We are starting a segment that looks at where major subprime mortgage players are today. With many of them it is easy because they don’t exist any more. I know you’ve seen television, Internet, and newpaper ads for Ally Financial, which used to GMAC.
Ally Financial’s mortgage subsidiaries include Residential Capital, LLC (ResCap)
Here is the twist. Ally still owes the government, and ResCap is being sued at least 22 times as we enter the new year. Nobody wants to buy ResCap, and we can’t blame them.
ResCap has $3.5 billion of bonds outstanding, according to data compiled by Bloomberg. Its $2.12 billion of 9.625 percent notes due in May 2015 plummeted 22.6 cents to 56.9 cents on the dollar on Nov. 9 after a report that the unit hired Centerview Partners LLP to weigh options, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority. The bonds climbed 0.8 cent to 76 cents on the dollar at 4:18 p.m. yesterday.
Assets at ResCap, once one of the largest subprime mortgage originators, dwindled to $16.8 billion at the end of 2010 from more than $130 billion in 2006. The Treasury, which owns 74 percent of Ally, failed to find a buyer for ResCap in 2010.
ResCap is involved in 22 securities lawsuits, Michael Carpenter, Ally’s chief executive officer, said on a conference call with investors on Nov. 2. The Federal Housing Finance Agency and MBIA Inc. are among the parties that have filed suit against the company, which also faces state investigations into foreclosure practices.
Ally may be raising the possibility of a bankruptcy as a negotiating tactic as it tries to settle those suits, according to Manal Mehta, a partner at Branch Hill Capital in San Francisco.