ResCap Settles With Fannie Mae Over Repurchase Exposure


ResCap Settles With Fannie Mae Over Repurchase Exposure Ally Financial Inc.'s mortgage unit, Residential Capital LLC (ResCap), and certain ResCap subsidiaries have reached an agreement with Fannie Mae to resolve potential repurchase exposure for breaches of selling representations and warranties.

According to a statement from Ally, the agreement covers loans serviced by GMAC Mortgage on behalf of Fannie Mae prior to June 30 and all mortgaged-backed securities that Fannie Mae purchased at various times prior to the settlement, including private-label securities. The settlement was for approximately $462 million and releases ResCap and its subsidiaries from liability related to approximately $292 billion of original unpaid principal balance ($84 billion of current UPB) on these loans. The settlement was modestly in excess of reserves previously taken, Ally said.

‘This agreement, along with prior repurchase settlements with Freddie Mac and others and the sale of legacy assets and operations, has significantly reduced Ally's risk related to the legacy mortgage business going forward,’ said Ally CEO Michael A. Carpenter.

In addition to the settlement amount, ResCap and Fannie Mae have an arrangement in regard to ResCap's payment of mortgage insurance proceeds where mortgage insurance coverage is rescinded or canceled, an exposure that ResCap does not expect to be material.

The settlement covers ResCap and its subsidiaries but excludes Ally Bank. The company does not expect significant repurchase claims on the loans at Ally Bank, as more than 90% of the Ally Bank loans serviced on behalf of Fannie Mae were originated from 2008 to 2010.Â

SOURCE: Ally Financial

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