NEW YORK-NCUA last week asked a federal bankruptcy court in the huge Residential Capital Chapter 11 bankruptcy to expedite more than $300 million of claims related to the 2009 collapse of WesCorp FCU, one of dozens of investors in mortgage-backed securities issued by the one-time subprime mortgage subsidiary of GMAC. NCUA, which is agent of the liquidation for the former corporate, asked the U.S. Bankruptcy Court to categorize it and other MBS investors with unsecured creditors of the giant mortgage company, since rebranded as Ally Financial, instead of creditors of the various trusts that the MBS were issued through. A ruling in NCUA's favor would entitle the regulator to a pro rata share of the bankruptcy proceeds, improving prospects for recovery of some of its more than $300-million claim. Otherwise, recoveries for MBS investors could be nil.
Ally Financial, which is now 74% owned by the government under the 2009 auto bailout, is working to cap its exposure to the subprime lender's mortgage business so it can move forward on efforts to repay the $17.2 -billion bailout and focus on its core auto-lending and online-banking businesses.
