Residential Capital Corp. and its mortgage related affiliates earned $230 million in the second quarter, compared to a year ago loss of $1.3 billion.

However, compared to the first quarter, earnings fell 37%.

The company funded $13.5 billion of home mortgages in 2Q, a 28% decline from the same period a year ago. In the first quarter it originated $13.3 billion.

A subsidiary of Ally Financial (formerly GMAC), the company credited the turnaround to "improved performance in the origination and servicing business, strong margins, lower operating expenses and gains on the sale of legacy mortgage assets."

ResCap noted that loan loss provisions and repurchase reserve expenses were significantly lower compared to 2Q09 due to "strategic actions taken in the fourth quarter of 2009" and a 1Q buyback settlement it struck with Freddie Mac concerning representations and warranties. (Both ResCap and Freddie have declined to say how much was paid.)

Ally said it continues to make progress in minimizing its "legacy mortgage risk," selling off "domestic non-core assets." It sold $510 million of assets for $308 million.

ResCap and its affiliates rank fourth among all residential lenders, and fifth among servicers, according to figures compiled by National Mortgage News and the Quarterly Data Report.

All of Ally Financial earned $565 million in the second quarter, compared to a net loss of $3.9 billion in 2Q09.

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