Ally Financial (GJM) reported more than $1 billion in outstanding claims for the bank to repurchase troubled mortgages from investors in the second quarter, up 28% from the previous period. Second quarter income at Ally plummeted 80%, driven by a $174 million loss in its legacy portfolio and other mortgage operations. The firm reported $184 million in mortgage repurchase costs, which was offset from lower loan delinquencies. But mortgage investors filed $382 million in new repurchase claims, nearly triple the $133 million in the previous period. Total outstanding claims reached their highest level ever at the bank. The previous peak occurred in the fourth quarter of 2010 at $918 million in total claims. A large portion of the outstanding claims come from monoline insurance companies, which guarantee securities for issuers in order to receive a higher credit rating.

Ally said roughly two-thirds of the outstanding claims have been rejected. Ally Chief Financial Officer James Mackey was more specific on a conference call with investors Tuesday. Mackey said Ally rejected $785 million of the outstanding claims. “There will always be some level of repurchase activity,” Mackey said. “You could continue to see periodic spikes as some counterparties such as monolines make requests that result in high rejections.” The reserve balance for mortgage repurchase reserves remained flat at $830 million. Settlements Ally struck in December with Fannie Mae and in March 2010 with Freddie Mac covered past, present and future claims on legacy mortgages, but Mackey said the bank’s origination department has been focused on writing more loans for the government-sponsored enterprises than the Federal Housing Administration and Veterans Affairs in recent periods, meaning the GSEs could always send more repurchase claims on these newer loans. Ally disclosed in its financial supplement the different risk when handling private-label repurchase claims compared to those from the GSEs. Ally said representations and warranties from private investors are less stringent and tailored to specific loan pools, however there are “logistical hurdles, significant upfront cost with uncertain return,” lengthy time lines and “collateral segregated into different programs to highlight risks.” Write to Jon Prior. Follow him on Twitter @JonAPrior.