NEW YORK -(Dow Jones)- Goldman Sachs Group (GS) has no plans to quickly follow competitors into buying residential mortgage firms, a company executive said Tuesday. Chief Financial Officer David Viniar said Goldman has little experience in consumer lending and is cautious about buying mortgage companies at a time when home sales are declining. "We will never say never," Viniar said in a conference call with analysts after the company reported third-quarter results, but "so far, all of our valuations have been that the negatives outweigh the positives." Merrill Lynch & Co. (MER) last week said it will pay $1.3 billion to buy First Franklin Financial Corp., one of the 10 biggest U.S. mortgage lenders to borrowers with weak credit histories. Last month, Morgan Stanley (MS) announced a $706 million deal to buy Saxon Capital Inc. (SAX), a residential mortgage company that services $26 billion of home loans to "subprime" borrowers. Like Lehman Brothers Holdings (LEH) and Bear Stearns Cos. (BSC) before them, the banks want to ensure a steady supply of mortgage loans for packaging into securities they sell to investors. Investment banks traditionally buy mortgages from third parties, but rising interest rates have cut supplies. Owning the source of mortgage loans also gives bank traders keener insight into the mortgage-securities market. Some investors have questioned the timing of the purchases, since commercial banks have been selling their mortgage arms out of fear of higher credit losses and low growth potential. Merrill is buying First Franklin from Cleveland-based bank company National City Corp. (NCC) "There were probably a lot of buying mortgage companies made in the last few years that shouldn't have been made," James Ellman, a money manager at Seacliff Capital LLC said after Merrill announced its deal. "The biggest risk is that the brokers will become great targets" for lawsuits and congressional investigations if they foreclose on a wave of loans to low-income borrowers. Despite the reputational risk, investment banks have largely been successful in home lending by cutting operating costs in the low-margin loan business and reaping the mortgage-securities benefits. Goldman earlier this year bought a minority stake in LownHome Financial Holdings, a start-up residential mortgage firm in southern California. A Goldman spokesman said the investment was purely for investment purposes. "We will continue to evaluate the origination business," Viniar said Tuesday, using investment banking jargon for lending. "There are different risks when you're touching the retail customer." Goldman mainly does business with professional traders, corporations and institutional investors. The company's net income in the third quarter ending Aug. 25 fell 1% from a year earlier to $1.59 billion, but its diluted earnings per share of $3.26 for the quarter exceeded analysts' expectations. Goldman generated $2.74 billion of revenue in its third quarter from trading fixed-income, currency and commodity products, the third-highest total in its history for buying mortgage companies. The 4% jump from the year-earlier quarter reflected higher net revenue in trading commodities and mortgage-backed securities, it said, while currency gains slowed. | 
