Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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      C-BASS To Sell Servicing Unit To Goldman For $500 Million -Source
      Dow Jones

      NEW YORK -(Dow Jones)- Credit-Based Asset Servicing & Securitization LLC, a subprime-mortgage investor struggling for cash, known as C-BASS, is expected to sell its mortgage-servicing unit to Goldman Sachs Group Inc. (GS) for about $500 million in coming weeks, according to a person familiar with the matter.

      The unit, Litton Loan Servicing, which is known for reworking troubled home loans, could help Goldman manage credit risk at a time when the nation's delinquency rate on home mortgages has reached a five-year high and investors are fleeing securities stuffed with risky mortgages, this person said. New York- based Goldman ranks No. 10 among the underwriters of mortgage-backed securities.

      A spokeswoman at C-BASS, New York, wasn't immediately available to comment. A spokesman at Goldman declined to comment.

      C-BASS hired Blackstone Group LP (BX) in August to help obtain capital as the panic in the mortgage-bond market - triggered by investors' growing aversion to owning risky debt securities - choked off its funding. The firm, founded in 1996, specializes in buying at a discount mortgages to people with weak credit, servicing those loans and repackaging them into mortgage-backed securities to sell to investors. Mortgage insurers MGIC Investment Corp. (MTG) and Radian Group Inc. (RDN) each own 46% of the company.

      Both insurers, which last month decided to end their proposed merger, have said the "unprecedented" disruptions in the market for risky mortgages might have wiped out the value of their stakes in C-BASS, which were worth more than $ 1 billion in June.

      Goldman, long known for its opportunistic investing skills, has signaled lately that mortgage prices appear to be nearing a bottom.

      "There are going to be opportunities in the mortgage business," Chief Financial Officer David Viniar told analysts after reporting its third-highest quarterly profit in its history. "There are certainly going to be opportunities to buy distressed assets. Timing is going to be very important."

      Unlike rivals such as Morgan Stanley (MS), Lehman Brothers Holdings Inc. (LEH) , Bear Stearns Cos. (BSC) and Merrill Lynch & Co. (MER), Goldman has largely stayed away from originating residential mortgages. Instead, it buys loans from mortgage brokers and other banks.

      Goldman already runs Avelo Mortgage LLC, a small servicing firm that is part of Archon Group LP, a commercial mortgage and real estate management unit it owns, according to American Banker.

      Servicing companies such as Litton generate fees in good and bad times, and also can give pricing insights on the loans that Wall Street trades and packages into securities. Goldman joined the rest of Wall Street in marking down the value of some of its loan inventory in its fiscal third quarter, but was the only one of four firms reporting last month that booked big mortgage trading gains.

      "It is absolutely essential for market participants to understand the value of what they hold so they can manage the associated risks," Viniar said in an analysts' conference call. "While it is certainly more challenging to value many of these positions because of the current lack of liquidity, there is in fact a significant amount of evidence available."

      Goldman earlier this year bought Senderra Funding LLC, a small South Carolina- based lender to borrowers with sketchy credit histories, largely on the reputation of its founder Brad Bradley, who founded the subprime mortgage lender EquiFirst Corp. in 1990.

      Fannie Mae (FNM), the government-sponsored mortgage-finance giant, also expressed interest in buying Litton Loan Servicing, Dow Jones Newswires has reported. It is no longer pursuing the deal.

      -By Lingling Wei, Dow Jones Newswires; 201-938-2089; lingling.wei@dowjones.com

      -By Jed Horowitz, Dow Jones Newswires; 201-938-4047; jed.horowitz@dowjones.com

      (Damian Paletta contributed to the report.)

        (END) Dow Jones Newswires

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      TommyD

      What would be the benefit to the borrower with Goldman Sachs takeover or just on going nightmare??

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      Why would some one buy a company that deals in unscrupulous business practices and fraudulent behavior. 

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      .
      ??????? wrote:

      Why would some one buy a company that deals in unscrupulous business practices and fraudulent behavior. 


