The Law Offices of Robert E. Brown, P.C.
Ally Financial’s CEO Michael Carpenter told investors Wednesday that his company “would not settle for the kind of numbers being bandied about” as recompense for mishandled foreclosure paperwork.
Ally’s GMAC Mortgage was the first servicer to admit to robo-signing issues and affidavit errors related to foreclosure processing last fall, and it’s one of five major servicers in talks with state attorneys general to settle such infractions.
Earlier this week, details of the multi-state settlement proposal currently on the table surfaced, carrying a price tag of $25 billion to be levied collectively against Ally, Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.
As the settlement terms stand now, servicer penalties would be based on the number of foreclosures each company has completed. Of the total $25 billion settle-
ment amount, $5 billion would come in the form of cash payment penalties. The remaining $20 billion would take shape in principal-reducing modifications and refinancing for underwater borrowers.
Analysts estimate Ally could be on the hook for $2.5 billion — $500 million in cash and $2 billion in refis and mods.
On the company’s third-quarter earnings call Wednesday, Carpenter said Ally’s liability should be a “small fraction” of that.
He said while Ally “regretted sloppy operational practices,” the company found no instances in which borrowers were wrongfully foreclosed on after conducting its own extensive audits of past cases.
Ally posted a deficit for the third quarter, attributable to a $471 pre-tax loss related to its mortgage servicing rights (MSR), which lost value as a result of the decline in interest rates and market volatility, the Detroit-based company explained.
Ally says it plans to take immediate action to reduce its focus on the correspondent mortgage channel.
“As the mortgage industry changes, the model for mortgage businesses will also change, and we believe a fee-based structure would enable less risk and a greater ability to serve customers,” Carpenter said of the MSR impact on the company’s overall financials.
Ally reported a net loss of $210 million for the third quarter of 2011, compared to net income of $113 million in the prior quarter and net income of $269 million for the third quarter of 2010.
Thank you Carrie Bay of DSnews.com
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