Ally May Divest Mortgage Servicing, Business Lending Units
Ally Financial Inc. (ALLY), the auto lender that’s selling assets to repay a U.S. bailout, said its bank subsidiary may divest its portfolio of agency mortgage servicing rights and business-lending operations.
The firm wants to focus on customer deposits and supporting auto finance, the Detroit-based company said today in a statement. Ally said it will “explore strategic alternatives” for the two assets, language that typically means the units are for sale.
“They are no longer strategic activities for the bank,” Barbara Yastine, chief executive officer of Ally Bank, said in the statement.
Ally received more than $17 billion in U.S. aid after the 2008 financial crisis to save the lender and the auto industry from collapse. Plans to repay the government through an initial public offering were put on hold while the company determined the fate of its Residential Capital unit, whose subprime home mortgages led to billions of dollars in losses and ResCap’s bankruptcy in May.
The portfolio includes servicing for about $122 billion in outstanding loan balances, and the business-lending unit buys loans from smaller originators or wholesale brokers, the company said. The loans are owned or guaranteed by Fannie Mae or Freddie Mac, Gina Proia, a company spokeswoman said in an e-mail. Mortgage servicing involves billing, collections and overseeing foreclosures when borrowers fail to pay.
Ally will continue to originate a “modest” amount of jumbo mortgages, or those that are too large to qualify for government-supported programs, to keep on its balance sheet, according to the statement.
A plan announced in July to exit warehouse lending will be completed by year-end, according to the statement.
Earlier this week, billionaire Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) won an auction for a portfolio of ResCap loans with a $1.5 billion bid. Also this week, Ocwen Financial Corp. (OCN) made a $3 billion winning bid for ResCap’s loan-servicing unit, beating Nationstar Mortgage Holdings Inc. (NSM) Ally said Oct. 18 it agreed to sell its Mexican insurance business to Ace Ltd. (ACE) for $865 million.
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