      Because they'll make money. The media has bought into the sub-prime BS that anyone with a sub-prime loan is a deadbeat with bad credit so it's not the company's fault they're in trouble.

      Blame it on the borrower and rape and pillage at will.
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      . is right.  "Because they'll make money."
      http://biz.yahoo.com/e/061109/mtg10-q.html
      Form 10-Q for MGIC INVESTMENT CORP

      9-Nov-2006 Quarterly Report
      Our results of operations are also affected by income from joint ventures. Joint venture income principally consists of the aggregate results of our investment in two less than majority owned joint ventures, Credit-Based Asset Servicing and Securitization LLC ("C-BASS") and Sherman Financial Group LLC ("Sherman").
      C-BASS: C-BASS is primarily an investor in the credit risk of credit-sensitive single-family residential mortgages. It finances these activities through borrowings included on its balance sheet and by securitization activities generally conducted through off-balance sheet entities. C-BASS generally retains the first-loss and other subordinate securities created in the securitization. The mortgage loans owned by C-BASS and underlying C-BASS's mortgage securities investments are generally serviced by Litton Loan Servicing LP, a subsidiary of C-BASS ("Litton"). Litton's servicing operations primarily support C-BASS's investment in credit risk, and investments made by funds managed or co-managed by C-BASS, rather than generating fees for servicing loans owned by third-parties.

       
       
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      Nye Lavalle
      The benefit to Goldman would be to keep the lid on all the bad loans and allow them, like Bear and EMC, to DUMP some of their "toxic waste" on unwiting investors!
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      O -
      Sounds like the shell game, Hide the NUT!

      Speaking of bad  mortgage company's CITI's not doing so great since BUYING Ameriquest ......


       
      Bear Stearns Announces More Job Cuts
      Forbes - 32 minutes ago
      As the dust begins to settle from the summer’s subprime turmoil and credit crunch, some employees in brokerage houses are finding pink slips in their hands.
      Bear Stearns and Credit Suisse Announce More Layoffs New York Times
      Bear Stearns Cuts 310 Mortgage Jobs, to Merge Units (Update4) Bloomberg
      Kansas City Star - The Associated Press - Reuters - Orange County Business Journal
      all 216 news articles »  BSC
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      http://business.scotsman.com/index.cfm?id=1582962007

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      TommyD
      This one hit the nail right on the head.......
       
       
       
      Oct 4 2007 4:49PM EDT

      Worrying About Mortgage Servicers' Fate

      Mortgage servicing is hot. Goldman Sachs is looking at buying the C-Bass servicing unit, and there are many other deals going through as well, such as Wilbur Ross paying $435 million for the servicing business of American Home, and Carrington Capital Management buying the servicing business of New Century Financial for $184 million.

      I have to say this worries me. Joe Giannone explains that loan servicing is an attractive business to be in during a housing bust:

      Litton makes changes to mortgages that can help struggling borrowers pay their debt, a business that would do well as delinquency rates rise.

      Ideally, however, loan servicing isn't a standalone business – certainly not one which should be levered up by Wall Street and then bought with the intention of selling it later at a large profit. If you simply have a lender and a borrower, then often the servicing arm of the lender can be incredibly valuable to both sides: a good loan servicer will find a way to keep the borrower in their house, and maximize the value of the loan for the lender, which otherwise might have to write it off or go through a painful, expensive, and protracted foreclosure process.

      What happens, however, when the servicer is a for-profit entity not connected with the lender? Suddenly, there's a conflict between saving money for the lender, on the one hand, and making money for itself, on the other. A simple mortgage renegotiation is not very lucrative, for a servicer; a fully-blown foreclosure, on the other hand, provides much more in the way of opportunities to profit.

      More generally, any savings from the negotiation now have to be split three ways (between the lender, the borrower, and the servicer) rather than just two ways (between the lender and the borrower).

