Ally Financial reported $565m net income in Q210, compared to a $3.9bn net loss in the year-ago quarter, partly due to improved mortgage operations. The company continued to minimize legacy mortgage risk during the quarter, executing the sale of domestic non-core and international assets totaling more than $1.2bn of unpaid principal balance. Its mortgage operations -- including Residential Capital (ResCap) and the mortgage activities of Ally Bank and ResMor Trust -- posted $230m pre-tax Q210 income, improved from a $156m pre-tax income in the previous quarter and a $1.3bn pre-tax loss in the year-ago quarter. Ally attributed the gain in income to improved performance in the origination and servicing business, lower operating expenses and gains on the sale of legacy mortgage assets. Additionally, loan loss provision and repurchase reserve expenses were significantly lower from the corresponding period one year earlier. ResCap reached an agreement to sell its European mortgage origination and servicing business during the quarter. The unit reported its second consecutive profitable quarter, as Q210 income totaled $364m, compared to a $841m net loss in the previous-year period. ResCap has made recent headlines like that of Reuters, which said in a recent post that a possible auction of the unit may be in the works. A number of firms, including Centerbridge Partners, MetLife and PennyMac, are reported to be interested in bidding on parts or the whole of ResCap. None of the firms, however, returned requests for comment on the matter. "Ally Financial continues to explore strategic alternatives for the remaining parts of its mortgage operations with a goal of reducing exposure and preserving value," Ally spokesperson James Olecki told HousingWire. "We are evaluating all options thoughtfully, while defining a viable long-term strategy. There is nothing more to announce at this time." Write to Diana Golobay.