While the U.S. Treasury is busy putting advisers and custodial agents in place to help manage the Troubled Asset Relief Program, more than a few industry firms are wondering what the U.S. government involvement in the mortgage space will mean for those that manage defaulted loans, as well as those that provide key services to the default management industry. We’ve heard from investors, hedge funds, private equity, law firms, special servicers, title agents, collateral valuation specialists — you name it. It seems everyone knows that the TARP program could mean some sharp changes in how the industry operates, but nobody is completely sure what those changes might look like, or if anything will change at all. More than a few firms have gone on a press offensive as of late, letting it be known they’ve put in a bid for work under the TARP program. LandAmerica Financial Group, Inc. (LFG) said Tuesday that it is competing for the opportunity to serve as a contractor in providing whole loan asset management services for portfolios of troubled mortgage-related assets, signaling that it had bid under the Treasury’s guidelines for all or some of the whole loan management business. The company touted its end-to-end asset management capabilities, with SVP Peter Maselli making the claim that what LandAm could offer was “unique.” Which, of course, likely means that LandAm’s key competitors have put in bids as well, firms like The First American Corp. (FAF) and Lender Processing Services (LPS). Neither firm, however, has spoken with HW about its potential involvement in TARP management — that said, it’s worth noting that LPS recently purchased McDash Analytics, which manages the data efforts surrounding HOPE NOW. The Treasury organized the private coalition last year under direction from President Bush. Other, smaller firms have banded together to create a larger alliance that they hope will garner some business from the Treasury. One such motley group is USA Recovery Group, LLC, which includes some veteran contractors that once worked with the Resolution Trust Company and the Federal Deposit Insurance Corp. during the S&L crisis of the late 1980s and early 1990s. Earlier this week, the group announced that it had bid on managing loans under TARP and formed a special servicing operation. The alliance was quick to point out its status as “a full-scale minority and woman-owned company” in a press statement, and involves seven different industry firms. Among them is the law firm of Weltman Weinberg & Reis Co., LPA, which will provide all legal management services for USA Recovery; the company’s special servicing platform is provided by The Ontra Companies — Ontra has previously worked as a contracted special servicer with the RTC and HUD, and managed REO for what at the time was known as Citibank, now Citigroup, Inc. (C). USA Recovery’s “minority and woman-owned” status primarily comes via the involvement of Ontra’s Cathy Vann and Debbie Garcia of DEVAL, a Virginia-based minority-owned firm and government contractor. Both recruited the collection of firms to establish USA Recovery, and focused on including former senior personnel from the RTC as well as some of the RTC’s former leading asset management and recovery firms. “This crisis is not the place for on-the-job training,” Garcia said in a press statement. How much change? Despite the jockeying for asset management business, it’s not quite clear just how large the government foray into default management really will be. For one thing, Treasury has already committed $250 billion in direct capital injections to key U.S. financial institutions — likely out of a realization that the capital was needed to facilitate any of the asset sales the Treasury would like to see take place. Rumors Friday suggest that some administration officials may be considering a larger injection, as they realize the depth of capital really needed to help banks manage through the current mess. One of HW’s sources suggested that the government’s investment may double from its current $250 billion earmark, leaving just $200 billion under TARP’s current funding levels. Most sources we’ve spoken with seem to believe that the government’s interest in purchasing assets may lie primarily with the relatively more toxic mortgage-related securities, as well, such as CDOs and RMBS. Which would seem to suggest that the TARP may end up being a small player in the whole loan management space. But a few sources have also suggested in recent days that they expect to see a push to expand funding for TARP. “Now that we’ve already jumped in the pool, it’s easier to argue for a deeper end to swim in,” said a lobbyist that asked not to be identified. While any additional expansion of TARP would face a stiff set of headwinds — not the least of which would seem to be concern over debt or inflation, as well as a growing desire by key Democrats to fund a second economic stimulus package — it remains to be seen if it is completely off of the table. Which leaves most market participants, of course, pretty much where they started: it’s anyone’s guess what happens next. Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.