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for their Foreclosure Review services. In its objection, the Creditors' Committee alleged, among other things, that AFI should be responsible
for the costs of the Foreclosure Review. On October 11, 2012, the Bankruptcy Court entered an interim order allowing the Debtors to continue
paying the independent consultants on an interim 90 day basis, while reserving all parties' rights with respect to the allocation of costs
between the Debtors and AFI for the Foreclosure Review. On January 14, 2013, the bankruptcy court entered an interim order authorizing the
Debtors to continue paying the independent consultants for their Foreclosure Review services until February 28, 2013, and then on February
28, 2013, the bankruptcy court entered an interim order authorizing the Debtors to continue paying the independent consultants until March
21, 2013, reserving all parties' rights until that time. 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.
Legal Proceedings
We are subject to potential liability under various governmental proceedings, claims, and legal actions that are pending or otherwise
asserted against us. We are named as defendants in a number of legal actions, and we are involved in governmental proceedings arising in
connection with our respective businesses. Some of the pending actions purport to be class actions, and certain legal actions include claims
for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We establish reserves for legal claims
when payments associated with the claims become probable and the payments can be reasonably estimated. Given the inherent difficulty of
predicting the outcome of litigation and regulatory matters, it is generally very difficult to predict what the eventual outcome will be, and
when the matter will be resolved. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for the claims.
Mortgage-backed Securities Litigation
We have previously disclosed various litigation matters where the Debtors (as defined above) were named as defendants in cases relating
to mortgage-backed securities and certain other mortgage-related matters. As a result of the bankruptcy filings, all litigation against the
Debtors has been automatically stayed and will be resolved in the bankruptcy litigation out of the assets of the estate. Ally believes that it has
no potential future liability with respect to any litigation claims pending solely against the Debtors.
Ally Financial Inc. and certain of its subsidiaries (excluding the Debtors) (collectively, the AFI Entities) are named as defendants in
various cases relating to ResCap mortgage-backed securities (MBS) and certain other mortgage-related matters, which are described in more
detail below (collectively, the Mortgage Cases). In the private-label securities litigation, the plaintiffs generally allege that misstatements and
omissions occurred in registration statements, prospectuses, prospectus supplements, and other documents related to MBS offerings. The
alleged misstatements and omissions typically concern underwriting standards. The plaintiffs generally claim that such misstatements and
omissions constitute violations of state and/or federal securities law and common law including negligent misrepresentation and fraud.
Plaintiffs seek monetary damages and rescission. In these cases, the claims against Ally Financial Inc. are all indirect or vicarious in nature,
which generally requires proof of direct liability against the underlying Debtor entities before the litigants can seek to hold Ally Financial Inc.
responsible for such underlying conduct. With respect to the private-label monoline bond insurer claims, certain monoline bond insurers
generally allege breach of contract and fraud, as described more specifically below.
As described earlier, the proposed bankruptcy Plan, which provided for a release of all existing and potential causes of action against the
AFI Entities held by ResCap (including the Mortgage Cases), has been terminated. As a result, the Mortgage Cases are expected to proceed
against us. We intend to vigorously defend these cases.
Other than the Cambridge Place I and II, New Jersey Carpenters, FHFA and FDIC matters, all of the private-label securities matters are
currently subject to orders entered by the Bankruptcy Court staying the matter through April 30, 2013 in connection with the Debtors
bankruptcy. The Cambridge Place I and II and New Jersey Carpenters matters are currently subject to stay orders through March 31, 2013,
and the FHFA and FDIC matters are currently proceeding against the applicable Ally defendants. Other than the MBIA matter, all of the
private-label monoline bond insurer claims are currently subject to orders entered by the Bankruptcy Court staying the matter through April
30, 2013 in connection with the Debtors bankruptcy. The MBIA matter is currently proceeding against the applicable Ally defendants. All of
the stay orders permit motion to dismiss practice and limited discovery to proceed for and against the non-Debtor Ally defendants.
Set forth below are descriptions of these proceedings.
Private-label Securities Litigation
Allstate Litigation
On February 14, 2011, the Allstate Insurance Company and various of its subsidiaries and affiliates (collectively, Allstate) filed a
complaint in Hennepin County District Court, Minnesota, against Ally Securities LLC (Ally Securities) and a number of ResCap entities. The
complaint alleges that the defendants misrepresented in the offering materials the riskiness and credit quality of, and omitted material
information related to, residential mortgage-backed securities (MBS) Allstate purchased. The complaint asserts claims for fraud and negligent
misrepresentation and seeks money damages and costs, including attorneys' fees. A motion to dismiss the amended complaint was granted in
part and denied in part on November 28, 2011, pursuant to which the court dismissed the negligent misrepresentation claim and allowed the
fraud and Consumer Fraud Act claims to proceed.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K