Ally settles U.S. regulators' mortgage securities claims

Reuters

By Nick Brown and Nate Raymond

NEW YORK, Oct 29 (Reuters) - Ally Financial Inc,the former parent of bankrupt Residential Capital LLC, hasagreed to settle lawsuits by two U.S. regulators over allegedmisstatements about its residential mortgage-backed securities.

The automotive lender said on Tuesday it had reached a dealto resolve a lawsuit by the Federal Housing Finance Agency(FHFA) over $6 billion in mortgage investments as well asseparate claims from the Federal Deposit Insurance Corp. Allysaid it expects to record a charge of about $170 million.

"These settlements are key steps in Ally addressing itsremaining legacy mortgage risks," Michael Carpenter, thecompany's chief executive, said in the statement.

Exact terms of the deal were not revealed.

Alfred Pollard, general counsel for FHFA, said in astatement that details will be released after the end of thecurrent fiscal quarter, as both sides continue to hash out finalterms.

David Barr, a spokesman for the FDIC, said that agency'ssettlement was worth $55.3 million, and resolves four lawsuitsagainst Ally related to mortgage-backed securities.

Ally's former mortgage unit, ResCap, is under Chapter 11bankruptcy protection in New York, with a hearing slated forNov. 19 on its bankruptcy exit plan.

The plan is premised on a global settlement that, amongother things, released ResCap and Ally from most third-partyclaims. The FHFA and FDIC claims were excepted from thereleases.

Separately on Tuesday, ResCap revealed it has reached asettlement with the National Credit Union Administration, alsoover alleged misstatements regarding mortgage-backed securities.

The NCUA had asserted more than $290 million in claims, butreceived an allowed claim of $78 million in the bankruptcy,according to court papers.

A spokesman for the NCUA had no immediate comment onTuesday.

FHFA LAWSUITS

Ally was one of 18 financial institutions sued by the FHFAin 2011 as part of the fallout from the global financial crisis.The agency said the banks made false or misleading statementsrelating to some $200 billion in RMBS bought by Fannie Mae orFreddie Mac, for which the FHFA is conservator.

With respect to Ally, the agency sought to recoup losses onthe sale of more than $6 billion of securities to Freddie Macbetween September 2005 and May 2007.

The settlement would mark the latest in the FHFA's recentstring of deals related to its RMBS litigation. On Friday, itannounced a $5.1 billion deal with JPMorgan Chase & Co,$4 billion of which resolves the federal lawsuit pending againstit in New York.

The FHFA announced an $885 million settlement with UBS AG in July, and also reached deals earlier this year withCitigroup Inc and General Electric Co, terms ofwhich are confidential.

The settlement followed a ruling in August by U.S. DistrictJudge Denise Cote in Manhattan allowing the FHFA to pursue itscase against Ally even though Residential Capital was inbankruptcy.

The Ally case is Residential Capital LLC et al v. FederalHousing Finance Agency, U.S. District Court, Southern Districtof New York, No. 12-05116.

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