According to a release from Ally, the settlements require pending litigation against the bank to be dismissed, and FHFA- and FDIC-released claims will no longer be exceptions to liability releases secured by Ally in a settlement with Residential Capital, which was put into Chapter 11 bankruptcy last year.
Ally said it expects to record a charge of $170 million in the third quarter in connection with the two settlements. Overall, the bank has reserved $520 million in relation to the suits, said spokesperson Gina Proia.
As part of the settlement with FHFA, ResCap’s Chapter 11 plan will be amended to reflect that Freddie Mac and FHFA
will retain only some “ordinary-course” claims against Ally Bank, as a former mortgage servicer and seller.
Both FDIC and FHFA have agreed not to object to final confirmation of the bankruptcy plan, according to Ally’s announcement. The confirmation hearing for that plan is scheduled for November 19.
In a statement, Alfred M. Pollard, general counsel for FHFA, said final settlement terms will be completed during the current fiscal quarter, with details released before the end of the year.
A spokesperson for FDIC declined to comment.
For Ally, the agreement represents another major step in the bank’s ongoing effort to get away from mortgages and shift its focus to its more profitable auto finance and banking operations.
“These settlements are key steps in Ally addressing its remaining legacy mortgage risks,” said Ally CEO Michael A. Carpenter, adding that the bank is “pleased to be able to put these matters behind us.”
Ally isn’t the only bank to come to a settlement with FHFA, which—in its capacity as conservator for Fannie Mae and Freddie Mac—brought claims against more than a dozen banks for allegedly misrepresenting loans sold to the GSEs.
Since its launch, DS News magazine has positioned itself at the forefront of an
evolving industry. Always current with the most up-to-date
default servicing news, DSNews.com keeps you informed through daily Web casts,
community forums, and a wide range of industry resources.