      In other words, if servicers get bought up by financial investors, that's bad news for borrowers. What's needed now is more common sense in the mortgage world, and less profit motive. But the banks and hedge funds who are buying up the servicers have nothing but a profit motive – and I can't say that I've seen a great deal of common sense from them of late.

      http://www.portfolio.com/views/blogs/market-movers/2007/10/04/worrying-about-mortgage-servicers-fate
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      TommyD

      Does anybody have any news on this take over....

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      Tue Oct 16, 2007 5:43pm EDT
       
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      By Joseph A. Giannone and Al Yoon

      NEW YORK, Oct 16 (Reuters) - Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) has emerged as the final bidder for Litton Loan Servicing LP, the subprime mortgage servicing unit of Credit-Based Asset Servicing and Securitization LLC, and a deal could close in 60 days, people familiar with the situation said Tuesday.

      Goldman Sachs, the world's largest investment bank by market value, has been in talks with C-BASS, a subprime mortgage investment venture jointly owned by MGIC Investment Corp (MTG.N: Quote, Profile, Research) and Radian Group Inc (RDN.N: Quote, Profile, Research), for about a month.

      Negotiations surrounding the complex transaction could still break down. Obstacles to reaching the finish line include getting approval from C-BASS creditors and ultimately from every state mortgage regulator where Houston-based Litton does business, the sources said.

      Litton, which serviced $6.58 billion of loans at the end of June, is expected to fetch $400 million to $500 million in a sale, one person familiar with the matter said.

      Goldman Sachs and C-BASS declined to comment.

      Goldman Sachs Chief Financial Officer David Viniar said last month that the recent turmoil had created opportunities to buy mortgage assets. Previously Goldman Sachs had shied away from mortgage accusations. Viniar also predicted the beaten down U.S. mortgage market "was closer to a bottom."

      MGIC in September terminated a merger agreement with Radian, citing weakening conditions in mortgage markets. At the time, the companies said they were still pursuing a previously announced sale of C-BASS, though the venture had plunged in value.

      Servicing businesses remain in demand because they are less vulnerable to swings in credit cycles and tend to produce steadier results. Litton sends out bills, collects payments and handles escrow accounts for home borrowers.  Continued...

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      Goldman may back out of the deal, they can not get a solid $$$ amount on money held, and numerous other assets.  They are continuing their "Due Diligence".  However its getting darker for Goldman because of the merky water of Litton and CBASS accounting methods.  I'm beginning to think if Goldman buys it will be for much less than MGIC or RADIAN expected to get, and I'm guessing their maybe an extension on the 60 days, either way, Larry Litton Jr, is NOT being very forth right, Imagine that! 

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      C-Bass Unit Seeks Chapter 11 Protection
      November 27, 2007; Page C2

      BALTIMORE -- A Columbia, Md., housing lender acquired nine months ago by Credit-Based Asset Servicing & Securitization LLC has sought bankruptcy protection.

      Fieldstone Mortgage Co., which originated $5.5 billion in mortgages last year, filed for Chapter 11 protection in Baltimore. The firm said it has little cash to finance operations and would be forced to shut down unless it can borrow $3.8 million from C-Bass. It said it had more than $100 million in liabilities and less than $100 million in assets.

      Fieldstone listed some of the biggest Wall Street banks among its unsecured creditors. It said it owes $38.5 million to Morgan Stanley and $15.3 million to Bear Stearns Cos., as well as $10.4 million to Countrywide Financial Corp.

      C-Bass itself is in peril, according to filings with the Securities and Exchange Commission.

      In August, C-Bass hired Blackstone Group as its financial adviser in the wake of what it called "an unprecedented amount of margin calls due to the current state of disruption in the credit markets."

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      TommyD

      Nov. 21, 2007 (Thomson Financial delivered by Newstex) --

      NEW YORK (AP) - MGIC Investment Corp. (NYSE:MTG) and Radian Group Inc. (NYSE:RDN) said Wednesday that regulators have sought information about their stakes in a troubled venture that invested in subprime mortgages.

