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Mortgages Profitable for Ally in 4Q

FEB 5, 2013 1:21pm ET
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Ally Financial Inc. said its mortgage operations provided pretax income of $100 million in 4Q12, well below the $300 million in 3Q12 and slightly below the $101 million for 4Q11. Current quarter performance was driven by strong gain-on-sale revenue from HARP refinancings.

The 4Q11 number, however, includes $317 million of pretax income from ResCap, which has filed for bankruptcy. If Ally Bank’s continuing operations are only considered, mortgage banking had a pretax loss of $216 million.

For 2012, mortgage operations provide pretax income of $639 million, compared with $160 million in 2011. For both years, it includes a ResCap-related adjustment. Without the adjustments, Ally would have a pretax profit of $689 million for 2012 and a loss of $622 million in 2011.

For the fourth quarter, the company had net income of $1.4 billion and full-year income of $1.2 billion.

It originated $10 billion in the quarter, up from $8 billion in 3Q12 but down from $16 billion in 4Q11. The year-over-year decline was a result of Ally’s cutback in its correspondent purchase channel. The 4Q11 data do not include any originations done by ResCap.

Refinancings made up 86% of 4Q12 loan production.

In the fourth quarter, Ally completed the wind-down of its warehouse lending business.

In the 4Q12 release, Ally said it is encouraged by the initial interest it has received for the sale of its own agency mortgage-servicing rights portfolio and lending business. Going forward, Ally said it plans to originate “a modest level” of jumbo loans for its own portfolio through third parties.

Subsequent to the end of the quarter, the sale of some ResCap assets (including the Fannie Mae MSR portfolio) to Walter Investment Management for proceeds of $500 million was completed, with the sales of other assets to Ocwen and Berkshire Hathaway still pending.

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