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the latest Or ig i nat ion SECONDARY MARKET Ally Settles with FHFA, FDIC The bank takes another step to get clear of the mortgage industry. s e c on da r y m a r k e t a na ly t ic s se r v ic i ng A Republicans Block Watt Nomination as FHFA Head Critics say the North Carolina congressman doesn't possess the technical know-how required for the post. S enate Republicans blocked a vote on the nomination of Rep. Mel Watt (D-North Carolina) to head up the Federal Housing Finance Agency (FHFA). Watt's nomination was stopped in a 56-42 vote to end the debate over his confirmation. Sixty votes were needed to invoke cloture and move forward. Edward DeMarco has led the agency as acting director since August 2009 following his appointment by President Obama. Throughout his tenure, he has attracted criticism from Democrats and consumer advocates who say he hasn't gone far enough to help distressed homeowners. One of 58 | The M Report the bigger controversies surrounding DeMarco is his steadfast opposition to the use of principal forgiveness by the GSEs, which he believes would be too costly to taxpayers. While he has said he would have to further investigate before making a move as FHFA director, Watt has in the past urged for principal reduction. (He asserted at a Senate Banking Committee hearing in June that he was advocating for his constituents in North Carolina at the time and not necessarily the country at large.) The topic of principal forgiveness isn't the only point where Watt and DeMarco diverge, however. "A Watt-led FHFA would be a considerable departure from DeMarco's tenure," said FBR Capital Markets in an analysis released before the vote. "He would be less likely to lower the loan limits at Fannie and Freddie and would be unlikely to make aggressive changes to their multifamily lending programs. We believe that Congressman Watt could change the course of some of DeMarco's strategic goals and could be more accommodative to lender concerns on clarity for representations and warranties." FBR also noted the failed vote could throw a wrench in Watt's plans, with February 28, 2014, being the deadline for the congressman to file for re-election should his nomination not work out. "Practically speaking, he would likely need to make a decision well before the deadline," the firm said. Should Watt take his name out of the hat, FBR has its eye on Sandra Thompson, who is currently FHFA's deputy director of housing mission and goals, as the next potential nominee. lly Financial Inc. announced the bank reached settlements with the Federal Housing Finance Agency (FHFA) and FDIC for all pending litigation related to toxic mortgages. According to a release from Ally, the settlements require pending litigation against the bank to be dismissed, and FHFA- and FDIC-released claims will no longer be exceptions to liability releases secured by Ally in a settlement with Residential Capital, which was put into Chapter 11 bankruptcy last year. Ally said it expects to record a charge of $170 million in the third quarter in connection with the two settlements. Overall, the bank has reserved $520 million in relation to the suits, said spokeswoman Gina Proia. As part of the settlement with FHFA, ResCap's Chapter 11 plan will be amended to reflect that Freddie Mac and FHFA will retain only some "ordinary-course" claims against Ally Bank, as a former mortgage servicer and seller. Both FDIC and FHFA have agreed not to object to final confirmation of the bankruptcy plan, according to Ally's announcement. The confirmation hearing for that plan was scheduled for November 19. In a statement, Alfred M. Pollard, general counsel for FHFA, said final settlement terms will be completed during the current fiscal quarter, with details released before the end of the year. A spokesperson for FDIC declined to comment. For Ally, the agreement represents another major step in the bank's ongoing effort to get away from mortgages and shift its focus to its more profitable auto finance and banking operations. "These settlements are key steps in Ally addressing its remaining legacy mortgage risks," said Ally CEO Michael A.

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