Ally Bank 2011 Annual Report Download - page 226

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
agreement in principle with the federal government, 49 state attorneys general, and 45 state banking departments with respect to investigations into
procedures followed by mortgage servicing companies and banks in connection with mortgage origination and servicing activities and foreclosure home
sales and evictions (Settlement). The Settlement is expected to be filed as a consent judgment in the U.S. District Court for the District of Columbia. In
addition, we separately reached an independent settlement with Oklahoma, which did not participate in the broader settlement described below.
The Settlement requires a payment by ResCap of approximately $110 million to a trustee, who will then distribute these funds to federal and state
governments. This amount is payable upon the filing of the consent judgment. In addition, the Ally Entities have committed to provide $200 million towards
borrower relief. This commitment for borrower relief will include loan modifications, including principal reductions, rate modifications, and refinancing for
borrowers that meet certain requirements, and participation in certain other programs. Generally, if certain basic criteria are met, borrowers that are either
delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth could be eligible for principal reductions, and
borrowers that are current on their mortgages but who owe more on their mortgage than their homes are worth could be eligible for refinancing
opportunities.
We currently expect that loans totaling approximately $550 million in outstanding unpaid principal balance will be modified in connection with these
programs. This estimate was determined by identifying loans that appear to meet the program eligibility requirements, and applying various assumptions
with respect to anticipated modifications. Given that we have limited historical experience upon which to base our assumptions, the actual unpaid principal
balance of loans ultimately modified could be significantly different. It is possible that certain of these modified loans will be accounted for as TDRs. Refer
to Note 1 for additional information related to our accounting policy for TDRs.
The Settlement provides incentives for borrower relief that is provided within the first twelve months, and all obligations must be met within three
years from the date the consent judgment is filed. In addition to the foregoing, the Ally Entities will be required to implement new servicing standards
relating to matters such as foreclosure and bankruptcy information and documentation, oversight, loss mitigation, limitations on fees, and related procedural
matters. Compliance with these obligations will be overseen by an independent monitor, who will have authority to impose additional penalties and fines if
we fail to meet established timelines or fail to implement required servicing standards.
The Settlement generally resolves potential claims arising out of origination and servicing activities and foreclosure matters, subject to certain
exceptions. The Settlement does not prevent state and federal authorities from pursuing criminal enforcement actions, securities−related claims (including
actions related to securitization activities and Mortgage Electronic Registration Systems, or MERS), loan origination claims, certain claims brought by the
FDIC and the GSEs, and certain other matters. The Settlement also does not prevent claims that may be brought by individual borrowers.
The Settlement is subject to ongoing discussions among the parties and the completion of definitive documentation, as well as required regulatory
and court approvals.
Federal Reserve Board Civil Money Penalty
On February 9, 2012, Ally Financial Inc. and ResCap also agreed with the Federal Reserve Board on a civil money penalty (CMP) of $207 million
related to the same activities that were the subject of the Settlement. This amount will be reduced dollar−for−dollar in connection with certain aspects of our
satisfaction of the required monetary payment and borrower relief obligations included within the Settlement, as well as our participation in other similar
programs approved by the Federal Reserve Board. While additional future cash payments related to the CMP are possible if we are unable to satisfy the
borrower relief requirements of the Settlement within two years, we currently expect that the full amount of the CMP will be satisfied through our
commitments included within the Settlement.
Financial Impact of the Settlement and CMP
For the year ended December 31, 2011, we recognized a charge of $230 million related to the matters described above. While we may forego future
interest payments received related to modified loans that we may not have otherwise agreed without the Settlement, we do not expect the borrower relief
modifications required by the Settlement will have a significant impact on future interest income or key performance metrics, including our net interest
margin. Further, we do not expect that our borrower relief commitments overall will have a material adverse impact on our results of operations, financial
position, or cash flows.
Other Mortgage Foreclosure Matters
Commonwealth of Massachusetts
On December 1, 2011, the Commonwealth of Massachusetts filed an enforcement action in the Suffolk County Superior Court against GMAC
Mortgage and several other lender/servicers. For further details, refer to Legal Proceedings below.
Consent Order
As a result of an examination conducted by the FRB and FDIC, on April 13, 2011, each of Ally Financial Inc., Ally Bank, Residential Capital, LLC
and GMAC Mortgage, LLC (collectively, the Ally Entities) entered into a Consent Order (the Consent Order) with the FRB and the FDIC. The Consent
Order requires the Ally Entities to make improvements to various aspects of Ally’s residential mortgage loan−servicing business, including compliance
programs, internal audit, communications with borrowers, vendor management, management information systems, employee training, and oversight by the
boards of the Ally Entities.
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