Ally Bank 2012 Annual Report Download - page 48

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Mortgage Operations
Results of Operations
The following table summarizes the operating results for our Mortgage operations excluding discontinued operations for the periods
shown. Our Mortgage operations include the ResCap legal entity (prior to its deconsolidation from Ally Financial as of May 14, 2012) and the
mortgage operations of Ally Bank. Refer to Note 1 to the Consolidated Financial Statements for further details on ResCap. The amounts
presented are before the elimination of balances and transactions with our other reportable segments.
Year ended December 31, ($ in millions) 2012 2011 2010
Favorable/
(unfavorable)
2012-2011
% change
Favorable/
(unfavorable)
2011-2010
% change
Net financing revenue
Total financing revenue and other interest income $ 743 $ 1,147 $ 1,711 (35) (33)
Interest expense 592 937 1,122 37 16
Net financing revenue 151 210 589 (28) (64)
Servicing fees 592 1,198 1,261 (51) (5)
Servicing asset valuation and hedge activities, net (8) (789) (394) 99 (100)
Total servicing income, net 584 409 867 43 (53)
Gain on mortgage loans, net 529 395 990 34 (60)
Other income, net of losses 504 157 141 n/m 11
Total other revenue 1,617 961 1,998 68 (52)
Total net revenue 1,768 1,171 2,587 51 (55)
Provision for loan losses 86 150 144 43 (4)
Noninterest expense
Compensation and benefits expense 252 394 322 36 (22)
Representation and warranty expense 67 324 670 79 52
Other operating expenses 674 925 679 27 (36)
Total noninterest expense 993 1,643 1,671 40 2
Income (loss) from continuing operations before income tax
expense $ 689 $ (622) $ 772 n/m (181)
Total assets $ 14,744 $ 33,906 $ 36,786 (57) (8)
n/m = not meaningful
2012 Compared to 2011
Our Mortgage operations earned income from continuing operations before income tax expense of $689 million for the year ended
December 31, 2012, compared to losses from continuing operations before income tax expense of $622 million for the year ended
December 31, 2011. During 2011, we experienced an unfavorable servicing asset valuation, net of hedge, that did not recur in 2012.
Additionally, during 2012, we earned higher fee income and net origination revenue related to increased consumer mortgage-lending
production associated with government-sponsored refinancing programs, and higher net gains on the sale of mortgage loans. We incurred
lower representation and warranty expense and operating expenses resulting from the deconsolidation of ResCap during the second quarter of
2012. Refer to Note 1 to the Consolidated Financial Statements for further information regarding ResCap.
Net financing revenue was $151 million for the year ended December 31, 2012, compared to $210 million in 2011. The decrease in net
financing revenue was primarily due to the deconsolidation of ResCap during the second quarter of 2012. Additionally, total financing
revenue and other interest income decreased in 2012 due to lower average yield mix as higher-rate Ally Bank mortgage loans continued to run
off. Partially offsetting the decrease was lower interest expense related to lower funding costs.
Total servicing income, net was $584 million for the year ended December 31, 2012, compared to $409 million in 2011. The increase
was primarily due to the performance of the derivative servicing hedge as compared to a less favorable hedge performance in 2011. The
increase was partially offset by lower servicing fees due to the deconsolidation of ResCap.
The net gain on mortgage loans increased 34% for the year ended December 31, 2012, compared to 2011. Though we deconsolidated
ResCap during the second quarter of 2012, the increase was primarily due to higher consumer mortgage-lending production through our direct
lending channel and margins associated with government-sponsored refinancing programs, higher margins on warehouse and correspondent
lending due to decreased competition and more selective originations from these channels, and improved market gains on specified pooled
loans.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K