Looks like MBIA will be getting the good news on Ally in the morning; they should have settled long ago but they didn't. Did Jay Brown not settle because he was foolish or because they were so far gone that hoping for litigation miracle(s) was all he had? I don't know the answer.
Regardless of the reason, along the way he turned into the real life equivalent of a Saul Goodman and needs to be investigated.
Once you cross the line of legality you've got little to lose isn't that right Mr. Brown?
“Please explain to us why the increased likelihood of these bankruptcies did not result in a reduction of the value of your recoveries recorded from put-backs against these companies,” Jim Rosenberg, senior assistant chief accountant at the SEC, said in an Aug. 2 e-mail to MBIA Chief Executive Officer Jay Brown.
I think all that is left is the hope of collecting something from the parent (Ally) and of course the fight with other unsecured creditors over how the remnants are to be allocated. Things have gone more quickly than I expected.
Berkshire Wins Auction for ResCap Loans
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By ANDREW R. JOHNSON
Warren Buffett's Berkshire Hathaway Inc. BRKB +0.24% was the winning bidder in a bankruptcy auction for a portfolio of loans from Residential Capital LLC, the subprime mortgage unit of government-owned Ally Financial Inc.
ResCap's board approved the winning bid of $1.5 billion by Berkshire. The bid beat a consortium of investors, said a person familiar with the auction.
On Wednesday, ResCap said it reached an agreement to sell separate mortgage servicing and origination assets to Ocwen Financial Corp. OCN -0.42% for $3 billion in another bankruptcy auction.
ResCap filed for Chapter 11 bankruptcy in May as bond payments loomed and mortgage securities lawsuits mounted.
The auctions of the ResCap assets are supposed to take place this week. There is an article on the WSJ web site if anyone is interested.
How in the world will they avoid taking down the ResCap asset this quarter? ResCap's unsecured bonds are not showing any strength at all.
Portion of article from WSJ. ResCap bonds moved up a little today.
Ocwen Wins Auction for ResCap Assets
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By ANDREW R. JOHNSON
With its $3 billion bid, Ocwen Financial Corp. OCN +4.28% was named winner Wednesday in an auction for the mortgage-servicing and origination assets of lender Residential Capital, which is in bankruptcy proceedings.
ResCap spokeswoman Susan Fitzpatrick said in an email that ResCap's board has given preliminary approval to the bid, which Ocwen partnered with Walter Investment Management Corp. WAC +6.46%
Ocwen was battling with Nationstar Mortgage Holdings Inc., NSM -9.61% a competing nonbank mortgage servicer that was designated as stalking horse bidder for the bankruptcy auction earlier this year. A sale-approval hearing in the bankruptcy court is scheduled for Nov. 19.
"We will continue to work with all parties involved to ensure the best possible outcome for its creditors and other stakeholders," Ms. Fitzpatrick said.
Nationstar's last bid was about $2.91 billion, according to a person familiar with the matter. Ocwen's bids had included a $24 million break-up fee it must pay Nationstar as the stalking horse bidder.
"Price matters," said Nationstar Chief Executive Jay Bray in a statement. "Obviously we are disappointed in the outcome of the auction. But in the end, our judgment was that the price of the assets would not represent a compelling investment opportunity for us."
Paul Koches, general counsel for Ocwen, did not have an immediate comment when contacted Wednesday.
The assets went to auction Tuesday as part of the bankruptcy proceedings for ResCap, a subsidiary of government-owned auto lender Ally Financial Inc. ResCap filed for Chapter 11 bankruptcy in May as billions of dollars of bond payments loomed, and litigation over soured mortgage securities mounted.
Good news. Unsecured creditors might not be wiped out! Bonds trading at 25 cents on the dollar so hey that's something.
Some minor Res Cap news. MBIA in a sense is an investor in Res Cap. and it just couldn't be a sweeter situation.
Going to share $3.4 Bill
Claims prospectively owed litigants, such as the bond insurers and various RMBS investors, were included in "unknown" amounts on ResCap's list of largest unsecured creditors and, as such, are also excluded from the $5.3 billion figure. Units of MBIA, Ambac Financial Group Inc., Assured Guaranty Ltd., FGIC Corp., Allstate Corp., Western & Southern Mutual Holding Co., and UNIFI Mutual Holding Co. along with the Federal Housing Finance Agency
The latter agreement clears the way for an irrevocable offer to settle with RMBS trusts for a maximum allowed claim of $8.7 billion — an amount that would be shared with the bond insurers that have brought representation-and-warranty claims. MBIA Inc. recently cautioned that a ResCap bankruptcy filing could "substantially reduce" its recoveries on those claims.
A very big chunk of MBIA's strategy has been to get the banks to settle in the hope that the other parties who have valid claims would not be able to file claims. Their expectation being that they could get a cut of the claims that other parties have. We can now safely say that this expectation has been dashed with regard to ResCap:
The value of any recovery plunged this morning and whats worse (1) MBIA farted away attorney fees while moving forward in this litigation while other MBS holders/insurers did not (2) AGO, FHFA both collected on many of their claims prior to bankruptcy because they had the good sense to follow the contract provisions for R&W violations. Be sure and thank Jay Brown next time you see him and tell him you fully support him in any future legal difficulties he might face.