Residential Capital, a mortgage firm that fell into Chapter 11 bankruptcy reorganization, finalized a deal with its former parent company Ally Financial to settle remaining claims between the two firms, thereby shielding Ally from lingering mortgage liabilities.

Ally put its ResCap mortgage unit into Chapter 11 reorganization and started the process of rebuilding its business as an auto lender.

The latest deal is a type of shield, releasing Ally from any claims that could be brought by ResCap over allegations tied to representation and warranty issues related to mortgages.

It also blocks Ally from claims brought by third parties, other than securities claims by the Federal Housing Finance Agency (FHFA) and the Federal Deposit Insurance Corporation (FDIC).

“This agreement is a seminal moment for Ally,” said Chief Executive Officer Michael Carpenter. 

“We are pleased to have reached a consensual and comprehensive agreement that enables the company to put the issues related to the mortgage industry behind us.  We remain confident in our strategic direction going forward and in the market position we hold with our leading dealer financial services and direct banking franchises.  These franchises are the cornerstones of Ally’s future success.”  

The plan still requires the approval of a bankruptcy court.