July 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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THE LATEST SECONDARY MARKET home loan portfolio that accounts for less than 9 percent of Ally's overall bank balance sheets but helped shift majority ownership to the federal government during the crisis. Ally will still subservice loans via ResCap while it serves as counterparty to Fannie Mae and Freddie Mac. Nationstar Mortgage Holdings, The filing will sap risk out of a Inc., will acquire $374 billion in mortgage servicing assets from ResCap, along with $201 billion in primary residential mortgage servicing rights and $173 billion in subservicing contracts. Executives expected that $14.4 Ally Shifts from Home Loans to Auto Loans Following the company's deal with ResCap, Ally moves closer to exiting the mortgage originations business. A I the books on its share of owner- ship in the mortgage business. Executives with Ally took fter suffering from bad loans during the financial crisis, Ally Financial looks to close to the phone with investors to explain a recent filing for bank- ruptcy protection by subsidiary Residential Capital, LLC. The consensus: Residential mortgage loans are out for Ally and auto finance is back in the center. Speaking with one investor, Ally CEO Michael Carpenter un- derscored the relative stability of auto finance in the financial crisis. "Not to make a joke of it," he said, "[but] you can live in your car if you don't pay your mortgage. If you look at what consumers pay first, the answer is their car loan." Senior EVP Jeffrey Brown added that resolution of the Supervise Nonbank Entities TARGETING GREATER OVERSIGHT FOR FINANCIAL ENTITIES, THE BUREAU PROPOSES AN OFFICIAL SUPERVISION RULE. CFPB Proposes New Rule to n what the head of the Consumer Financial Protection Bureau (CFPB) called "an important step in the development of our nonbank supervi- sion program," the CFPB officially proposed a rule to establish proce- dures for the bureau's supervision of nonbank financial entities. 74 | THE M REPORT The Dodd-Frank Act grants the CFPB authority to supervise a nonbank that "it has reasonable cause to determine is posing a risk to con- sumers based on complaints or other information it receives," according to a recent release from the CFPB. Banks have been subject to ResCap bankruptcy would leave Ally without any "[mortgage servicing rights] on the balance sheet, [a] very clean auto finance company." A speedy exit will not leave Ally without skin in the game. If a court approves it, the bank- ruptcy deal for ResCap will require cash contributions, equity write-downs, and liability reserves for representations and warranties that total $1.3 billion. federal supervision for some time, but this is the first instance nonbanks will come under the magnifying glass. While the CFPB will oversee "large participants" in some sectors, it has the authority to supervise nonbank institutions of any size in the mortgage industry. The CFPB defines a nonbank as "a company that offers or provides consumer financial products or ser- vices but does not have a bank, thrift, or credit union charter." This includes mortgage lenders and servicers. Under the CFPB's proposed rule, the bureau would notify a nonbank our ability to repay U.S. Treasury, substantially strengthen Ally's finan- cial profile, and really allow us to focus all of our energy and attention on building the two tremendously strong franchises we have in U.S. auto and direct banking, billion in first-quarter mortgage assets would "diminish over time" as the financial institution returns to a more traditional role in auto finance. The financial institu- tion also trumped up $5.5 billion in repayments to the Treasury Department for taxpayer funds. "The ResCap filing will accelerate told investors. "We're very excited about the end result of all this. Asked by one investor about " Carpenter " exposure by Ally to the ongoing debt and credit crises in Europe, Ally executives refrained and said that the financial institution con- tinues to implement safeguards. A statement by the company said that the auction and sale of any ResCap assets will end later this year. if it is considering supervising it. The nonbank organization will then have an opportunity to respond in writing or orally. Supervision may include examinations by the CFPB as well as completion and submission of various reports for up to two years before the nonbank institution may file a petition to cease supervision. The CFPB noted in its announce- ment that "the Dodd-Frank Act does not require that the CFPB issue this rule" but that the CFPB "is issuing it to be transparent." The proposed rule is open for comment through July 24. SECONDARY MARKET ANALYTICS SERVICING ORIGINATION

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