10-29-13 8:02 PM EDT | Email Article

--Ally reaches deals with FHFA and FDIC

--Regulators had sued company over sale of mortgage-backed securities

--Company will take a $170 million charge for the third quarter

 

(Adds details on Ally's settlements in the fifth through seventh paragraphs.)

 
   By Andrew R. Johnson 
 

Ally Financial Inc. is settling lawsuits brought by federal regulators over mortgage-backed securities sold during the financial crisis as the government-owned auto lender takes another step toward putting litigation woes behind it.

The Detroit-based company said Tuesday it will take a $170 million charge in the third quarter in connection with the settlements with the Federal Deposit Insurance Corp. and Federal Housing Finance Agency, the regulator for government-backed mortgage-finance firms Freddie Mac (FMCC) and Fannie Mae (FNMA).

The settlement is the latest in a string of agreements for the FHFA, which sued Ally and 17 other banks in 2011 alleging they sold shoddy mortgage securities to Freddie Mac and Fannie Mae leading up to the financial crisis. Losses on those securities contributed to the near collapse of the mortgage firms, which were ultimately taken over by the government in 2008.

The FDIC had also sued Ally and other banks for allegedly selling defective mortgage securities to other banks that ultimately failed and were taken over by the agency.

Ally's settlement with the FDIC is $55.3 million, a spokesman for the regulator said.

Ally and the FHFA declined to disclose the amount of their settlement but a spokeswoman for that agency said final terms will be finalized by the end of the year, and details of the agreement will be released then.

Including the $170 million charge announced today, Ally has reserved $520 million for the two agencies' suits, said Gina Proia, a spokeswoman for the company.

The regulators' cases were excluded from a release Ally received under a settlement it reached this summer with its subprime mortgage subsidiary, Residential Capital LLC. That deal, which also included ResCap's creditors, granted Ally a release from litigation in exchange for a $2.1 billion payment to ResCap's bankruptcy estate.

ResCap, once one of the country's largest subprime mortgage lenders, filed for Chapter 11 bankruptcy in May 2012 as litigation over soured mortgage securities mounted and bond payments loomed. Such issues had been a drag on the financial health of Ally, stalling the auto lender's efforts to pay back a $17.2 billion bailout it received from the U.S. government during the financial crisis.

"These settlements are key steps in Ally addressing its remaining legacy mortgage risks," said Michael Carpenter, chief executive officer of Ally, in a statement.

The FHFA had objected to how ResCap's bankruptcy plan handled its fraud lawsuit against Ally. Freddie Mac bought $6 billion worth of mortgage-backed securities from ResCap between 2005 and 2007.

The FHFA and Freddie Mac will retain some claims against Ally's banking subsidiary, Ally Bank, as a former mortgage seller and servicer.

ResCap filed its plan to reorganize--and eventually to liquidate--in July. Judge Martin Glenn is set consider approval of the Chapter 11 plan at a Nov. 19 hearing in U.S. Bankruptcy Court in New York.

Ally's settlement is the latest in a string of agreements the FHFA has reached with the banks it sued.

The regulator on Friday announced a $5.1 billion agreement with J.P. Morgan Chase & Co. (JPM), which is trying to put several mortgage probes behind it. That agreement included $4 billion to settle the suit over mortgage securities Freddie and Fannie bought and $1.1 billion to settle separate demands from the government-backed firms that J.P. Morgan repurchase loans it sold them that violated their underwriting standards.

The FHFA has also reached an $885 million settlement with UBS AG (UBS) in July and settled for undisclosed amounts with Citigroup Inc. (C) and General Electric Co. (GE) this year. The three companies didn't admit any wrongdoing.

 

-Patrick Fitzgerald contributed to this article

Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com

 

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


(END) Dow Jones Newswires

October 29, 2013 20:02 ET (00:02 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
Add a Comment

News   More...

Start Premium Trial Register For Free

P F Fund Financial Data (13,000+ funds)
P F Stock Financial Data (7,000+ stocks)
P F Stock and Fund Screeners (basic)
P F Investing Articles and Market Commentary
P F Articles Archive (>30 days)
P F Discuss (dozens of stock, fund, bond, and general bulletin boards)
P F Portfolio Manager (basic)
P F Morningstar Investment Classroom
P F Access Your Portfolio Anytime, Anywhere via Your Mobile Device
P   Morningstar Fund Analyst Reports (full research on 1,700 funds, ETFs, and CEFs)
P   Morningstar Stock Analyst Reports (full research on more than 1,100 stocks)
P   Portfolio Manager (advanced with 10 X-Ray analyses, including recommendations)
P   Portfolio Monitor (monthly and on-demand personalized portfolio statements)
P   Morningstar Proprietary Stock Information (stock star ratings, buy/sell prices, economic moat ratings, and more)
P   Morningstar 5-Star Stock and Fund Favorites & Red Flags eNewsletters
P   Premium Stock and Fund Screeners (advanced with nearly infinite ways to find the best securities for you)
P   Discounts on Morningstar newsletters, books, seminars, and more

Sign-up to Morningstar


Basic Access

Articles and Videos
Morningstar video reports, articles, data, and tools. Dig into our lineup of e-newsletters and investing classroom courses outlining sensible strategies for maximizing your investments.
Morningstar Discuss
Follow the buzz on individual stocks or fund families. Plus, read the latest posts from Morningstar members and analysts.
Portfolio Manager
Track your investments and watch lists with our Portfolio Manager. Customize your view with our comprehensive stock, fund, and ETF data.

Access these features and more when you sign up for Free Membership.
Join Morningstar today. It's Free.

Unlimited Access

Analyst Research
Gather in-depth, actionable insight on over 3,700 stock and mutual funds covered by Morningstar analysts. View our mutual fund Analyst Reports favored by professionals, savvy experienced investors, and new investors researching options for retirement savings, college plans, or other investment needs.
Portfolio X-Ray®
Ensure your portfolio is positioned exactly how you want with Morningstar's X-Ray Interpreter and Stock Intersection tools. A Barron's "Best of the Web" award winner for five years running, X-Ray Interpreter goes under the hood of your portfolio to provide a useful allocation, sector, and geographic analysis. And you can discover how much of a stock you really own, individually and through mutual funds, with Stock Intersection.
Investment Picks
Find new 5-star stocks (greatly undervalued companies) to consider daily. Our 5-star stock rating is a proven winner, consistently beating benchmarks like the S&P 500. Plus, browse our Fund Analyst Picks and Stewardship Grades to find shareholder-friendly mutual funds that are poised for outperformance.
Portfolio Monitor
Get a clear view of your investments with personalized reports about your portfolio. Receive monthly statements and generate reports on-demand to help you stay on track to meet your investment goals.

Access these features and more when you sign up for Premium Membership.
Start your free 14-day trial today online
Your subscription may be tax deductible. Please contact your tax advisor.

Content Partners
Morningstar - 2013/10/29 - Ally Strikes Deals With Regulators Over Mortgage Suits -- 2nd Update
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Author |  Collection |  Interest |  Popularity

Previous: Ally Strikes Deals With Regulators Over Mortgage Suits  |  Next: Ally Strikes Deals With Regulators Over Mortgage Suits -- Update