''Bankruptcy of Ally Mortgage Unit Raises Questions About Foreclosure Fraud Settlement''

From FireDogLake

''Ally Bank, formerly known as GMAC Mortgage, the nation’s fifth-largest mortgage servicer, put its mortgage subsidiary Residential Capital into bankruptcy. This is part of a continuing effort on the part of Ally, which is still majority-owned by the US government, to escape its mortgage liabilities. But what does it mean for the foreclosure fraud settlement, to which Ally is a signatory?

Previously, Ally planned to repay its loan from the government with an initial public offering, but that talk has ended. Now, the ResCap bankruptcy appears to be the means to pay off the government while jettisoning major liabilities with the mortgage unit. And it could spawn a copycat in the form of Bank of America, which has considered using bankruptcy for Countrywide.''

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