- Won't be like last time, Brown says, referencing old GMAC unit
- Mortgages were put in ``rearview mirror,'' former CEO had said
Ally Financial Inc. is reentering the mortgage business just two years after it stopped making new home loans.
Ally, whose defunct GMAC Mortgage unit was one of the biggest lenders of subprime mortgages in the run-up to the 2008 housing bust, will inch back into direct home loan originations next year, the bank’s Chief Executive Officer Jeffrey Brown said this week at a Goldman Sachs Group Inc. financial conference in New York.
“Don’t think of this as Ally going down the road of the old GMAC,” Brown said, referring to the home lending unit that brought Ally to the brink of collapse.
The bank has no plans to securitize its originations, and it won’t keep any servicing rights or build out a servicing operation, Ally spokeswoman Gina Proia said in an e-mail. The bank will detail new product offerings, including a new credit card, at its investor conference in February.
At the height of the housing boom in 2006, GMAC’s Residential Capital, ranked 12th among U.S. subprime lenders, according to trade publication Inside Mortgage Finance. When Ally exited home lending in 2013, former CEO Michael Carpenter said mortgages were in its “rear-view mirror.” That ended an almost 30-year foray that led to more than $10 billion in losses and a $17.2 billion U.S. bailout.
Its decision to return to the market also comes as the mortgage industry looks for ways to revive various forms of home lending, including subprime, that all but disappeared in the immediate aftermath of the housing crisis.
Ally isn’t expected to start offering risky products the way GMAC did, according to Jeff Davis at Mercer Capital. “But they’ve got to do something, because they won’t make a decent return if the business is limited to making car loans,” he said.