NEW YORK (CNNMoney) — Ally Financial’s ResCap mortgage unit filed for a prepackaged bankruptcy protection Monday, a move that the taxpayer-owned bank says will allow it to take another step to repay Treasury.
The ResCap unit, which operates under the GMAC Mortgage brand, was once one of the nation’s leading subprime lenders. Problems with those home loans for riskier borrowers and the sharp drop in the company’s core auto finance business forced Treasury to give it a $15.8 billion bailout in 2009, as part of its efforts to rescue the troubled auto industry and housing market.
The company, which started as the finance unit of automaker General Motors (GM, Fortune 500) under the GMAC name, changed its name to Ally following the bailout. Besides continuing its auto finance business, it now operates an online commercial bank.
Ally also said it is looking at a possible sale or other strategic alternatives for its international business.
The company said that it expects GMAC to continue to make and service mortgage loans while the bankruptcy process is completed. The portfolio of home loans it holds, now valued at less than half its original value, will be auctioned off as part of the bankruptcy process.
GMAC said it will make a so-called “stalking horse” bid of $1.6 billion for those loans, but they are expected to draw a higher bid from investors.
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