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Ally settles U.S. regulators' mortgage securities claims

An Ally Financial sign is seen on a building in Charlotte, North Carolina May 1, 2012. REUTERS/Chris Keane
An Ally Financial sign is seen on a building in Charlotte, North Carolina May 1, 2012. REUTERS/Chris Keane

By Nick Brown and Nate Raymond

NEW YORK (Reuters) - Ally Financial Inc, the former parent of bankrupt Residential Capital LLC, has agreed to settle lawsuits by two U.S. regulators over alleged misstatements about its residential mortgage-backed securities.

The automotive lender said on Tuesday it had reached a deal to resolve a lawsuit by the Federal Housing Finance Agency (FHFA) over $6 billion in mortgage investments as well as separate claims from the Federal Deposit Insurance Corp. Ally said it expects to record a charge of about $170 million.

"These settlements are key steps in Ally addressing its remaining legacy mortgage risks," Michael Carpenter, the company's chief executive, said in the statement.

Exact terms of the deal were not revealed.

Alfred Pollard, general counsel for FHFA, said in a statement that details will be released after the end of the current fiscal quarter, as both sides continue to hash out final terms.

David Barr, a spokesman for the FDIC, said that agency's settlement was worth $55.3 million, and resolves four lawsuits against Ally related to mortgage-backed securities.

Ally's former mortgage unit, ResCap, is under Chapter 11 bankruptcy protection in New York, with a hearing slated for November 19 on its bankruptcy exit plan.

The plan is premised on a global settlement that, among other things, released ResCap and Ally from most third-party claims. The FHFA and FDIC claims were excepted from the releases.

Separately on Tuesday, ResCap revealed it has reached a settlement with the National Credit Union Administration, also over alleged misstatements regarding mortgage-backed securities.

The NCUA had asserted more than $290 million in claims, but received an allowed claim of $78 million in the bankruptcy, according to court papers.

A spokesman for the NCUA had no immediate comment on Tuesday.

FHFA LAWSUITS

Ally was one of 18 financial institutions sued by the FHFA in 2011 as part of the fallout from the global financial crisis. The agency said the banks made false or misleading statements relating to some $200 billion in RMBS bought by Fannie Mae or Freddie Mac, for which the FHFA is conservator.

With respect to Ally, the agency sought to recoup losses on the sale of more than $6 billion of securities to Freddie Mac between September 2005 and May 2007.

The settlement would mark the latest in the FHFA's recent string of deals related to its RMBS litigation. On Friday, it announced a $5.1 billion deal with JPMorgan Chase & Co, $4 billion of which resolves the federal lawsuit pending against it in New York.

The FHFA announced an $885 million settlement with UBS AG in July, and also reached deals earlier this year with Citigroup Inc and General Electric Co, terms of which are confidential.

The settlement followed a ruling in August by U.S. District Judge Denise Cote in Manhattan allowing the FHFA to pursue its case against Ally even though Residential Capital was in bankruptcy.

The Ally case is Residential Capital LLC et al v. Federal Housing Finance Agency, U.S. District Court, Southern District of New York, No. 12-05116.

(Reporting by Nick Brown; Editing by Bernard Orr)

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