      The two mortgage insurers added that the venture's debt was restructured recently in an attempt to stave off a bankruptcy filing.

      Credit-Based Asset Servicing and Securitization LLC, or C-BASS, was set up by the two mortgage insurers to invest in subprime mortgages, or loans given to customers with poor credit history. As subprime mortgages increasingly went into default this summer, the value of securities backed by the loans declined. That led both to write down their stakes in C-Bass as it closed the business. Each had a stake worth about $467 million.

      MGIC and Radian have recently worked out an agreement with C-Bass creditors under which C-BASS was restructured to eventually sell assets to pay off debt without being forced into bankruptcy, according to filings made Wednesday with the Securities and Exchange Commission.

      In late September, C-BASS agreed to sell its servicing unit, Litton Loan Servicing LP, for $467.9 million to raise cash. The sale is scheduled to close in the current quarter or early in 2008. Radian expressed uncertainity in its filing about whether the deal will be completed.

      According to the companies, the SEC has requested information about the investments in C-Bass, as well as the failure of a proposed combination of MGIC and Radian and MGIC's subprime mortgage holdings.

      Milwaukee-based MGIC and Philadelphia-based Radian each said in separate filings they are complying with the requests.

      In July, multiple potential buyers showed interest in acquiring C-BASS for a price above its book value, according to Radian's SEC filing. As potential suitors were reviewing C-BASS's operations and financial statements, the subprime mortgage investor received mounting margin calls, or requests from lenders for more money to back its outstanding debt. C-BASS was unable to meet all the calls, further hampering the company's operations and ability to be sold.

      In the agreement with creditors, about $3.83 billion of debt was restructured, according to a statement from Hunton & Williams LLP, the law firm that acted as lead counsel for C-BASS during the restructuring. The deal includes about $3.22 billion in secured debt and repurchase obligations and another $610 million in unsecured debt.

      If the terms of the agreement with creditors are not met, C-BASS might be forced to file for bankruptcy, the mortgage insurers said.

      The pair also will furnish the SEC with documentation related to the proposed combination they terminated in September. The deal broke down as the mortgage market swooned and the C-BASS venture essentially became worthless.

      In the regulatory filing, MGIC slightly revised its third-quarter loss to $4.61 per share from $4.60 per share. The total loss remained at $372.5 million. The mortgage insurer earned $130 million, or $1.55 per share, during the same period last year.

      Credit rating agency Standard & Poor's (NYSE:MHP) cut the rating of MGIC to an investment grade 'A-' from 'A,' saying underwriting losses are possible in both 2008 and 2009. S&P noted MGIC's higher risk tolerance compared with rivals, 'particularly for borrowers with low credit scores.' S&P also cut the ratings of three of MGIC's subsidiaries.

      S&P also affirmed its 'A' counterparty credit rating for Radian, though it reiterated a negative outlook for the company. A negative outlook means there is a one in three chance the rating could be downgraded in the next two years
      Radian revised its loss per share for the third quarter, to $8.82 from $8.78. The total loss for the quarter was $703.9 million. Radian earned $112 million, or $1.36 per share, during the year-ago period.

      Shares of MGIC fell 94 cents, or 4.5 percent, to $19.96 in afternoon trading. Radian shares fell 23 cents, or 2.1 percent to $10.51.

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      'Strained' markets' red lights flashing

      So the mortgage crisis comes to this: Columbia's Fieldstone Mortgage enters bankruptcy proceedings, stiffing Wall Street's biggest names, and it's only a local story.

      Mr. Bernanke, here's another indicator you're losing control. If a major subprime lender leaves Morgan Stanley, Household International, Bear Stearns and others holding a $100 million bag and the national news media ignore it, maybe the problem is a heck of a lot bigger than most of us dreamed.

