (3982947) Irving TX
    (12/31/2008 Archon Capital (Non-Pooling) LP (4005030) ;;right to Goldman Sachs Mortgage Co.

    (Flows to #5) Avelo Mortgage LLC #6 (3983047) (20-2657082) Avelo Mortgage LLC, Wilmington DE (#6 floes to #5, Flows to #4 flows to #1)

    Note: 12/31/2008 Asset Funding Company III, LLC (3956368) flows to Goldman Sachs Mortgage Co.

    ——————————————————————————
    Repository of financial data and institution characteristics collected by Federal Reserve System characteristcs

    MSFraud.org > Forums > Litton Loan/Goldman: NEW PROBE BY SECA new probe opened by the SEC, and appears to be backed by a number of suits has found Goldman dumped up to and most likely more than 2 BILLION of mortgages that they knew were toxic/ Then the puchase of Litton Loan to dispose of them by guess what? “MANUFACTURED FORCLOSURE” There is a lot more to come of this, keep your eyes on the SEC and suits out of NYC.

    Jan 28, 2010 … Litton W Edwin form 4 sec filings insider trading and stock options: reveal insider stocks held, purchased, sold, and stock options awarded

  11. Goldman’s Litton Loan Servicing LP & Ocwen & Barclays:

    What’s Barclays plc, 1 Churchill Place, London E14 5HP UK
    (Banking, Financial services, Real estate)
    got to do? Got to do with it? May 12 2011
    “Are Real Estate Foreclosures A Viable Option For Lenders In Dubai?”

    In September 2010, the Company completed the sale of HomEq Servicing to Ocwen Loan Servicing LLC. In April 2011, Carlyle Group sold The Mill to the Company’s Barclays Private Equity.

    Ocwen Financial Solutions Private Limited dba Ocwen
    4th ,5th & 6th Floor,Salarpuria Aren
    24, Luskar, India Tel: 8066671234

    Ocwen Financial may acquire Goldman’s Litton Loan Servicing business (5/20/2011 report)

    According to Reuters, Ocwen Financial Corporation, a provider of asset management services, is leading an auction to acquire Litton Loan Servicing LP, a mortgage servicing unit of Goldman Sachs Group, Inc.

    Goldman Sachs Group Inc acquires Litton Loan Servicing LP from Radian Group Inc Dec 10 2007 Litton Loan Servicing, LP (A Subsidiary of Goldman Sachs Group) US – Goldman Sachs Group Inc (GS) acquired Litton Loan Servicing LP (LL), a provider of loan servicing services, from Credit-Based Asset Servicing & Securitization LLC (CB), a joint venture between Radian Group Inc and MGIC Investment Corp (MI). MI was…

    Linda Remsberg acquires NoteWorld LLC from Goldman Sachs Group Inc Dec 06, 2007 …US – Ms Linda Remsberg acquired NoteWorld LLC, a provider of escrow services, from Litton Loan Servicing LP, a unit of Credit-Based Asset Servicing & Securitization LLC.…

    USI Holdings Corp acquires Armitage & Co Oct 09, 2007
    …US – USI Holdings Corp, a unit of the GS Capital Partners LP subsidiary of Goldman Sachs Group Inc’s Goldman Sachs & Co unit, acquired Armitage & Co, a provider of property and casualty and surety products and services.…
    …US – USI Holdings Corp acquired Treadwell & Harry Insurance Agency, a provider of property and casualty insurance services.…

    (Money Products) Goldman Sachs Group Inc acquires a minority stake in BackOffice Associates LLC Jan 10, 2008

    …US – Goldman Sachs Group Inc acquired an undisclosed minority stake in BackOffice Associates LLC, a provider of data quality and data governance solutions services, for $## mil.…

    Goldman Sachs Group Inc acquires Money Partners Ltd from Kensington Group PLC Jan 09, 2008.
    …UK – Goldman Sachs Group Inc of the US acquired Money Partners Ltd, an Uxbridge-based provider of financing services, from Kensington Group PLC (##.#%) and other undisclosed sellers.

  12. So what happens now to the homeowners who are in the midst of foreclosure. Goldman had suspended many of the foreclosures under Litton. My mortgage is in foreclosure – the second set of attorneys, case dismissed and then reopened. It’s been ongoing for 6 years – these matters are opening up the issue further. I can’t find a competent attorney [any ideas? Ohio] Back to the question, does Ocwen just pick up where they left off? How does one find out if their mortgage was “let go” in the 200million bailout by Goldman in the sale? What happens now?…

  13. If original paperwork signed by homeowner is found to be “fraudulent”, doesn’t that mean part of the damages able to be won would include every penny paid to the servicer from point of signature?
    Why don’t more lawyers push for this? Is it because judges don’t really understand what the heck is going on??? Or what constitutes fraud???

