Former GM mortgage unit files for bankruptcy in the US

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The Independent Online

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.