Ally Financial Agrees to Pay 52 Million to Resolve Investigation (mortgage backed securities)

[nitpicker]

https://www.justice.gov/usao-cdca/pr/ally-financial-agrees-pay-52-million-resolve-investigation-improper-conduct-related

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Monday, November 21, 2016

Ally Financial Agrees to Pay $52 Million to Resolve Investigation into Improper Conduct Related to Issuance of Mortgage-Backed Securities

LOS ANGELES – Ally Financial Inc. has agreed to pay the United States $52 million to settle allegations that its subsidiaries acted improperly in relation to 10 subprime residential mortgage backed securities (RMBS) in 2006 and 2007.

A settlement agreement announced today resolves an investigation into alleged violations of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), specifically conduct related to the packaging, securitization, marketing, sale and issuance of the RMBS.

Under the settlement agreement, Ally is required to pay a $52 million civil penalty and to immediately discontinue operations of its registered broker-dealer, Ally Securities, LLC, which served as the lead underwriter on the subprime RMBS at issue in this matter.

The subsidiary will be wound-down immediately and de-registered as a broker-dealer as acknowledgment of the improper conduct. The broker-dealer served as the lead underwriter on the 10 subprime RMBS offerings issued in the RASC-EMX series between 2006 and 2007. Ally Securities dedicated a specialized marketing effort to create the RASC-EMX brand, securing investors for the RMBS offerings, and directing third-party due diligence on samples of the mortgage loan pools underlying the RMBS to test whether the loans comply with disclosures made to investors in the public offering documents.

As the lead underwriter, Ally Securities recognized in 2006 and 2007 that there was a consistent trend of deterioration in the quality of the mortgage loan pools underlying the RASC-EMX Securities that stemmed, at least in part, from deficiencies in the subprime mortgage loan underwriting guidelines and diligence applied to the collateral prior to securitization. All the RASC-EMX Securities sustained losses as a result of underlying mortgage loans falling delinquent.
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