After more than a year in bankruptcy, a judge has approved Residential Capital LLC’s Chapter 11 Bankruptcy Plan.
At one time, ResCap was among the biggest residential lenders in the country, originating $179 billion in 2003.
But the company, which was heavily invested in subprime and Alt-A mortgages, began a downward spiral in 2007 as the sector disintegrated.
Parent Ally Financial Inc., which had been sinking capital into the company to keep it afloat, gave up last year, and ResCap — along with 27 related entities — filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York on May 14, 2012.
Since then, Ally has offered up even more capital as it works to extricate itself from the massive and complicated bankruptcy case.
On Wednesday, it finally severed its ties with the former lending giant.
The bankruptcy judge in ResCap’s case approved an order confirming ResCap’s Chapter 11 Plan, New York-based Ally announced.
The move reportedly marks the court’s formal approval of broad releases for all mortgage-related claims against Ally and its subsidiaries, subject to certain limited exceptions.
The Chapter 11 Plan is expected to become effective within the next week.
“This marks a key milestone for Ally, and the ResCap chapter in our history is officially behind us,” Ally Chief Executive Officer Michael A. Carpenter said in the announcement. “Confirmation of the ResCap Plan offers broad and permanent releases of substantially all past, present and future mortgage-related claims, which is a key point of progress for Ally in achieving nearly complete closure for mortgage liabilities.”
Carpenter added that Ally is fundamentally transformed and has repaid more than 70 percent of government bailout funds.
Ally, which has exited the mortgage business, is represented by Kirkland & Ellis LLP and Evercore Partners in the ResCap bankruptcy.