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From my understanding, ModNation for PS3 was developed by United Front Games, who is now working on the "True Crime: Hong Kong" game for Square. The Vita version of ModNation is being handled by SCE San Diego, so I don't know if UFG is big enough to handle two games at once.

I was thinking of some ways for something like LBKarting to utilize the ModNation engine and expand upon it. It could have regular racing like it has now, but it could also include a top-down (think Micro Machines) engine, too.