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Ally Financial Mortgage Subsidiary ResCap Files for Chapter 11
May 14, 2012

Residential Capital LLC (ResCap), a subsidiary of Ally Financial Inc., has announced that its Board of Directors voted to file for Chapter 11 protection along with 50 of its subsidiaries. ResCap’s mortgage origination, servicing and other business activities, conducted through its subsidiaries, including GMAC Mortgage, will continue to operate as the Chapter 11 proceeds. Undergoing the Chapter 11 process will: ►Permit ResCap to continue as a going concern during the reorganization process, and to continue to provide uninterrupted service to its mortgage customers and business partners; ►Permit ResCap to continue to originate new mortgage loans, service its more than 2.4 million consumer mortgage loans, and offer loan modifications that allow homeowners to remain in their homes; ►Permit the ResCap business, post-reorganization and under new ownership, to continue to play an important role in preserving homeownership, providing the necessary financing for homeownership, and contribute to bringing increasing stability to the U.S. mortgage markets;  ►Provide ResCap with the opportunity to maximize value for its stakeholders; ►Permit ResCap to address legacy litigation and other liabilities in a manner that is fair to creditors; and ►Preserve the existing jobs of ResCap’s employees, and contribute to the creation of additional jobs in the U.S. in the mortgage sector when ResCap’s business operations emerge from the reorganization process under new ownership. The Chapter 11 filings are intended to facilitate ResCap’s sale of substantially all of its assets. It has agreed to sell its mortgage origination and servicing businesses to Nationstar Mortgage LLC, and its legacy portfolio, consisting mainly of mortgage loans and other residual financial assets, to Ally Financial. Together, the asset sales are expected to generate approximately $4 billion in proceeds. ResCap has secured a $1.45 billion debtor-in-possession (DIP) financing from Barclays Bank PLC, as Sole Lead Arranger and Administrative Agent on behalf of a syndicate of lenders.  As part of Ally Financial’s support for the Chapter 11 cases and the restructuring plan, Ally Financial and ResCap have reached a global settlement of potential claims each entity and its affiliates had against the other, which settlement will provide ResCap with substantial value. In the unlikely event that ResCap does not obtain confirmation of its proposed reorganization plan, ResCap will still seek to close the sales to Nationstar and Ally Financial. In addition, ResCap has obtained support for a restructuring plan premised upon the sales described above from holders of ResCap’s junior secured notes holding a significant amount of the outstanding notes. Also, ResCap has obtained support from, and entered into a settlement agreement with, institutional investors in residential mortgage-backed securities (RMBS) issued by ResCap’s affiliates. ResCap has consistently been an early participant in government-supported and proprietary mortgage modification efforts in implementing permanent modifications under the Home Affordable Modification Program (HAMP). Since 2008, GMAC Mortgage has executed more than 784,000 default workouts for borrowers. In the most recent assessment by the U.S. Department of the Treasury of compliance with its “Making Home Affordable” program, GMAC Mortgage has been and continues to be a best-in-class mortgage servicer.
May 14, 2012
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