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Wednesday, June 29, 2011

Ally to Record $100 Million Cost on Mortgages

Ally Financial Inc., the auto and home lender that got a $17.2 billion bailout, will record a second-quarter cost of about $100 million to cover losses suffered by trusts that bought its mortgages. The firm also got subpoenas from U.S. investigators relating to home loans.
The cost will help cover losses on insured mortgages where insurers later canceled the policies because “they believe certain loan underwriting requirements have not been met,” Detroit-based Ally said today in a filing. The mortgages had been sold to trusts, which packaged them into securities to sell to bond investors.
“These payments resulted from a review of securitized mortgages as to which mortgage insurance was rescinded, although no claims have been made against us to date with respect to these mortgages,” Ally said in the filing.
The disclosure was contained in an update to the prospectus, initially filed in March, for the company’s planned public share offering. The share sale has been delayed until equity markets improve, a person familiar with the plans said earlier this month.
Ally, 74 percent owned by the U.S. Treasury Department, also said in the filing that it has received subpoenas from the U.S. Department of Justice and the Securities and Exchange Commission relating to how it handled mortgages.
The DOJ subpoena “includes a broad request for documentation and other information in connection with its investigation of potential fraud” tied to the origination or underwriting of home loans, the company said.

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