NEW YORK – NCUA has asked a federal bankruptcy court in the huge Residential Capital Chapter 11 bankruptcy to expedite more than $300 million of claims related to the 2009 collapse of WesCorp FCU, one of dozens of investors in mortgage-backed securities issued by the one-time subprime mortgage subsidiary of GMAC.

NCUA, which is agent of the liquidation of the one-time $34 billion corporate credit union, asked the U.S. Bankruptcy Court yesterday to categorize it and other MBS investors with unsecured creditors of the giant mortgage company, since rebranded as Ally Financial, instead of creditors of the various trusts that the MBS were issued through. A ruling in NCUA’s favor would entitle the credit union agency to a pro rata share of the bankruptcy proceeds, improving prospects for recovery of some of its more than $300 million claim. Otherwise, recoveries for MBS investors could be nill.

Ally Financial, which is now 74% owned by the government under the 2009 auto bailout, is working to cap its exposure to the subprime lender's mortgage business so it can move forward on efforts to repay the $17.2 billion bailout and focus on its core auto-lending and online-banking businesses.

ResCap was one of the biggest issuers of residential MBS and sold more than $225 billion worth to big institutional investors like WesCorp.

NCUA, which has filed civil suits over billions of dollars in faulty MBS purchased by WesCorp and four other corporate failures, claims ResCap violated its own standards in packaging subprime mortgages into mortgage-backed securities that eventually were purchased by WesCorp. The claims are similar to ones NCUA has filed in civil suits against nine different investment banks that sold MBS to one or more of the corporate failures.

Other buyers of ResCap MBS have joined the NCUA bid, including AIG Asset Management and Allstate Insurance, Massachusetts Mutual Life, Sunamerica Life Insurance, American Heritage Life Insurance, U.S. Life Insurance Co., and various Prudential entities.

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