Nationstar is the “stalking-horse bidder” in Tuesday’s rights auction, which may spill over into Wednesday. This means that it will win the auction unless someone tops its $2.45 billion bid by at least the $20 million breakup fee Nationstar gets if another buyer prevails. Nationstar would keep ResCap servicing in the United States, although it would probably cut some of the jobs, based on its history.
(A few months ago, Warren Buffett’s Berkshire Hathaway made a pitch for the servicing business that forced Nationstar to improve its bid. However, Buffett doesn’t seem likely to be a player Tuesday. Berkshire Hathaway is also a major shareholder in The Washington Post Co.)
Ocwen has a less-than-wonderful relationship with Fannie Mae, which is the biggest player in the mortgage business and would have to approve any transfer of servicing rights on its mortgages, which are the majority of ResCap’s servicing pool. Hence a third company, the Green Tree subsidiary of Walter Investment Management, is hovering around the auction.
Like Nationstar, Green Tree is a high-touch servicer that hires people in the United States and has a good relationship with Fannie. Green Tree has apparently combined with Ocwen to bid jointly on the portfolio, according to people familiar with the maneuverings. If they have combined and prevail at the auction, it seems likely that a good number of ResCap servicing jobs — but not all of them — would be outsourced. (Green Tree and Fannie both declined comment.)
Even though Fannie has never made formal announcements, people in the industry say that Fannie has sometimes insisted on servicers keeping a U.S. presence before allowing them to take over the rights to service Fannie mortgages. Fannie is said to be considering issuing rules restricting transfer of servicing of Fannie mortgages out of the country — but so far, it hasn’t done so.
Meanwhile, folks in Waterloo wait and worry about the auction results,
“When I started, I was 21, I was a kid,” says Sharon Robinson, who in 28 years has risen from mail clerk to a top consumer-service post. “I wanted full-time employment and benefits, and I was just going to stay here until I found something better. And I haven’t found something better; I’ve never even had a reason to look.” After next week, however, that may no longer be the case.
Fortune magazine staffer Erika Fry contributed from Waterloo, Iowa.