A quarterly decline in conforming business at Residential Capital LLC was more than offset by gains in government and jumbo lending. Warehouse assets increased around $600 million. The mortgage unit saw two consecutive profitable quarters — a dramatic improvement from billions of dollars in losses each of the past three years. A settlement with Freddie Mac impacted year-over-year variances in repurchase expense.
Domestic home-loan production was $13.2 billion, Ally Financial Inc. reported today in its second-quarter earnings results. Originations nudged up from the first quarter’s $13.0 billion but fell from $18.5 billion a year ago.
Second-quarter volume included $9.1 billion in prime conforming business, slipping from $9.5 billion three months earlier. But the drop in conforming business was more than offset by an increase to $0.5 billion in prime non-conforming loans from $0.4 billion and a jump in government lending to $3.6 billion from $3.1 billion.
The primary mortgage servicing portfolio closed out the second quarter at $349.1 billion. The portfolio was $349.0 billion at the end of the first quarter and $353.9 billion a year prior.
Prime-jumbo assets rose to $1.7 billion from $1.2 billion on March 31, while legacy mortgage holdings fell to $8.2 billion from $8.5 billion.
Warehouse line assets climbed to $1.8 billion from $1.2 billion at the end of the first quarter.
The typical Ally mortgage borrower had a weighted-average loan-to-value and combined LTV of 94 percent, improving from 106 percent back in September 2009. The weighted-average, refreshed FICO has risen to 725 from 705 during the same period.
Mortgage delinquency of at least 30 days finished June at 4.4 percent, the same as on March 31.
ResCap, which has been rumored this year to be up for sale, had been a potential candidate for bankruptcy early last year when GMAC LLC warned in its annual report about the implications of a possible ResCap bankruptcy. ResCap had $5.6 billion in losses during 2008 and $4.3 billion in losses during 2007. Losses last year at the mortgage unit soared to nearly $8 billion.
But mortgage operations earned a $230 million profit before taxes in the latest quarter, better than the $156 million first-quarter profit. Income from real estate finance saw a dramatic improvement from the $1.335 billion loss in the second-quarter 2009.
“ResCap LLC was profitable and required no additional capital or liquidity support in 2Q,” Ally stated. “ResCap LLC met its covenants with tangible net worth of $793 million at the end of the second quarter.”
Repurchase reserve expense jumped from $49 million in the first quarter to $97 million, “largely in line with expectations.” The expense during the second-quarter 2009 was $237 million. At the same time, the repurchase reserve balance fell to $855 million from the prior period’s $890 million but was up from $463 million on June 30, 2009.
“Loan loss provision and repurchase reserve expenses were significantly lower from the corresponding period a year ago due to the strategic actions taken in the fourth quarter of 2009 and the settlement reached with the Federal Home Loan Mortgage Corp. for representation and warranty claims in the first quarter of 2010.”
Ally Financial core pre-tax income was $738 million, improving from $578 million in the first quarter and swinging from a $1.308 billion second-quarter 2009 loss.
The U.S. Treasury held 56.3 percent of Ally’s common ownership as of the end of June.
