When the bidding commenced for the mortgage servicing assets of Residential Capital Corp. (ResCap) on Tuesday morning just two firms showed up at the auction: Nationstar and Ocwen Financial, which is working with Walter Investment Management Corp., according to industry advisors tracking the deal.

Late Tuesday the bid process was still active up until 8 p.m. and was being held at the Sheraton Hotel in lower Manhattan, said one source. ResCap is in bankruptcy. It services roughly $365 billion of MSRs.

A servicing executive familiar with the process, and requesting anonymity, said based on what he’s heard, the MSRs could wind up in the hands of Nationstar.

Also, according to a report from investment firm Sterne Agee, the Federal Housing Finance Agency (FHFA) – which likely will have a final say on the transfer of any GSE servicing rights controlled by ResCap – is making some noise about representations and warranties on the MSRs.

FHFA apparently “will not automatically walk away from any unfunded rep and warranties related to its servicing assets, estimated at $74.5 billion,” the firm put out in a research note to clients.

Sterne Agee has ‘buy’ ratings on Ocwen and Walter, but a ‘neutral’ call on Nationstar, which was spun off by Fortress Investment Group earlier this year.

The research firm added: “The bidding is not over yet...and we do not know what resolution will be worked out with the FHFA.”

The MSRs alone could be worth north of $1 billion but the bidding “has driven that price up” said a source.

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