  14. Shelly – a good post, that is exactly the type of thing I think Carie was referring to, not to mention the fact that Wall Street controls the loan from day one under the seller servicer agreement with the servicer.

    In otherwords what better way to control the fraudulent acts that were bestowed and would continue to be betstowed on the homeowners – just purchase a servicing company.

  15. wrongful behavior does not necessarily mean illegal behavior – for example, by not having adequate loan servicing personnel, that was not illegal, but it was wrongful for the servicer to expect to be able to service the type of dangerous loan programs that had been originated.

    Same thing with wrongful origination. Some of those actions are out and out illegal and tagged as fraud or whatever criminal aspect can be proved. But wrongful origination does not necessarily mean the action was illegal. Many times, loan officers will put the wrong borrower in a loan that was not the one best suited. But that does not mean it was illegal. Yes we had a lot of illegal originations, no question – and now the whole industry is geared to assuming everything anyone did was illegal, fraudulent, you name it.

    I simply was trying to tell you about the better days for the industry.

  16. Goldman Sachs saw the greed in servicing fees and the easy way to cause defaults with controls at every level of banking, to cause defaults and foreclose and steel houses for free, and they got caught with their hands in the pie. The servicing companies or departments they purchased, as they knew it were the banks control mechanism where all the pilfering, stealing, and incentives are to steal the HAMP money and then pretend to give mod loans, while paralleling foreclosure, and actually telling borrowers to default for insurance money then drag them into foreclosure, stealing money and funds for fees from the investors without the real investors having control of anything, not knowing the con game going on to steal from them and then to steal a free house, or I shoud say free houses from millions of homeowners and their families. The servicer had the major controls to steal!!!!!!! The banksters knew the defaults were being pushed forward in record amounts, so they could bet against the defaults and steal in the stock market, and they could steel insurance money for the people like me and millions that were told to fall behind to get the mod, that it was the only way I could qualify and I would receive help., then have us pay mods just to turn around and disqualify us after five or six mod payments, then tell us the mod payments were now considered partial payments so you are in foreclosure status and must come up with over twenty five thousands including late fees or be foreclosed on. Americans were tricked and drug into foreclosure. The banks knew this was their scheme, and then they could claim “they were behind, they deserve the foreclosure.” All this treasury has cause a domino of economic loss, that caused the next wave of homes lost, caused by more incomes lost by Americans until it has reached epidemic portion, all caused by the bank that thought owning the service companies could hide all the fraud that has come out. They just got caught and are trying to sell off their mistakes they so arrogantly tried to pull off, thinking they would not get exposed. If they think investors will trust them know they are wrong.

  17. @seniorauthor

    What is the difference between “wrongful behavior” of originators, and “illegal behavior” of originators?

    Have the words “sloppy” and “wrongful” replaced the words “illegal” and “fraudulent”???

    It’s mind-boggling…or as our infinitely eloquent ex prez Bush once said: “It boggles the imagination…” huh?

  18. What a shame it has come to this. In 1984-05, Litton Loan Servicing was either the first or among very few at the time, that opened their doors for business, without being a retail loan originator of loans.

    They were able to sell Fannie and Freddie on the idea, that this would be specialty servicing group and that they could do a good job. And they did for some time to come.

    Litton was given a chance to show their stuff when they took on portfolios from troubled mortgage companies which were already in the business of servicing and originating loans, and who fell short of F & F’s seller and servicing criteria.

    We all know about the adjustable rate and neg am loans that were produced in the early 80’s that helped bring about the failing of that era to some degree..

    Job loss in tandem with the new programs were a critical factor for so many people losing their homes, not to mention the fraud that came into play at the time of origination. However, It just did not compare with what has gone on in this last decade.

    Litton was a fine company who knew what to do and they were successful and it would be here at this time, that I believe Fannie and Freddie were the best of the best with respect to the monitoring and quality control of their loans. If a servicer did not perform, it did not take them all day to decide if the servicer got a second chance. F & F were on the side of the homeowner even though they did not deal directly with the homeowner or take complaint calls except in very unusual situations. What they did do though was immediately decide whether or not to cancel their relationship with such mortgage bankers that participated in wrong doing.

    As a trouble shooter for the troubled mortgage companies on assignment, I was one of the first on the list to ship out the loans that had been improperly originated and serviced by

    At any rate, those days are gone and the mindset, honesty and integrity with it..

    When I found that Goldman Sachs had purchased Litton, I thought to myself, nothing unusual here. They are just going to assure that whoever servicers their loans is on their side. After all, anybody with half a brain in the 2002 period would have known that the wrongful behavior of originators was going to hit the fan. And it did.

  19. Ocwen agreed to finance about $2.47 billion of servicing advances associated with the business, the statement said. Advances include the principal, interest, taxes and insurance remittances that servicers must make to securities trusts even when homeowners fall behind on those payments.

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