Ally Financial’s ResCap Mortgage Unit Files Bankruptcy

Ally Financial’s ResCap mortgage unit, which operates as the GMAC Mortgage brand, filed for bankruptcy protection Monday, part of a strategy to bolster the company’s longer term financial profile and accelerate repayment to the U.S. Treasury.
GMAC was one of the leading subprime lenders, providing mortgages for higher-risk borrowers during the run-up to the financial crisis of 2008.
Those failing mortgages combined with the company’s faltering core auto finance business prompted the Treasury to give it a $15.8 billion bailout in 2009.
It was a bailout that covered a dual effort to rescue the troubled auto industry and housing market.
The company started as the finance unit of automaker General Motors under the GMAC name. But it changed its name to Ally following the bailout.
Ally continues operating an auto finance business, in addition to an online commercial bank.
“The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us,” said Ally Chief Executive Officer Michael A. Carpenter.
Ally also said it plans to launch a process to explore “strategic alternatives” for its international operations.
“These actions will enable Ally to further invest in and grow its leading U.S.-based automotive services and direct banking franchises and be best positioned to return additional capital to the U.S. taxpayer by year-end,” Ally said in a statement.

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