NEW YORK — Ally Financial Inc., the government-owned auto lender, swung to a $250 million net loss in the fourth quarter after taking a charge for regulatory penalties stemming from foreclosure matters.
The Detroit-based lender, which provides financing for General Motors Co. and Chrysler Group LLC dealers and customers, continued to make money from its auto-lending operations, but the results were weighed down again by its mortgage unit, which is saddled with lawsuits over foreclosures and soured mortgage investments.
The loss compares to a year-ago profit of $79 million. It had a core pretax loss, which reflects results from continuing operations before taxes and other expenses, of $24 million, down from $526 million. Excluding a $270 million foreclosure-related charge, core pretax income would have been $246 million.
"One of our key priorities remains aggressively addressing the risks related to the mortgage business and taking steps to protect the key franchises at Ally," said Michael Carpenter, chief executive of Ally, in a statement issued with the results. "This will be critical to advance plans to repay the U.S. taxpayer."
Ally is one of at least five major mortgage servicers in discussions with state and federal regulators over a potential settlement of "robo-signing" and other alleged foreclosure offenses. Regulators are close to finalizing a deal worth as much as $25 billion that could also include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.
On Tuesday, Ally said it would record the $270 million charge in the fourth quarter for penalties from regulators and other government agencies related to foreclosure issues.
The charge was mainly related to its mortgage subsidiary, Residential Capital, which has been the subject of bankruptcy speculation for several months. The charge caused a temporary decline in ResCap's tangible net worth below $250 million, breaching debt covenants of some of its lenders, Ally said.
Ally has been trying to scale back its mortgage operations as it focuses on building up its auto business and online retail bank. In November, the company said it would significantly curtail its correspondent lending operations, which comprise the bulk of its mortgage originations.
Plans outlined last year for an initial public offering, which would help pay back the government bailout it received during the financial crisis, have stalled as it grapples with mortgage issues and decides what to do with ResCap. Ally transformed into a bank holding company in 2008, allowing it to receive $17.2 billion through the Treasury Department's Troubled Asset Relief Program.
Ally, formerly owned by GM, saw better results in its auto-lending operations. Income from global automotive operations was $592 million, down from $762 million a year ago. In North America, it earned $478 million, down from $589 million a year ago. The decline was partly due to decreased lease remarketing gains, the company said.
Ally's loans to U.S. consumers for vehicles were $9.2 billion, down from $9.3 billion a year ago. The most recent quarter included $5.5 billion of loans for new vehicles, $2.3 billion in loans for used vehicles and $1.3 billion in leases. Used volume grew 71% from a year ago.
Ally Bank, the company's online bank that offers checking accounts, savings accounts and other products, saw deposits grow in the quarter. Retail deposits were $27.7 billion at Dec. 31, up from $26.3 billion at the end of the third quarter.
