Ally Financial Inc. (ALLY), the auto and home lender rescued by the U.S. government, said it reached a settlement tied to disputed mortgages with two federal agencies.
The agreement with the Federal Housing Finance Agency and the Federal Deposit Insurance Corp. will result in a $170 million third-quarter charge, Detroit-based Ally said today in a statement. The accord ends all pending litigation and the agencies won’t object to the reorganization plan for the company’s money-losing Residential Capital mortgage lender, according to the statement.
“These settlements are key steps in Ally addressing its remaining legacy mortgage risks,” Chief Executive Officer Michael A. Carpenter said in the statement.
Ally has sought to pay off mortgage liabilities caused by ResCap, once one of the largest subprime home lenders, whose billions of dollars in losses led to a $17.2 billion government bailout of Ally. ResCap agreed in July to pay $230 million to compensate borrowers for improper foreclosure practices, according to a Federal Reserve statement.
Ally has now set aside $520 million in reserves to cover the settlements, Gina Proia, a company spokeswoman, said in an e-mail. The third-quarter charge adds to $350 million of reserves remaining from prior periods. The lender took two charges totaling $2.3 billion and paid $1.95 billion to the ResCap estate to secure releases from mortgage liabilities, leaving $350 million, according to company statements.
Proia said she couldn’t comment on the total cost of the settlement because the details haven’t been disclosed. The FDIC’s portion of the deal, settled last week, is $55.3 million, said David Barr, an agency spokesman.
“We are pleased to have reached settlements that put these matters behind us,” Proia said in an e-mailed statement.
FHFA General Counsel Alfred Pollard said in a statement that his agency has “agreed to resolve securities law claims” with Ally. Final terms are still being set and details will be released by the end of the year, he said.
As part of the settlement, the FHFA will vote in favor the ResCap plan, Ally said in a filing. The FDIC did not cast a vote for the plan. The hearing to approve the ResCap plan is scheduled for Nov. 19, according to the statement.