Ally Financial Inc. has entered into a settlement with the creditors of its former subprime lending subsidiary Residential Capital LLC, according to AFI chief executive Michael Carpenter.
The CEO did not disclose the amount of the settlement, which is still subject to the approval of a bankruptcy court.
“This agreement is a seminal moment for Ally,” Carpenter said. “We are pleased to have reached a consensual and comprehensive agreement that enables the company to put the issues related to the mortgage industry behind us.”
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The ResCap creditors pressed Ally to take over $25 billion of ResCap’s debt. Ally offered to settle the dispute for $750 million.
Carpenter recently told Wall Street analysts that ResCap had an independent board of directors and it filed its own financial statements with the Securities and Exchange Commission.
“We do not believe Ally has any responsibility for claims against ResCap for rep and warranty issues,” the Ally CEO said during a May 1 conference call.
If the ResCap creditors won’t accept the $750 million, “we are prepared to go into litigation,” Carpenter said. “I will politely call it a hostage payment,” he said during the conference call.
