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Ally’s mortgage unit files for bankruptcy
NEW YORK — Troubled U.S. Treasury-owned lender Ally Financial said Monday its was placing its mortgage unit into bankruptcy protection as the government seeks to reduce loss risks from a major $17 billion crisis-era bailout.
Ally said the unit, Resolution Capital, burdened with toxic loans from the subprime crisis, filed for Chapter 11 bankruptcy Monday, which allows the company to reorganize under protection from its creditors.
The Treasury, which took over the former General Motors finance arm to save the auto giant in the 2008-2009 economic crash, said it was necessary to pare away the home loan unit to improve Ally’s overall financial health.
“While it is unfortunate that a Chapter 11 filing became necessary for ResCap, we believe that this action puts taxpayers in a stronger position to continue recovering their investment in Ally Financial,” said assistant Treasury secretary Timothy Massad.
“We believe that by addressing the legacy mortgage liabilities at ResCap, the action taken today will put taxpayers in a stronger position to maximize the value of their remaining investment in Ally.”
• From wire dispatches and staff reports
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