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Fitch removes Ally Financial from negative watch

NEW YORK (AP) -- Fitch Rating is no longer considering lowering its credit rating for Ally Financial after the company agreed to pay $2.1 billion as part of a settlement plan to resolve potential financial claims stemming from its mortgage division, Residential Capital LLC, which is in bankruptcy proceedings.

Ally Financial Inc. announced the amount of the settlement on Thursday, after backing the plan last week.

The agreement, reached as part of mediation with ResCap and its creditors, releases Ally from any claims that could be brought by ResCap, including representation and warranty claims, and all claims held by third parties related to ResCap.

The only exception: securities claims by the Federal Housing Finance Agency and the Federal Deposit Insurance Corp. in its role as receiver for certain failed banks.

Fitch said Friday that it removed Ally from its negative watch list, meaning that it is no longer considering a potential downgrade of ratings.

The agency also affirmed the company's long-term issuer default rating and senior unsecured debt rating at "BB-", or junk status. The rating outlook is stable.

Ally Financial — formerly known as GMAC Inc. — is an automotive financial services company that is 74 percent owned by the U.S. government as a result of bailouts. Ally has paid back $6.1 billion to the Treasury Department to date.

ResCap filed for bankruptcy protection in May 2012 under the weight of toxic mortgages. ResCap has been a drain on Ally's finances because it has struggled to make payments on its debt ever since the U.S. housing market collapsed in 2007.

In February, ResCap completed the sale of a portfolio of mortgage loans to Berkshire Hathaway Inc. Warren Buffett's company won the bankruptcy auction for ResCap's loan portfolio with a $1.5 billion bid last year. ResCap has also sold some assets to Ocwen Loan Servicing LLC and Walter Management Investment Corp. The company said that proceeds from the asset sales totaled more than $4 billion.