Warren Buffett's Berkshire Hathaway Inc. (BRKa: Quote,BRK-A: Quote,BRK-B: Quote) is seeking to buy the mortgage assets of Residential Capital LLC, the bankrupt mortgage unit of Ally Financial Inc. (GJM: Quote), according to media reports on Monday.
Berkshire is seeking to replace Nationstar Mortgage Holdings Inc. (NSM: Quote) as the "stalking horse" bidder for ResCap's $374 billion mortgage portfolio. Nationstar Mortgage is owned by Fortress Investment Group LLC (FIG: Quote).
Berkshire is also said to be willing to become the stalking horse bidder for the part of ResCap's loan portfolio that Ally Financial is seeking to buy.
According to media reports, Berkshire has offered to pay about $50 million more than Ally Financial's bid for the loan portfolio. The company is also said to be willing to match Nationstar Mortgage's bid for the servicing business with a lower break-up fee and expense reimbursement.
In mid-May, Ally Financial said its troubled mortgage unit ResCap filed for Chapter 11 bankruptcy, paving the way for the auto lender to focus on its profitable auto finance and banking operations.
Ally Financial is 74 percent owned by the U.S. government after it received a bailout of more than $17 billion during the financial crisis, as part of the government's broader rescue of the auto industry. Ally still owes about $12 billion to the U.S. Treasury. The company is a former financing unit of automaker General Motors Co. (GM).
At that time, ResCap said that Nationstar Mortgage will make a stalking horse bid valued at about $2.4 billion in ResCap assets, while Ally Financial will make a stalking horse bid for up to $1.6 billion of ResCap-owned mortgages.
Bloomberg had reported in May that Warren Buffet had tried to buy ResCap before it was placed in bankruptcy. However, Ally is said to have declined the offer as it believed the mortgage unit was better protected from future liabilities through a bankruptcy filing and sale.
Berkshire, one of ResCap's largest creditors, has reportedly raised questions over ResCap's proposed deals with Nationstar Mortgage and Ally Financial. The company is said to have pushed for the U.S. Bankruptcy Court to approve the appointment for an independent examiner to investigate the deals as well as past transactions between ResCap and Ally.
On June 18, Bankruptcy Court Judge Martin Glenn is scheduled to consider approving auctions for the assets and name Nationstar Mortgage and Ally as the initial bidders.
BRK-B closed Monday's trading at $80.28, down $1.08 or 1.33 percent on a volume of 3.87 million shares.
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by RTT Staff Writer
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