Buffett bets big on housing with ResCap portfolio buy

  • Article by: DAVID MCLAUGHLIN, DAKIN CAMPBELL and NOAH BUHAYAR , Bloomberg News
  • Updated: October 25, 2012 - 11:04 PM

His Berkshire Hathaway bought a ResCap loan portfolio for $1.5 billion at auction.

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FILE - In this May 7, 2012, file photo Warren Buffett, chairman and CEO of Berkshire Hathaway, laughs during an interview in Omaha, Neb. Omaha won�t throw a bash for Buffett�s 82nd birthday on Thursday, Aug. 30, 2012, but his hometown is grateful the billionaire never considered leaving Omaha behind because he has bolstered the city�s reputation and attracted thousands of tourists.

Photo: Nati Harnik, Associated Press - Ap

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Warren Buffett's Berkshire Hathaway Inc. won an auction for a portfolio of Residential Capital's loans with a $1.5 billion bid, adding to the billionaire's bet on a housing market recovery.

The competing bidder was a group that included a unit of Credit Suisse Group AG, according to two people familiar with the matter, who declined to be identified because they weren't authorized to speak publicly. ResCap auctioned its mortgage-servicing business to Ocwen Financial Corp. on Wednesday for $3 billion. Ocwen beat Nationstar Mortgage Holdings Inc. in an auction that would create at least the fifth-largest U.S. mortgage servicer.

"This is part of their optimism on the overall home market," Meyer Shields, an analyst at Stifel Nicolaus & Co., said of the auction results in a phone interview Thursday.

Ally Financial Inc., a Detroit-based auto lender majority-owned by U.S. taxpayers, allowed its New York-based ResCap unit to file for bankruptcy in May to distance itself from the mortgage lender's losses and help repay its 2008 bailout following the U.S. housing crash and subsequent credit crisis. Ally was previously owned by General Motors Corp.

ResCap is based in Bloomington but employs only about 80 of its 3,600 employees there.

ResCap's board approved Berkshire's offer for the portfolio of about 47,000 whole loans as the "highest and best bid," according to a statement. The agreement must now be approved by the bankruptcy court. A hearing is set for Nov. 19. The two auctions were expected to generate about $4 billion.

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