Ally Bank 2012 Annual Report Download - page 85

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2012 compared to 2011. The decrease in repurchase claims was driven by significantly fewer new claims during the fourth quarter of 2012.
The following table presents Ally Bank's new claims by GSEs (original unpaid principal balance).
Year ended December 31, ($ in millions)2012 2011
Fannie Mae $ 255 $ 210
Freddie Mac 108 160
Total claims $ 363 $ 370
The following table presents the total number and original unpaid principal balance (UPB) of loans related to unresolved representation
and warranty demands (indemnification claims or repurchase demands). The table includes demands that we have requested be rescinded but
have not been agreed to by the investor. Total unresolved representation and warranty demands where Ally Bank has requested the investor to
rescind increased to $23 million or 40% of outstanding claims at December 31, 2012, compared to $11 million or 24% of outstanding claims
at December 31, 2011.
2012 2011
December 31, ($ in millions)Number of
Loans Original UPB of Loans Number of
Loans Original UPB of Loans
Fannie Mae 187 $ 41 72 $ 15
Freddie Mac 72 17 138 31
Total number of loans and unpaid principal balance 259 $ 58 210 $ 46
Repurchase Process
After receiving a claim under representation and warranty obligations, Ally Bank will review the claim to determine the appropriate
response (e.g., appeal and provide or request additional information) and take appropriate action (rescind, repurchase the loan, or remit
indemnification payment). Historically, repurchase demands were generally related to loans that became delinquent within the first few years
following origination. As a result of market developments over the past several years, investor repurchase demand behavior has changed
significantly. GSEs are more likely to submit claims for loans at any point in the loan's life cycle, including requests for loans that become
delinquent or loans that incur a loss. Representation and warranty claims are generally reviewed on a loan-by-loan basis to validate if there
has been a breach requiring a potential repurchase or indemnification payment. Ally Bank actively contests claims to the extent they are not
considered valid. Ally Bank is not required to repurchase a loan or provide an indemnification payment where claims are not valid.
The risk of repurchase or indemnification and the associated credit exposure is managed through underwriting and quality assurance
practices and by servicing mortgage loans to meet investor standards. Ally Bank believes that, in general, the longer a loan performs prior to
default, the less likely it is that an alleged breach of representation and warranty will be found to have a material and adverse impact on the
loan's performance. When loans are repurchased, Ally Bank bears the related credit loss on the loans. Repurchased loans are classified as
held-for-sale and initially recorded at fair value.
The following table presents Ally Bank's new claims by vintage (original unpaid principal balance).
Year ended December 31, ($ in millions)2012 2011
Pre 2008 $ 73 $ 42
2008 181 149
Post 2008 109 179
Total claims $ 363 $ 370
Private Mortgage Insurance
Mortgage insurance is required for certain consumer mortgage loans sold to the GSEs and certain securitization trusts. Mortgage
insurance is typically required for first-lien consumer mortgage loans having a loan-to-value ratio at origination of greater than 80 percent.
Mortgage insurers are, in certain circumstances, permitted to rescind existing mortgage insurance that covers consumer loans if they
demonstrate certain loan underwriting requirements have not been met. Upon receipt of a rescission notice, Ally Bank will assess the notice
and, if appropriate, refute the notice, or if the notice cannot be refuted, Ally Bank attempts to remedy the defect. In the event the mortgage
insurance cannot be reinstated, Ally Bank may be obligated to repurchase the loan or provide an indemnification payment in the event of a
loss, subject to contractual limitations. While Ally Bank makes every effort to reinstate the mortgage insurance, it has had limited success and
as a result, most of these requests result in rescission of the mortgage insurance. At December 31, 2012, Ally Bank has approximately $9
million in original unpaid principal balance of outstanding mortgage insurance rescission notices where it has not received a repurchase
demand. However, this unpaid principal amount is not representative of expected future losses.
Guarantees
Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based
on changes in an underlying agreement that is related to a guaranteed party. Our guarantees include standby letters of credit and certain
Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K