Former GM mortgage unit files for bankruptcy in the US
Tuesday 15 May 2012
ResCap, the subprime mortgage lender that was once owned by the US car giant General Motors, filed for bankruptcy protection yesterday in a move that is expected to help its parent company, Ally Financial, focus on its main car lending business and put together a plan to pay back billions to US taxpayers.
The US Treasury Department injected $17bn (£11bn) into Ally, formerly known as Gmac, through multiple bailouts during the financial crisis and now owns nearly 74 per cent of the company.
Ally still owes the US government $12bn, counting dividend payments by the lender and the sale of some securities by the Treasury.
Ally's mortgage unit, Residential Capital, or ResCap, filed for bankruptcy protection under a plan that has the support of some of its creditors, although it is still expected to be a drawn-out and litigious process.
At the same time, Nationstar Mortgage Holdings, which is majority owned by Fortress Investment Group, struck a deal to buy substantially all of ResCap's mortgage servicing and related assets for about $2.4bn, including debt.
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