After much speculation about who would acquire bankrupt Residential Capital’s loan portfolio, Berkshire Hathaway has emerged as the winning bidder following a lengthy loan auction process.
The conglomerate Berkshire – which is run by billionaire Warren Buffett – beat out a consortium of other investors with a $1.5 billion bid, allowing it to obtain the Residential Capital loans from the subprime mortgage unit of the debtor. The acquisition by Berkshire is still subject to the bankruptcy court’s final approval. The Residential Capital portfolio is made up of roughly 47,000 whole loans, and a hearing to finalize the sale will take place on November 19. Residential Capital said that $1.5 billion bid was the highest it received, and slightly more than the previous minimum $1.442 billion bid Berkshire had offered in June, according to The Associated Press.
In a separate loan auction for the company’s mortgage servicing and origination assets, Ocwen Financial Corporation won with a $3 billion bid, beating out Nationstar Mortgage Holdings. Nationstar was previously dubbed the stalking horse bidder in the auction, and earlier in the year, Berkshire unsuccessfully tried to beat the non-bank mortgage servicer for the rights to the mortgage assets. In the final auction, Nationstar said it declined to top Ocwen’s bid, which will give it servicing rights to 2.4 million mortgages valued at roughly $374 billion.
Residential Capital filed for Chapter 11 protection under bankruptcy law in May after buckling under large bond payments and court costs for faulty mortgages. Parent company Ally Financial is not part of bankruptcy proceedings, and has attempted to quickly dismantle Residential Capital in order to distance itself from the failed mortgage unit and repay roughly $17.2 billion it received from the government from the Troubled Asset Relief Program.