LOS ANGELES (CN) — Ally Financial will pay the United States $52 million for the way its subsidiaries handled toxic mortgages and residential-mortgage backed securities in the runup to the financial meltdown that began in 2008.
Ally Securities was the lead underwriter in securitizing more than 40,000 subprime mortgage loans in 2006 and 2007, more than half of which became delinquent at some point, and it misrepresented the strength of the subprime mortgage collateral, according to an annex to its settlement.
Ally Securities “will be wound down immediately and deregistered as a broker-dealer,” the Department of Justice said Monday in announcing the settlement.
“These securities were marketed to investors with the knowledge that a significant percentage of the pooled subprime mortgages were toxic, meaning that they were underwritten to risky guidelines likely to result in the loans falling delinquent,” U.S. Attorney Eileen Decker said in a statement. “Nevertheless, Ally Securities continued to market the RMBS, and investors lost millions of dollars as the value of the securities plummeted.”
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.