Residential Capital L.L.C., a Fort Washington mortgage arm of Ally Financial Inc., agreed to pay Fannie Mae $462 million to settle claims that it sold loans to the government-owned mortgage giant that did not meet required standards.
The agreement, announced Monday by Detroit-based Ally Financial, formerly GMAC, was the final step in an effort this year to cut the amount of risk in the mortgage operations of Ally, which received $17 billion of federal bailout money and is 56 percent owned by the government.
ResCap chief executive Thomas Marano said in a statement that the firm would now focus predominantly on making and collecting payments on plain-vanilla mortgages.
A year ago, ResCap employed 1,800 in Fort Washington. Spokesman James Olecki did not return a call Monday seeking further information.
The ResCap settlement is part of a pushback by Fannie Mae, Freddie Mac, and other entities that purchased mortgages to be packaged into bonds during the fast-and-loose era of lending that ended with the financial crash that began in 2007.
Fannie Mae, for example, at the end of September had outstanding requests for lenders to buy back $7.7 billion in loans. During the third quarter, lenders either bought back or reimbursed Fannie Mae for losses on $1.6 billion in loans.
ResCap said its settlement with Fannie Mae "was modestly in excess of reserves previously taken" to cover the expense. At the end of September, Ally's mortgage-repurchase reserves were $1.13 billion to cover $890 million in claims. Those figures show that Fannie Mae claims, resulting in the $462 million settlement, were a major hurdle for ResCap.
Previously, ResCap had reached settlements with Freddie Mac and others but did not disclose the amounts. During the five quarters ended Sept. 30, Ally's mortgage operations received $1.74 billion in new demand for mortgage purchases.
Since 2006, when the housing downturn started, Ally's mortgage-related assets have fallen to $41 billion from $140 billion, the company said.
Analysts at FBR Capital Markets estimated on Nov. 29 that U.S. lenders' cumulative losses from being forced to buy back mortgages would be at least $54 billion, but could go as high as $106 billion.
The analysts estimated that repurchase losses at Bank of America Corp., which bought Countrywide Financial Corp. during the heat of the financial tumult of 2008, would fall between $10.7 billion and $20.4 billion. Bank of America had recorded an estimated $8.1 billion in such losses, analysts said.