Ally Will Keep ResCap, `Screwed Up' Using Robosigners
Ally Financial CEO Michael Carpenter
Melissa Golden/Bloomberg
Ally Financial Inc. Chief Executive Officer Michael Carpenter said, “We’ll be the first to say we screwed up on robosigner affidavits, but we’re not going to say we screwed up on foreclosures.”
Ally Financial Inc. Chief Executive Officer Michael Carpenter said, “We’ll be the first to say we screwed up on robosigner affidavits, but we’re not going to say we screwed up on foreclosures.” Photographer: Melissa Golden/Bloomberg
Ally Financial Inc., the auto and home lender, said it will keep its mortgage business and that the company was “embarrassed” it used so-called robosigners to fill out foreclosure documents.
“We have looked at various alternatives,” Chief Executive Officer Michael Carpenter, 63, said today on the Detroit-based company’s third-quarter earnings conference call. “With regard to the business of origination and servicing, there is no intention of selling that business.”
Carpenter said a year ago he was exploring “strategic alternatives” -- Wall Street parlance for a unit’s sale or shutdown -- for the mortgage business and Residential Capital unit after losses triggered a U.S. bailout of more than $17 billion.
The lender said today it had largely reduced potential losses after completing the sale of its European mortgage and resort-financing operations.
The firm settled representation and warranty claims with six counterparties, the largest being government-owned finance company Freddie Mac, according to a company presentation today. Ally increased reserves for mortgage buybacks to $1.1 billion in the third quarter, from $855 million in the second quarter, the company said in a statement.
Ally has “gone through great efforts to de-risk” ResCap, said Adam Steer, an analyst at New York-based research firm CreditSights Inc. “Beyond that, there is this opaque risk sitting out there in reps and warranties and I think that ultimately made it hard to sell off ResCap.”
‘Confident’ on Reserves
Carpenter said he’s “confident” the reserves will be enough to match claims. Such claims typically include disputes from mortgage buyers who want the lender to take the loans back after they’ve defaulted because the mortgages weren’t properly vetted.
Ally’s GMAC Mortgage unit has been caught up in the national turmoil over whether the industry has taken improper shortcuts to speed up foreclosures. Ally suspended evictions by GMAC in 23 states during September after an employee testified that he signed foreclosure documents without ensuring their accuracy. That touched off an examination of practices at other mortgage firms, with attorneys general from 50 states conducting a joint probe.
“We screwed up,” Carpenter said today. “We had a robosigner affidavit problem. No question about it. We’re embarrassed about it and we fixed it going forward.”
Any errors will be corrected and the company is “confident that we did not foreclose on anybody inappropriately,” Carpenter said. “It’s up to us to prove that.”
Independent Reviews
Last month Ally extended its review to all 50 states before resuming sales in cases where it didn’t find errors, according to Gina Proia, company spokeswoman. The firm has hired outside companies to conduct independent reviews of response and procedures.
Ohio Attorney General Richard Cordray sued Ally last month, claiming the lender used fraudulent practices to foreclose on homeowners. Court documents show GMAC was sanctioned in 2006 for similar practices and Cordray said he could fine the company as much as $25,000 for each violation, according to an Oct. 6 statement.
Ally has reviewed more than 9,500 files and fixed some affidavits, with remaining reviews likely to be completed by the end of the year, Carpenter said. The company is the fifth- largest U.S. mortgage servicer, according to National Mortgage News, an industry newsletter based in New York.
Ally reported third-quarter net income today of $269 million, compared with a net loss of $767 million in the same period a year earlier, according to a statement today. The company is 56.3 percent owned by the U.S. and doesn’t have publicly traded shares.
To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; Natalie Doss in New York at ndoss@bloomberg.net
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net
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