Ally Bank 2011 Annual Report Download - page 231

Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10−K
Legal Proceedings
We are subject to potential liability under various governmental proceedings, claims, and legal actions that are pending or otherwise asserted against
us. We are named as defendants in a number of legal actions, and we are occasionally involved in governmental proceedings arising in connection with our
respective businesses. Some of the pending actions purport to be class actions, and certain legal actions include claims for substantial compensatory and/or
punitive damages or claims for indeterminate amounts of damages. We establish reserves for legal claims when payments associated with the claims
become probable and the payments can be reasonably estimated. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters,
it is generally very difficult to predict what the eventual outcome will be, and when the matter will be resolved. The actual costs of resolving legal claims
may be higher or lower than any amounts reserved for the claims.
Mortgage−backed Securities Litigation
Private−label Securities Litigation
Ally and certain of its subsidiaries have been named as defendants in several cases relating to their various roles in MBS offerings. The plaintiffs
generally allege that the various defendants made misstatements and omissions in registration statements, prospectuses, prospectus supplements, and other
documents related to MBS offerings. The alleged misstatements and omissions typically concern underwriting standards. Plaintiffs generally claim that such
misstatements and omissions constitute violations of state and/or federal securities law and common law including negligent misrepresentation and fraud.
Plaintiffs seek monetary damages and rescission. Set forth below are descriptions of certain of these legal proceedings.
Allstate Litigation
On February 14, 2011, the Allstate Insurance Company and various of its subsidiaries and affiliates (collectively, Allstate) filed a complaint in
Hennepin County District Court, Minnesota, against GMAC Mortgage LLC (GMAC Mortgage); Residential Funding Company LLC (RFC); Residential
Funding Securities LLC (RFS); Residential Accredit Loans, Inc. (RALI); Residential Asset Mortgage Products, Inc. (RAMP); Residential Funding
Mortgage Securities I, Inc. (RFMSI); Residential Funding Mortgage Securities II, Inc. (RFMSII); and Residential Asset Securities Corporation (RASC).
The complaint alleges that the defendants misrepresented the riskiness and credit quality of, and omitted material information related to, residential MBS
Allstate purchased in the offering materials. The complaint asserts claims for fraud and negligent misrepresentation and seeks money damages and costs,
including attorneys' fees. Discovery in this case is underway.
Charles Schwab Litigation
The Charles Schwab Corporation (Schwab) filed a complaint in San Francisco County Superior Court against RALI, and RAMP, on August 2, 2010.
The complaint alleges that the defendants made false representations and omissions of material facts in the offering documents for various securitization
trusts backed by residential mortgage loans and seeks rescission and money damages for negligent misrepresentation and violations of state and federal
securities laws. The case is entering the discovery phase.
DZ Bank
DZ Bank and DG Holding Trust filed a Summons with Notice on December 13, 2011, in New York County Supreme Court directed at Ally, and
numerous of its mortgage subsidiaries, on December 13, 2011, in New York County Supreme Court against numerous defendants including Ally;
Residential Capital Corporation (RCC); GMAC−RFC Holding Company LLC (GMAC−RFC); RFC; Ally Securities LLC (Ally Securities); RAMP; RASC;
and RALI. The Summons alleges that the offering materials issued by the defendants for MBS they purchased contained material misrepresentations and
omissions related to the originator's underwriting guidelines and the credit quality and characteristics of the mortgage loans underlying the securities. It also
notices the defendants of the plaintiffs' claims for damages. Such claims include common law fraud, fraudulent inducement, negligent misrepresentation,
and aiding and abetting fraud. The Summons has not been served.
FHFA Litigation
FHFA, as conservator for Freddie Mac, filed a complaint on September 2, 2011, against Ally; GMAC Mortgage Group, Inc. (GMAC Mortgage
Group); Residential Capital LLC (ResCap); GMAC−RFC; RFC; Ally Securities; RAMP; RASC; and RALI, in New York County Supreme Court. The
complaint alleges that Freddie Mac purchased over $6 billion of residential MBS issued in connection with 21 securitizations sponsored and/or underwritten
by the defendants. It further alleges that the registration statements, prospectuses, and other offering materials associated with these transactions contained
false and misleading statements and omissions of material facts. The complaint asserts claims for negligent misrepresentation, fraud, and violations of state
and federal securities laws, and seeks rescission and recovery of the consideration Freddie Mac paid for the securities, as well as other compensatory and
punitive damages. The FHFA has moved to remand this case to state court. That motion is still pending.
FHLB Litigation
Federal Home Loan Bank (FHLB) of Indianapolis filed an Amended Complaint in Marion County Superior Court for rescission and damages on July
14, 2011, asserting claims for common law negligence and violations of state and federal securities laws, and names RFS, RFMSI, and GMAC Mortgage
Group, among other defendants. The complaint alleges that the offering documents for the securities underwritten and issued by the defendants contained
material misrepresentations of fact, evidenced by high default and foreclosure rates, and seeks unspecified damages and an order voiding the transactions at
issue. The defendants' motion to dismiss is pending.
FHLB of Boston filed a complaint on April 20, 2011, in Suffolk County Superior Court, naming numerous defendants including Ally;
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