Ally’s ResCap Unit Files for Ch. 11 Bankruptcy
Mortgage lender Residential Capital, LLC (ResCap), on Monday filed for Chapter 11 bankruptcy protection.
The move is expected to assist ResCap's parent company, Detroit-based auto lender Ally Financial, Inc., as it attempts to repay billions of dollars that it received in the form of federal government bailouts during the financial crisis.
ResCap spokeswoman Susan Fitzpatrick told Twin Cities Business on Monday that ResCap was based in Bloomington until its headquarters were shifted to New York several months ago because some senior leaders were based there and “the transition supported operational efficiencies.”
According to a report by Reuters, the U.S. Treasury Department injected $17 billion into the lender through multiple bailouts during the financial crisis and now owns nearly 74 percent of the company.
Ally said Monday that it has paid back about $5.5 billion to the U.S. Treasury, which has “enabled the taxpayer to recover about one-third of the investment made in the company.”
In addition, Ally said that it will “explore strategic alternatives” for its international businesses. “These actions will enable Ally to further invest in and grow its leading U.S.-based automotive services and direct banking franchises and be best positioned to return additional capital to the U.S. taxpayer by year-end,” Ally said in a news release.
Ally expects its recently announced initiatives, including the ResCap bankruptcy, to allow it to return another one-third of the bailout money.
Ally said that ResCap's board decided to file for bankruptcy to “best enable it to preserve more than 3,500 jobs and keep its talented work force focused on assisting homeowners by servicing the more than 2.4 million loans in its portfolio.”
The company currently employs 82 people in Bloomington, and headcount there will not be affected by the filing, Fitzpatrick said.
ResCap's mortgage origination, servicing, and other business activities, conducted through its subsidiaries, including GMAC Mortgage, will continue to operate as the bankruptcy process moves forward.
In its bankruptcy petition, which was filed in the Southern District of New York, ResCap indicated that it has more than 200 debtors. It listed assets of $15.68 billion and liabilities of $15.28 billion. ResCap said that the filing is meant to facilitate the sale of substantially all of its assets.
ResCap has chosen Lewisville, Texas-based Nationstar Mortgage, LLC, to serve as the “stalking-horse” bidder in an auction of its mortgage origination and servicing assets, meaning that Nationstar can cast the initial bid.