HW Vanguard Awards: Leadership has never been more important

HW Vanguard Awards: Leadership has never been more important

Recognizing executives leading the housing economy

loanDepot closes first $150M securitization of personal loans

Demand for new personal loans takes off

TRID is a real obstacle to mortgage process

Contrary to some reports

Ally estimates ResCap bankruptcy could cost up to $1.2 billion

/ Print / Reprints /
| Share More
/ Text Size+

A bankruptcy filing on the ResCap mortgage unit could cost parent company Ally Financial between $400 million and $1.25 billion, according to a financial disclosure by the bank Friday.

"If a ResCap bankruptcy were to occur, we could incur significant charges, substantial litigation could result, and repayment of our credit exposure to ResCap could be at risk," according to the filing.

On April 17, Ally disclosed the troubled mortgage unit missed an interest payment on its debt and would be considered in default if it wasn't made within 30 days. More than $473 million on the debt is outstanding.

The unit actually forged a $191 million profit in the first quarter. But according to the filing Friday, Ally estimates the losses from litigation matters and repurchase obligations could reach as high as $4 billion over time.

Barclays Capital (BCS) analysts predicted the unit could be placed into bankruptcy within one to two months, and outlined why selling the servicing rights would be critical for investors in ResCap issued mortgage-backed securities.

The unit has stopped lending to real estate developers and homebuilders in the U.S., according to the Ally filing Friday.



Recent Articles by Jon Prior

Comments powered by Disqus