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Ally Financial Inc.'s troubled mortgage subsidiary filed for Chapter 11 bankruptcy early Monday, potentially paving the way for Ally to sever itself from substantial litigation that has been a drag on its other operations and prevented it from repaying the remainder of its government bailout.
May 14
Although Nationstar has agreed to buy most of Residential Capital Corp.'s mortgage assets, the sale is by no means a done deal, according to ResCap mortgage CEO Tom Marano.
In an interview with National Mortgage News, Marano noted there are two "stalking horse" bids on the table for ResCap though he said "we're very happy" with the Nationstar bid.
Asked whether Nationstar has the financial wherewithal to complete the sale and grow the new, resulting company, he indicated there are "billions of dollars of private equity money" available on this deal.
The ResCap CEO said the bid process will be completed within 90 days. The sale should close by yearend. Meanwhile, "it will be business as usual" at the company, he said, with ResCap funding new loans and refinancing HARP mortgages and other products.
Although the total price for ResCap could generate $4 billion in proceeds, the deal actually has two components: a $2.3 billion bid by Nationstar for servicing and other assets, and a $1.6 billion bid by Ally Financial for loans in portfolio. (Ally, the parent of ResCap, is 74% owned by the U.S. Treasury and hopes to go public this year.)
Marano, who will eventually leave Ally and join the new firm, said he is optimistic about the new company. "This is a huge opportunity," he said. "It will create the largest nonbank servicer in the country."
He stressed that he sees no layoffs coming as a result of the bankruptcy/sale and that ResCap is currently in a hiring mode and will continue to originate and service loans. "I don't anticipate any layoffs," he said.
He also seemed happy that ResCap has worked out a deal with private label MBS investors to settle $8.6 billion in claims. He said in the end the settlement will cost the lender roughly $1.5 billion.
ResCap's bondholders — who must approve any transaction — are "nearly done" with their review of the deal, Marano said.
