Early today, government-controlled Ally Financial's unit Residential Capital (ResCap) and fifty of its mortgage subsidiaries filed for Chapter 11 protection through a pre-packaged bankruptcy plan.

After news of the bankruptcy broke, Barclays Capital analysts published a report examining the major impact on non-agency MBS investors of ResCap's Chapter 11 filing.

The bankruptcy filing is an overall positive for holders of MBS issued by ResCap subsidiaries, analysts stated.

"With the agreed-upon sale of the MSRs to [Fortress Investment Group], bondholders are highly unlikely to see any significant disruption in cash flows," analysts stated. "The sale effectively removes the uncertainty that a splintering of the MSRs could occur."

This leaves, according to analysts, the net negative value servicing rights, comprising mostly MSRs on low balance non-agency subprime transactions, at the bankrupt estate.

But, they said that considering that Nationstar has historically implemented more loan modifications and has been more frequently stopping advances compared to ResCap, MBS holders are probably going to see some servicing performance shifts.

In terms of reps and warranties (please see story), an agreement was reached between RMBS institutional investors and ResCap to settle rep and warranty claims on MBS deals issued by its subsidiaries.

In exchange for supporting ResCap's bankruptcy plan, non-agency MBS holders of 392 securitization trusts issued between 2004 and 2008 worth $221 billion in original face value will receive a stipulated rep and warranty claim of $8.7 billion. This amount is 3.9% of original unpaid principal balance.

This claim will allow bondholders to receive recoveries on a pro rata basis with other senior unsecured creditors, Barclays analysts said.


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