Ally Bank 2014 Annual Report Download - page 58

Table of Contents
Management's Discussion and Analysis
Ally Financial Inc. • Form 10-K
46
Total noninterest expense decreased 79% for the year ended December 31, 2014, compared to 2013. The decrease was primarily due to
our 2013 exit of all non-strategic mortgage-related activities. Included in the decrease were lower broker fees from consumer mortgage-
lending production associated with government-sponsored refinancing programs, lower compensation and benefits expense as a result of a
reduction in the number of employees in our Mortgage operations, and lower representation and warranty expense resulting from decreased
repurchase risk associated with the sale of our agency MSRs portfolio.
2013 Compared to 2012
Our Mortgage operations incurred a loss from continuing operations before income tax expense of $258 million for the year ended
December 31, 2013, compared to income from continuing operations before income tax expense of $595 million for the year ended
December 31, 2012. The decrease was primarily related to our exit of all non-strategic mortgage-related activities, including consumer
mortgage-lending production associated with government-sponsored refinancing programs, our warehouse lending operations, and our agency
MSRs portfolio during 2013.
Net financing revenue was $76 million for the year ended December 31, 2013, compared to $149 million in 2012. The decrease in net
financing revenue was primarily due to lower production as a result of the wind-down of our consumer held-for-sale portfolio, run-off of our
held-for-investment portfolio, and the shutdown of our warehouse lending operations. The decrease was partially offset by lower interest
expense as a result of lower funding costs.
We incurred a net servicing loss of $145 million for the year ended December 31, 2013, compared to net servicing income of $296
million in 2012. The decrease was primarily due to the completed sales of our agency MSRs portfolio in the second quarter of 2013, including
the valuation of the portfolio in conjunction with the sale and the unwinding of all related derivative activity.
The net gain on mortgage loans decreased $320 million for the year ended December 31, 2013, compared to 2012. The decrease was
primarily due to our decision to cease mortgage-lending production through our direct lending channel and lower margins associated with
government-sponsored refinancing programs.
Other income, net of losses, was $90 million for the year ended December 31, 2013, compared to $488 million in 2012. The decrease
was primarily due to lower fee income and net origination revenue related to decreased consumer mortgage-lending production associated
with government-sponsored refinancing programs.
The provision for loan losses was $13 million for the year ended December 31, 2013, compared to $86 million in 2012. The decrease for
the year ended December 31, 2013, was primarily due to lower net charge-offs in 2013 due to the continued runoff of legacy mortgage assets
and improvements in home prices.
Total noninterest expense decreased 49% for the year ended December 31, 2013, compared to 2012. The decrease was primarily due to
our decision to cease consumer mortgage-lending production through our direct lending channel and the broker fee associated with those
government-sponsored refinancing programs, and lower representation and warranty expense. Lower representation and warranty expense
was primarily due to the establishment of our representation and warranty liability during the second quarter of 2012 resulting from the
deconsolidation of ResCap and the subsequent sale of the MSRs portfolio in 2013.
Mortgage Loan Production and Servicing
Mortgage loan production was $6.8 billion and $32.4 billion for the years ended December 31, 2013 and 2012, respectively. During
2013, we sold our business lending operations, completed the sales of agency MSRs, and exited the correspondent and direct lending
channels. During 2014, we purchased $857 million of of high-quality jumbo mortgage loans originated by third parties. We expect this
activity to continue in 2015 in support of our treasury asset liability management (ALM) activities and diversification.