Ally Financial's mortgage unit, Residential Capital (ResCap), is being investigated by the U.S. Securities and Exchange Commission (SEC) for potential misconduct in its origination and underwriting processes.
According to a Reuters report, the SEC disclosed in court documents that ResCap was the subject of a formal order of investigation issued on Feb. 22. The SEC publicly disclosed the investigation for the first time during a court request on Monday that sought documents from R.R. Donnelley & Sons that were prepared for the investment banks underwriting ResCap's securitizations under investigation. The SEC says that it was seeking the R.R. Donnelly documents in order to confirm if ResCap made ‘material misrepresentations or omissions about the mortgage loan pools that backed the securitizations under investigation.’
ResCap filed for bankruptcy in May. Its parent company is 74% owned by the U.S. government.