Ally Financial says it has a strong legal defense to a residential mortgage-backed securities lawsuit filed against the financial firm by John Hancock Life Insurance Co.
Ally Financial told HousingWire in a statement that the case specifically relates to ResCap, an Ally subsidiary in bankruptcy reorganization.
"Ally has strong legal and factual defenses to the claims in the lawsuit," a spokeswoman for the company said. "Further, the claims relate to the activities of ResCap, which has filed for Chapter 11 protection in bankruptcy, and are subject to resolution in connection with the ResCap bankruptcy."
In a suit filed with the U.S. District Court of Minnesota, John Hancock accuses Ally Financial, as well as its various affiliates and subsidiaries – including GMAC LLC and Residential Funding Securities -- of packaging mortgage loans into securitized trusts and then selling them off to investors without disclosing the true underlying risks.
"Based on these material misrepresentations and omissions, plaintiffs purchased securities that were far riskier than had been represented, backed by mortgage loans that were worth significantly less than had been represented and which had been made to borrowers who were much less creditworthy than had been represented," John Hancock wrote in its complaint.
Numerous other banks are named in the complaint as co-defendants. John Hancock accuses the firms of fraud, aiding and abetting fraud, negligent misrepresentation and numerous violations of the federal Securities Act of 1933 and the Minnesota Securities Act.
John Hancock did not disclose a specific damage amount, but claims it acquired residential mortgage-backed securities that were packaged and sold by Ally and the other named defendants.
John Hancock alleges in court documents that data from the FCIC shows Fannie Mae forced Ally-GMAC to buy back 3,457 loans originated by Ally Bank, GMAC Mortgage and Residential Funding. The suit claims those loans had an unpaid principal balance of $679 million. In addition, the complaint alleges ResCap agreed to pay Fannie Mae $462 million to settle claims related to ResCap's obligation to buy back defective mortgage loans.