CBASS possible partial sale 9-Aug-07 05:18 pm
Dow Jones is reporting that FNM is currently working on plans to purchase Litton Loan Servicing, which is the servicing subsidiary of C-BASS. MTG and RDN, through a joint venture, each own approximately 46% of C-BASS. The parties involved have provided no comments regarding this transaction, and no potential terms were disclosed by Dow Jones. FNM currently has no servicing operations. We believe FNM may be interested in Litton as a way to more effectively refinance certain adjustable-rate subprime loans into longer-dated fixed rate mortgage products, and to support the sale of these loans into the secondary market in the form of MBS. However, we believe regulatory permission would probably be necessary to accomplish this transaction. We believe today’s news has two implications for MTG and RDN. First, it implies that the sale of C-BASS in its entirety is probably unlikely. However, it also indicates that the companies may not suffer a complete write-down of their investment in the company, which totals slightly more than $500mm each. Please call with questions, thanks.
UBS Investment Research