      Jay Hancock Jay Hancock Recent columns

      Lower the short-term interest rates. Don't wait until the next Federal Reserve meeting in two weeks. Lower rates at least a half-percentage point. Then get ready to lower again.

      For all of the damage it caused investors and homebuyers, Fieldstone's demise is a minor story because the overall mortgage mess is thousands of times bigger.

      The problem is that it's not clear the Federal Reserve understands how much bigger and how much worse it's getting.

      On Halloween the Fed judged that "the situation in a number of markets remained strained."

      On Nov. 8 Fed Chairman Ben S. Bernanke told Congress that he expects "moderate, but positive, growth going forward."

      On Nov. 16 Fed Governor Randall S. Kroszner said the most recent economic data releases "would not, by themselves" suggest that rates needed to be lower.

      Every recession indicator known to man is flashing red, and the Fed says some markets are "strained?" Check out these data releases, Governor Kroszner.

      Corporations that make up the Standard & Poor's 500 stock index saw profits fall 8.5 percent in the quarter ending in September, the fifth-worst performance since 1945. The last time something like this happened, reports Merrill Lynch economist David Rosenberg, was late 2000 -- right before the 2001 recession. The second to last time it happened was late 1989, right before the 1990-1991 recession.

      In July 2006 short-term interest rates rose above long-term rates, creating the "inverted yield curve" that often portends recession a year and a half later. A recent decline in the ratio of employed people to the total population has a "100 percent track record" in predicting recessions, writes Rosenberg.

      Yesterday's third-quarter Case-Shiller index showed U.S. housing prices dropped 4.5 percent from a year previously and 1.7 percent compared with the second quarter -- the worst showing in at least two decades.

      Nationwide housing price declines have a long history as a recession harbinger. So does the kind of plunge we've seen in housing construction starts.

      Consumer confidence hit its lowest point in two years this month and fell much further than analysts expected, the Conference Board said yesterday. Stocks have tanked. A dollar of Dow Jones industrial average profits (excluding one-time losses) sells for close to its lowest level in more than a decade.

      And mortgage mayhem shows no sign of abating. Last week Freddie Mac, a government-sponsored lender, said it would write off $1.2 billion in bad mortgage debt. Freddie's stock has plunged 60 percent since the beginning of October.

      This wasn't supposed to happen.

      Freddie and cousin Fannie Mae were presumed to avoid the kind of subprime loans causing heartburn for investors in outfits such as Fieldstone. But Freddie, at least, wasn't careful enough.

      Fieldstone, which specialized in subprime mortgages (many of them "liar loans," with no documentation of the borrower's income) is an object lesson in the danger of thinking mortgage pain is easily reversible and credit markets are merely "strained."

      In February the company agreed to be bought by Credit-Based Asset Servicing and Securitization for $5.53 a share. In March, alarmed by the deterioration of subprime mortgage paper, C-BASS cut the price to $4. By late summer C-BASS said it might have to write off all of its Fieldstone investment. Then Fieldstone quit making loans at all. It has hit bottom now that it's in bankruptcy court, but plenty of other lenders have room to fall.

      Meanwhile, they're trying to improve battered balance sheets. Reuters reported yesterday that Freddie will try to sell as much as $6 billion in preferred stock. Citigroup, which ejected CEO Charles Prince last month, is getting a $7.5 billion infusion from Abu Dhabi Investment Authority. Citi, Bank of America and JPMorgan are trying to raise $100 billion to buy troubled debt assets known as structured investment vehicles.

      But even if lenders beef up capital ratios, that doesn't mean they'll lend. This is beginning to look like a widespread credit crunch -- not confined to mortgages -- and perhaps that's the surest recession sign of all. The volume of short-term corporate loans known as commercial paper is quickly shrinking. Banks are tightening standards for business loans.

      And why not? If the Fed is going to sleepwalk into a recession, loan officers ought to be ultraconservative. A quick cut in short-term rates by Bernanke, however, would help change their minds and keep an economic setback from being inevitable.

      jay.hancock@baltsun.com

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