Former ResCap parent Ally to pay $52 million under settlement with DOJ

By Caroline Salls

Pittsburgh, Nov. 21 – Ally Financial Inc. reached a settlement with the Department of Justice related to investigations into residential mortgage-backed securities (RMBS) issued by former mortgage subsidiary Residential Capital, LLC and its subsidiaries, according to an 8-K filed Monday with the Securities and Exchange Commission.

Allied said the DOJ has been investigating potential fraud and other legal claims related to ResCap RMBS.

The investigation covered potential claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the False Claims Act related to representations made by Ally in connection with investments the Department of the Treasury made under the Troubled Asset Relief Program in 2008 and 2009 in connection with claims against ResCap.

Under the settlement, Ally will pay $37.5 million to the DOJ, Ally Securities LLC, formerly known as Residential Funding Securities LLC, will withdraw its registration as a broker-dealer and wind down its affairs, and, after that withdrawal of registration but no later than Dec. 31, Ally will pay an additional $14.5 million to the DOJ.

Ally said it fully reserved for this settlement within discontinued operations during the three months ended Sept. 30.

Residential Capital, a New York-based mortgage originator and servicer, emerged from bankruptcy on Dec. 17, 2013.

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