Ally Financial has agreed to pay Fannie Mae $462 million to settle repurchase demands for breaches of representations and warranties related to whole loans and private-label securities the lender sold the GSE.
Ally's mortgage unit Residential Capital (ResCap), which owns GMAC Mortgage and Ditech, used to be a major subprime and Alt-A lender before the financial crisis.
The $462 million settlement releases ResCap and its subsidiaries from liability relating to approximately $292 billion of original unpaid principal balance on those loans, according to the Detroit-based lender. The current unpaid principal balance on those loans serviced by GMAC Mortgage is $84 billion.
"This agreement, along with prior repurchase settlements with Freddie Mac and others and the sale of legacy assets and operations, has significantly reduced Ally's risk related to the legacy mortgage business going forward," said Ally chief executive Michael Carpenter.
In March, ResCap and GMAC Mortgage agreed to make a one-time payment to Freddie for a "partial release" of repurchase obligations on loans sold to Freddie prior to 2010. Freddie and Ally have not disclosed the amount of the settlement but it is understood to be less than the Fannie agreement.
The agreement with Ally addresses "our exposure on a portfolio of loans sold to Fannie Mae by GMAC Mortgage or serviced by GMAC Mortgage," said Fannie spokeswoman Janis Smith. "The agreement also addresses Fannie Mae's potential claims for losses on certain private label securities issued by GMAC entities.