Ally Bank 2012 Annual Report Download - page 114

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On February 26, 2013, the official committee of unsecured creditors appointed in the Debtors' bankruptcy cases (the Creditors'
Committee) filed with the Bankruptcy Court a response to the Debtors' motions for appointment of a chief restructuring officer and to extend
their exclusive period to file a chapter 11 plan, which, among other things, states that the Creditors' Committee supports such extension
through and including April 30, 2013, and during such time the Creditors' Committee will agree not to bring any claims against AFI. The
response further states that the Debtors consent to the Creditors' Committee seeking standing in the Bankruptcy Court to prosecute and/or
settle the Debtors' alleged claims against AFI and agree to settle claims against AFI only with Creditors' Committee consent.
On February 27, 2013, the Debtors filed a motion with the Bankruptcy Court seeking, for purposes of any proposed chapter 11 plan, that
GMAC Mortgage's obligation to conduct and pay for independent file review regarding certain residential foreclosure actions and foreclosure
sales prosecuted by GMAC Mortgage and its subsidiaries, as required under the Consent Order, be classified as a general unsecured claim in
an amount to be determined, and that the automatic stay under the Bankruptcy Code be applied to prevent the FRB, the FDIC, and other
governmental entities from taking any action to enforce the obligation against the Debtors. If the Bankruptcy Court approves the motion, such
governmental entities are likely to seek to enforce the obligation against AFI, and any such obligations ultimately borne by AFI could be
material. The Debtors have requested that the motion be heard at a hearing on March 21, 2013.
We are currently named as defendants in various lawsuits relating to ResCap mortgage-backed securities and certain other mortgage-
related matters, which are described in more detail in Note 29. Substantially all of these matters are currently subject to orders entered by the
Bankruptcy Court staying the matters through either March 31, 2012 or April 30, 2013. Unless the Debtors seek and obtain Bankruptcy Court
approval to extend these stay orders, these matters are expected to proceed against us once the applicable stay orders expire.
As a result of the termination of the Settlement, AFI is no longer obligated to make the $750 million cash contribution and neither party
is bound by the Settlement. Further, AFI is not entitled to receive any releases from either the Debtors or any third party claimants, as was
contemplated under the Plan and Settlement. However, AFI has not withdrawn its offer to provide a $750 million cash contribution to the
Debtors' estate if an acceptable settlement can be reached. As a result of the termination of the Settlement, substantial claims could be brought
against us, which could have a material adverse impact on our results of operations, financial position or cash flows. We would have strong
legal and factual defenses with respect to any such claims, and would vigorously defend them.
As a result of the bankruptcy filing, effective May 14, 2012, we have deconsolidated ResCap from our financial statements and ResCap
is prospectively accounted for using the cost method. Furthermore, circumstances indicated to us that as of May 14, 2012, our investment in
ResCap would not be recoverable, and accordingly we recorded a full impairment of such investment. ResCap's results of operations have
been removed from our Consolidated Financial Statements since May 14, 2012. As of December 31, 2012, due to Ally Bank performing
certain mortgage activities during the bankruptcy process and the related uncertainty associated with the timing of resolution of the ResCap
bankruptcy, we did not classify ResCap as a discontinued operation. Accordingly, ResCap's results are presented as continuing operations
within our Consolidated Statement of Income for periods prior to May 14, 2012. Our Consolidated Statement of Income includes the
following for ResCap's results of operations (amounts presented are before the elimination of balances and transactions with Ally).
Year ended December 31, ($ in millions) 2012 2011 2010
Total net revenue $ 476 $ 632 $ 2,051
Provision for loan losses — 24 (7)
Total noninterest expense 437 1,438 1,526
Income (loss) from continuing operations before income tax expense 39 (830) 532
Income tax expense from continuing operations 715 7
Net income (loss) from continuing operations $ 32 $ (845) $ 525
Based on our assessment of the effect of the deconsolidation of ResCap, obligations under the Plan, and other impacts related to the
Chapter 11 filing, we recorded a charge of $1.2 billion during 2012, within our other operating expenses. This charge primarily consists of the
impairment of Ally's $442 million equity investment in ResCap and the $750 million cash contribution to be made by us to the Debtors' estate
described above. As of December 31, 2012, we have $1.3 billion of financing due from ResCap, which is classified as Finance Receivables
and Loans, net on our Consolidated Balance Sheet. We maintain no allowance or impairment against these receivables because management
considers them to be fully collectible. At December 31, 2012, our hedging arrangements with ResCap were fully collateralized. Additionally,
under a shared services agreement (SSA), each entity agreed to provide services to the other for a period of one year. The SSA will
automatically renew each year unless either entity provides written notice of nonrenewal to the other party at least three months prior to the
expiration. The SSA fees received by Ally and the expenses paid to ResCap will be reflected within the Consolidated Statement of Income as
a reduction or increase of noninterest expense. Because of the uncertain nature of the bankruptcy proceedings, we cannot predict the ultimate
financial impact to Ally. Refer to Note 29 for additional information regarding these bankruptcy proceedings.
Consolidation and Basis of Presentation
The Consolidated Financial Statements include our accounts and accounts of our majority-owned subsidiaries after eliminating all
significant intercompany balances and transactions and include all variable interest entities (VIEs) in which we are the primary beneficiary.
Refer to Note 10 for further details on our VIEs. Our accounting and reporting policies conform to accounting principles generally accepted in
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K