Ally said to be Shopping Mortgage Unit

One of the financial institutions that are
party to the reported settlement agreement with the attorneys general of the
majority of the states is reportedly on the auction block.  According to Bloomberg News, Ally Financial is
talking with private equity firms about selling its mortgage unit, Residential
Capital LCC
, through a pre-package bankruptcy. 

Any sale of the company would be
complicated by its recent financial history. 
The company was founded as General Motors Acceptance Corporation (GMAC) in
1919 by General Motors as an intermediary to provide financing for the purchase
of its autos.  Over the years it expanded
into other types of lending and into real estate brokerage and adopted the acronym
as its brand name. 

GMAC was hard hit by the housing crash
and was one of the beneficiaries of Toxic Asset Relief Funds (TARP).   In addition to the company’s potential liabilities
– a share of a reported $25 billion to be paid to the states in the above
referenced settlement deal represents merely one of the many suits arising out
of the company’s role in the financial crisis – the U.S. Treasury has a large
stake in the parent company. According to the company’s website, the Treasury owns
73.8 percent; other large stakeholders at less than 10 percent each are GM
Trust, Cerberus and affiliates, and third party investors.  In 2010, reportedly to distance the financial
arm from the auto company, its name was changed to Ally. 

The company reported a fourth quarter
loss on a $270 million charge to cover expected penalties from regulators.

According to Bloomberg, Ally has
contacted Fortress Investment Cerberus Capital Management, Centerbridge
Capital, and Leucadia National Corporation to see if they have any interest in
a purchase.  Bloomberg also said the company is seeking a sale in
order to limit its liability.  The
pre-packaged bankruptcy would allow it to reach agreements with creditors and
stakeholders before filing for court protection.

…(read more)

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