Ally Financial disclosed Tuesday that it will incur a $270 million charge in the fourth quarter – and an overall loss for the entire firm – due to what it calls “penalties” imposed by regulators and the states tied to “foreclosure related matters.”
At deadline an Ally spokeswoman said the firm had no comment on the matter.
One industry observer said he believes the foreclosure-related matter is likely Ally's financial hit for settling robo-signing allegations. (A nationwide settlement between five large servicers, the Department of Justice, and State Attorney Generals is pending.)
In a new Securities and Exchange Commission (SEC) filing Ally noted that a majority of the charge will be recorded at its mortgage division, Residential Capital. It added: “Further, ResCap is required to maintain consolidated tangible net worth of at least $250 million at the end of each month under the terms of certain of its credit facilities.”
As a result of the charge, ResCap fell out of compliance on its lines, but then remedied the shortfall when Ally gave it $196.5 million “which was provided through forgiveness of intercompany debt and results in pro-forma tangible net worth at ResCap of $300 million.”
Recently, investors holding at least $800 million of secured bonds in ResCap organized and hired counsel, fearing a possible bankruptcy filing by the mortgage unit.
Ally Financial, a bank holding company, is majority owned by the U.S. government. Ally had hoped to take ResCap/GMAC public last year but eventually scuttled the idea. ResCap/GMAC receives funding for its mortgage business from Ally.