Edgar Filing: Ally Financial Inc.

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011, or

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 1-3754

ALLY FINANCIAL INC.

(Exact name of registrant as specified in its charter)

Delaware

38-0572512

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

200 Renaissance Center

P.O. Box 200, Detroit, Michigan

48265-2000

(Address of principal executive offices)

(Zip Code)

(866) 710-4623

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing for the past 90 days.

Yes þ No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for a shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer þ	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

At May 5, 2011, the number of shares outstanding of the Registrant’s common stock was 1,330,970 shares.

ALLY FINANCIAL INC.

INDEX


		Page
Part I — Financial Information
Item 1.	Financial Statements		3
	Condensed Consolidated Statement of Income (unaudited) for the Three Months Ended March 31, 2011 and 2010		3
	Condensed Consolidated Balance Sheet (unaudited) at March 31, 2011, and December 31, 2010		4
	Condensed Consolidated Statement of Changes in Equity (unaudited) for the Three Months Ended March 31, 2011 and 2010		6
	Condensed Consolidated Statement of Cash Flows (unaudited) for the Three Months Ended March 31, 2011 and 2010		7
	Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		78
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		127
Item 4.	Controls and Procedures		128
Part II — Other Information
Item 1.	Legal Proceedings		129
Item 1A.	Risk Factors		130
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		132
Item 3.	Defaults Upon Senior Securities		132
Item 4.	(Removed and Reserved)		132
Item 5.	Other Information		132
Item 6.	Exhibits		132
Signatures			133
Index of Exhibits			134

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended March 31,
($ in millions except per share data)	2011			2010
Financing revenue and other interest income
Interest and fees on finance receivables and loans	$	1,623		$	1,618
Interest on loans held-for-sale		108			215
Interest on trading securities		3			1
Interest and dividends on available-for-sale investment securities		104			99
Interest-bearing cash		12			14
Operating leases		680			1,163

Total financing revenue and other interest income		2,530			3,110
Interest expense
Interest on deposits		172			158
Interest on short-term borrowings		126			111
Interest on long-term debt		1,410			1,433

Total interest expense		1,708			1,702
Depreciation expense on operating lease assets		285			656

Net financing revenue		537			752
Other revenue
Servicing fees		371			385
Servicing asset valuation and hedge activities, net		(87	)		(133	)

Total servicing income, net		284			252
Insurance premiums and service revenue earned		433			468
Gain on mortgage and automotive loans, net		92			271
Loss on extinguishment of debt		(39	)		(118	)
Other gain on investments, net		84			143
Other income, net of losses		216			82

Total other revenue		1,070			1,098
Total net revenue		1,607			1,850
Provision for loan losses		113			144
Noninterest expense
Compensation and benefits expense		434			426
Insurance losses and loss adjustment expenses		186			211
Other operating expenses		772			882

Total noninterest expense		1,392			1,519
Income from continuing operations before income tax (benefit) expense		102			187
Income tax (benefit) expense from continuing operations		(68	)		36

Net income from continuing operations		170			151

(Loss) income from discontinued operations, net of tax		(24	)		11

Net income	$	146		$	162

Net loss attributable to common shareholders	$	(25	)	$	(340	)
Basic and diluted earnings per common share (a)
Net loss from continuing operations	$	(1	)	$	(439	)
(Loss) income from discontinued operations, net of tax		(18	)		13

Net loss	$	(19	)	$	(426	)

Weighted-average common shares outstanding		1,330,970			799,120

(a)

Due to the antidilutive effect of converting the Fixed Rate Cumulative Mandatorily Convertible Preferred Stock into common shares and the net loss attributable to common shareholders for the three months ended March 31, 2011 and 2010, income attributable to common shareholders and basic weighted-average common shares outstanding were used to calculate basic and diluted earnings per share.

The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)


($ in millions)	March 31, 2011			December 31, 2010
Assets
Cash and cash equivalents
Noninterest-bearing	$	1,652		$	1,714
Interest-bearing		11,294			9,956

Total cash and cash equivalents		12,946			11,670
Trading securities		75			240
Investment securities		15,401			14,846
Loans held-for-sale, net ($2,946 and $6,424 fair value-elected)		7,496			11,411
Finance receivables and loans, net
Finance receivables and loans, net ($971 and $1,015 fair value-elected)		107,459			102,413
Allowance for loan losses		(1,806	)		(1,873	)

Total finance receivables and loans, net		105,653			100,540
Investment in operating leases, net		8,898			9,128
Mortgage servicing rights		3,774			3,738
Premiums receivable and other insurance assets		2,175			2,181
Other assets		16,763			17,564
Assets of operations held-for-sale		523			690

Total assets	$	173,704		$	172,008

Liabilities
Deposit liabilities
Noninterest-bearing	$	2,064		$	2,131
Interest-bearing		38,632			36,917

Total deposit liabilities		40,696			39,048
Short-term borrowings		7,395			7,508
Long-term debt ($922 and $972 fair value-elected)		88,139			86,612
Interest payable		1,850			1,829
Unearned insurance premiums and service revenue		2,842			2,854
Reserves for insurance losses and loss adjustment expenses		828			862
Accrued expenses and other liabilities ($14 and $ — fair value-elected)		11,001			12,126
Liabilities of operations held-for-sale		546			680

Total liabilities		153,297			151,519
Equity
Common stock and paid-in capital		19,668			19,668
Mandatorily convertible preferred stock held by U.S. Department of Treasury		5,685			5,685
Preferred stock		1,255			1,287
Accumulated deficit		(6,435	)		(6,410	)
Accumulated other comprehensive income		234			259

Total equity		20,407			20,489

Total liabilities and equity	$	173,704		$	172,008

The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

The assets of consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and the liabilities of these entities for which creditors (or beneficial interest holders) do not have recourse to our general credit were as follows.


