Ally Bank 2012 Annual Report Download - page 52

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Consumer mortgage loans held-for-investment were as follows.
December 31, ($ in millions) 2012 2011
Prime conforming $ 245 $ 278
Prime nonconforming 8,322 8,069
Prime second-lien 1,137 2,200
Government ——
Nonprime —1,349
International —422
Total 9,704 12,318
Net premiums 43 38
Fair value option election adjustment —(1,601)
Allowance for loan losses (432) (495)
Other 8—
Total, net (a) $ 9,323 $ 10,260
(a) At December 31, 2012, and December 31, 2011, the carrying value of mortgage loans held-for-investment relating to securitization transactions accounted
for as on-balance sheet securitizations and pledged as collateral totaled $0 million and $837 million, respectively. The investors in these on-balance sheet
securitizations have no recourse to our other assets beyond the loans pledged as collateral other than market customary representation and warranty
provisions.
Mortgage Loan Servicing
Our retained mortgage servicing rights consist of primary servicing rights. When we act as primary servicer, we collect and remit
mortgage loan payments, respond to borrower inquiries, account for principal and interest, hold custodial and escrow funds for payment of
property taxes and insurance premiums, counsel or otherwise work with delinquent borrowers, supervise foreclosures and property
dispositions, and generally administer the loans. The majority of our serviced mortgage assets are subserviced by GMAC Mortgage, LLC, a
subsidiary of ResCap, pursuant to a servicing agreement. Historically, we acted as a master servicer. When we acted as master servicer, we
collected mortgage loan payments from primary servicers and distributed those funds to investors in mortgage-backed and mortgage-related
asset-backed securities and whole-loan packages. Key services in this regard include loan accounting, claims administration, oversight of
primary servicers, loss mitigation, bond administration, cash flow waterfall calculations, investor reporting, and tax-reporting compliance. In
return for performing these functions, we receive servicing fees equal to a specified percentage of the outstanding principal balance of the
loans being serviced and may also be entitled to other forms of servicing compensation, such as late payment fees or prepayment penalties.
Servicing compensation also includes interest income or the float earned on collections that are deposited in various custodial accounts
between their receipt and the scheduled/contractual distribution of the funds to investors. Refer to Note 11 to the Consolidated Financial
Statements for additional information.
The value of mortgage servicing rights is sensitive to changes in interest rates and other factors. We have developed and implemented an
economic hedge program to, among other things, mitigate the overall risk of loss due to a change in the fair value of our mortgage servicing
rights. Accordingly, we hedge the change in the total fair value of our mortgage servicing rights. The effectiveness of this economic hedging
program may have a material effect on the results of operations. Refer to the Critical Accounting Estimates section of this MD&A and Note
22 to the Consolidated Financial Statements for further discussion. On October 26, 2012, we announced that Ally Bank began to explore
strategic alternatives for its agency mortgage servicing rights portfolio, including a potential sale of the asset. A sale alternative would require
GSE approval.
The following table summarizes our primary consumer mortgage loan-servicing portfolio by product category.
December 31, ($ in millions) 2012 2011
U.S. primary servicing portfolio
Prime conforming $ 117,544 $ 226,239
Prime nonconforming 11,628 47,767
Prime second-lien 1,136 6,871
Government 16 49,027
Nonprime —20,753
International primary servicing portfolio —5,773
Total primary servicing portfolio (a) $ 130,324 $ 356,430
(a) Excludes loans for which we acted as a subservicer. Subserviced loans totaled $0 billion and $26.4 billion at December 31, 2012 and 2011, respectively.
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K