The mortgage unit of Ally Financial, Residential Capital has filed for bankruptcy protection Monday. The US government is hopeful that the bankruptcy filing will help it to repay the government bailout, that it received in 2008 and 2009, faster.
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New York, May 16 (SharewellNewswire.com) - Ally Financial?s mortgage unit, Residential Capital, or ResCap filed for bankruptcy protection in New York Monday. The unit was facing problems in not being able to make payments on the debts it had taken out to finance secured home mortgages.
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The US government expects that the bankruptcy filing will help it to repay the government bailout faster. The filing will also distance the troubled ResCap subsidiary from Ally?s auto loan and banking businesses to enable them to grow and accelerate repayment of Ally?s bailout from 2008 and 2009.
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In order to generate more funds and strengthen its finances and make payments to the government, Ally indicated Monday that it might sell its international operations. These include insurance, auto loan and banking operations in Canada, South America, Britain, Mexico and Europe.
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Ally was provided with a $17.2-billion bailout by the government to survive the banking industry meltdown in 2008. It is 74 percent owned by the US government and it was the financial arm of General Motors (NYSE: GM) until the downturn in 2008. About $5.5 billion has already been repaid by Ally and it still owes the government about $12 billion. The government is hopeful of recovering the rest of the money through a public stock offering or perhaps the sale of its remaining businesses.
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