Bailout

Good news Friday: Litton withdraws in Ohio

By Felix Salmon

While we’re still celebrating the passage of the finance bill through the Senate, I hear this morning that Litton, the mortgage servicer owned by Goldman Sachs, will no longer auction off that house Ohio and try to kick the occupants out. Litton’s law firm, Lerner, Sampson & Rothfuss, confirmed to me that the sheriff’s sale is being withdrawn, and Jorge Newberry of AHP, who’s trying to buy the house and lease it back to its current owners, says that although Litton has yet to approve the short sale, at least the Monday deadline is no longer looming.

I’ll keep you posted on how this case plays out, but so far, so good. I have no idea whether this development came as a result of pressure on Litton from its owners in New York — but if it did, then good for Goldman. Not only are they doing the right thing, but they also make more money this way, and they help to sidestep some very unpleasant PR. Everybody wins.

Update: I just spoke to the homeowner, who seems happy and optimistic, after having gone through two nightmare years with three different loan servicers, one of whom declared bankruptcy, leaving a large pile of unpaid taxes which had been included in the mortgage payments.

My commenters are right that a strategy of “make sure that your loan servicer is owned by an embattled investment bank, and then get a financial blogger on your side” doesn’t really scale. But the AHP model does scale, and so long as servicers act in their own best interest, there’s some hope that it can work more generally.

Full post as published by Macroprudential on May 21, 2010 (boomark / email).