Politics & MoneyMortgage

Foreclosure charges push Ally Financial to fourth quarter loss

Expected penalties Ally Financial (GJM) set aside for alleged foreclosure abuses pushed the bank to a loss for the fourth quarter.

Ally lost $250 million for the three months ending Dec. 31, down from a $79 million profit one year earlier. The bank reserved $270 million it expects government agencies to impose as a result of the multistate investigation into foreclosure practices at the top mortgage servicers.

A nearing settlement with Ally, Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) will likely total $25 billion.

For the full year, Ally reported a net loss of $201 million, down from $1.1 billion in profits for 2010.

Revenue for the fourth quarter totaled $1.7 billion, down 19.6% from one year before. Total revenue for all of 2011 was $7 billion, down more than 21% from 2010.

The Ally mortgage operation narrowed losses to $302 million in the fourth quarter from $422 million one your before.

Originations fell off as they did at the other largest lenders. Ally wrote $16.5 billion in home loans during the quarter, down 28% from $23.2 billion originated the year before. Total production was up from $15.6 billion in the third quarter.

The foreclosure charges did more than push the bank to a loss. Its troubled ResCap division is expected to maintain a tangible net worth of at least $250 million at the end of each month. Because of the charge, ResCap slipped below this threshold temporarily before the bank injected $196.5 million in capital provided through the forgiveness of intracompany debt.

However, this temporary slip, the bank said, resulted in a breach in certain credit facilities at ResCap. Ally said it is seeking waivers from the lenders to this facility and expects to receive them.

“The charge taken to address foreclosure-related issues offset profitable performance in the global automotive services operation,” said CEO Michael Carpenter. “One of our key priorities remains aggressively addressing the risks related to the mortgage business and taking steps to protect the key franchises at Ally.  This will be critical to advance plans to repay the U.S. taxpayer.”

The Treasury Department invested $17.2 billion in Ally as part of the 2008 bailout and still holds a 73.8% stake in the bank.


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