Ally Financial Inc. is one of many financial servicers offering consumers ways to manage their money through online banking services, CDs, retirement and money market accounts. Ally also offers mortgage loans and auto financing options, but has recently faced financial trouble in their mortgage unit that lead to an industry shocking decision.
Crisis In Mortgage Unit
The troubled mortgage subsidiary filed for Chapter 11 bankruptcy yesterday, hoping to sever itself from potential lawsuit issues and get back on track towards repaying debts. Facing billions in lawsuits over mortgage securities and shoddily underwritten loans by insurers, Ally has several hurdles to overcome if they are to move forward.
One of the most pressing matters Ally mortgage is facing is the repayment of a $17.2 billion government bailout loan it received a few years ago. Ally’s mortgage unit, Residential Capital, is expected to be separated from its remaining operations in auto finance, insurance and banking operations as part of the debt restructuring plan. Severing ResCap from the remaining Ally units is believed to free up its assets for potential buyout by investors and separate debt liabilities that are dragging down the operations of the rest of the company.