Ally returns to mortgage business 2 years after exit
Ally Financial Inc. is reentering the mortgage business two years after it stopped making new home loans.
Ally, whose defunct GMAC Mortgage unit was one of the biggest lenders of subprime mortgages in the run-up to the 2008 housing bust, will inch back into direct home loan originations next year, the bank’s Chief Executive Officer Jeffrey Brown said this week at a Goldman Sachs Group Inc. financial conference in New York. The bank will not service the mortgages it originates, he said.
“Don’t think of this as Ally going down the road of the old GMAC,” Brown said, referring to GMAC Mortgage, the home lending unit that brought Ally to the brink of collapse.
The bank will detail new product offerings, including a new credit card, at its investor day in February.
Gina Proia, a spokeswoman at Ally, did not immediately reply to e-mail messages seeking comment.
At the height of the housing boom in 2006, GMAC’s Residential Capital, ranked 12th among U.S. subprime lenders, according to trade publication Inside Mortgage Finance. When Ally exited home lending in 2013, former CEO Michael Carpenter said mortgages were in its “rearview mirror.”That ended an almost 30-year foray that led to more than $10 billion in losses and a $17.2 billion U.S. bailout.
Its decision to return to the market comes as the mortgage industry looks for ways to revive various forms of home lending, including subprime, that all but disappeared in the immediate aftermath of the housing crisis.
Ally isn’t expected to start offering risky products the way GMAC did, according to Jeff Davis at Mercer Capital. “But they’ve got to do something, because they won’t make a decent return if the business is limited to making car loans,” he said.