Ally earnings tumble amid mortgage settlement costs

Officially finished with mortgages

Ally Financial (Ally) recorded a net income of $104 million for the fourth quarter of 2013, up from $91 million in the prior quarter, but down from a net income of $1.4 billion for the fourth quarter of 2012.

Earnings were heavily impacted by the $98 million charge taken related to the Consumer Financial Protection Bureau and U.S. Department of Justice settlement.

Overall, Ally reported a net income of $361 million for 2013, compared to a net income of $1.2 billion in 2012, due to the $1.4 billion charge related to the ResCap bankruptcy settlement recorded in the second quarter and lower income from the mortgage operations.

As HousingWire reported back in July, “Ally agreed to contribute $1.95 billion in cash to the ResCap estate, as well as the first $150 million of the insurance recoveries expected in connection with additional mortgage-related losses. It hopes to be finished with costs such as these by the end of the year”.

In lieu of this, Ally chose to exit the mortgage origination and servicing business in the second quarter of 2013, projecting to be mostly done with mortgages by the end of 2013.

For the fourth quarter of 2013, mortgage operations reported a pre-tax loss of $8 million, excluding repositioning items, compared to pre-tax income of $99 million during the fourth quarter of 2012, due to the company’s exit out of the mortgage business.

As of June 30, 2013, the business has had no further mortgage loan originations, and as a result of the sale of the mortgage-servicing rights portfolio in the second quarter, it has no remaining MSR assets.

"Ally closed the chapter on its legacy mortgage issues, sold substantially all of its international operations, reduced its higher cost unsecured debt and achieved financial holding company status. Today, Ally has a pristine balance sheet and is focused on its strengths with its leading domestic automotive services and direct banking franchises," said CEO Michael Carpenter. 

“"Ally experienced a landmark year in 2013 with the completion of a multi-year strategic transformation that has permanently changed the direction of the company and enhanced its future prospects," Carpenter added.

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please