Ally Financial pulls out of mortgage lending
Ally Financial, Inc. has announced that its broker-dealer subsidiary, Ally Securities will bow out of mortgage-related activities as it continues their strategy of reducing noncore businesses and focusing on retail lending as they stated they would do back in 2011. The company said in a statement that they would be winding down the operation “in an orderly manner over the coming weeks.”
Ally is 74 percent owned by the U.S. government, having accepted over $17 billion in bailout funds during the mortgage meltdown, and is expected to pay back $134 million to the U.S. Department of the Treasury in short order, as they make their mortgage services exit.
The bank has paid back $5.5 billion since February of 2009, owing roughly $12 billion to the government, thus taxpayers. Ally is expected to put it subsidiary, Residential Capital (ResCap) mortgage into bankruptcy after supporting ResCap with financial support through forgiveness of intercompany debt which is not expected to continue.
According to the Wall Street Journal, ResCap faces maturity deadlines on two senior credit facilities that Ally provides it on Friday, and Standard & Poor’s has expressed uncertainty over whether Ally will extend the maturities as a reason for downgrading ResCap’s ratings in February.
In a regulatory filing, Ally said it has reached an agreement with the majority of its stockholders to waive the provision in their bylaws that requires stockholder approval for transactions over $5 million which has now been reset to $25 million.
Ally’s cutting their broker-dealer mortgage activities affects 33 employees which may be offered positions elsewhere in the company.