($ in millions)	March 31, 2011			December 31, 2010
Assets
Loans held-for-sale, net	$	14		$	21
Finance receivables and loans, net
Finance receivables and loans, net ($971 and $1,015 fair value-elected)		36,801			33,483
Allowance for loan losses		(221	)		(238	)

Total finance receivables and loans, net		36,580			33,245
Investment in operating leases, net		1,481			1,065
Other assets		3,352			3,194
Assets of operations held-for-sale		—			85

Total assets	$	41,427		$	37,610

Liabilities
Short-term borrowings	$	784		$	964
Long-term debt ($922 and $972 fair value-elected)		26,362			24,466
Interest payable		18			15
Accrued expenses and other liabilities		408			352
Liabilities of operations held-for-sale		—			45

Total liabilities	$	27,572		$	25,842

The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Three Months Ended March 31, 2011 and 2010


($ in millions)	Common stock and paid-in capital		Mandatorily convertible preferred stock held by U.S. Department of Treasury		Preferred stock			Accumulated deficit			Accumulated other comprehensive income			Total equity			Comprehensive income
Balance at January 1, 2010, before cumulative effect of adjustments	$	13,829	$	10,893	$	1,287		$	(5,630	)	$	460		$	20,839
Cumulative effect of a change in accounting principle, net of tax (a)									(57	)		4			(53	)

Balance at January 1, 2010, after cumulative effect of adjustments	$	13,829	$	10,893	$	1,287		$	(5,687	)	$	464		$	20,786
Net income									162						162		$	162
Preferred stock dividends paid to the U.S. Department of Treasury									(386	)					(386	)
Preferred stock dividends									(116	)					(116	)
Dividends to shareholders									(5	)					(5	)
Other comprehensive income												33			33			33
Other (b)									74						74

Balance at March 31, 2010	$	13,829	$	10,893	$	1,287		$	(5,958	)	$	497		$	20,548		$	195

Balance at January 1, 2011	$	19,668	$	5,685	$	1,287		$	(6,410	)	$	259		$	20,489
Net income									146						146		$	146
Preferred stock dividends paid to the U.S. Department of Treasury									(134	)					(134	)
Preferred stock dividends									(69	)					(69	)
Series A preferred stock amendment (c)						(32	)		32
Other comprehensive loss												(25	)		(25	)		(25	)

Balance at March 31, 2011	$	19,668	$	5,685	$	1,255		$	(6,435	)	$	234		$	20,407		$	121

(a)	Cumulative effect of change in accounting principle, net of tax, due to adoption of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.

(b)	Represents a reduction of the estimated payment accrued for tax distributions as a result of the completion of the GMAC LLC U.S. Return of Partnership Income for the tax period January 1, 2009, through June 30, 2009.

(c)	Refer to Note 16 to the Condensed Consolidated Financial Statements for further details.

The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Three months ended March 31, ($ in millions)	2011			2010
Operating activities
Net income	$	146		$	162
Reconciliation of net income to net cash provided by operating activities
Depreciation and amortization		717			1,255
Other impairment		16			(20	)
Amortization and valuation adjustments of mortgage servicing rights		(117	)		196
Provision for loan losses		113			152
Gain on sale of loans, net		(94	)		(298	)
Net gain on investment securities		(85	)		(151	)
Loss on extinguishment of debt		39			118
Originations and purchases of loans held-for-sale		(12,635	)		(13,715	)
Proceeds from sales and repayments of loans held-for-sale		15,835			19,314
Net change in:
Trading securities		77			53
Deferred income taxes		69			(47	)
Interest payable		16			165
Other assets		(120	)		1,550
Other liabilities		(321	)		(477	)
Other, net		(614	)		(884	)

Net cash provided by operating activities		3,042			7,373

Investing activities
Purchases of available-for-sale securities		(5,529	)		(4,735	)
Proceeds from sales of available-for-sale securities		4,475			2,664
Proceeds from maturities of available-for-sale securities		1,103			2,873
Net (increase) in finance receivables and loans		(4,249	)		(3,571	)
Proceeds from sales of finance receivables and loans		—			1,187
Purchases of operating lease assets		(1,933	)		(845	)
Disposals of operating lease assets		1,882			2,278
Proceeds from sale of business units, net (a)		46			(526	)
Other, net		591			606

Net cash used in investing activities		(3,614	)		(69	)

Statement continues on the next page.

ALLY FINANCIAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)


Three months ended March 31, ($ in millions)	2011			2010
Financing activities
Net change in short-term debt		87			(2,629	)
Net increase in bank deposits		1,670			752
Proceeds from issuance of long-term debt		13,804			12,187
Repayments of long-term debt		(13,211	)		(18,761	)
Dividends paid		(228	)		(199	)
Other, net		83			294

Net cash provided by (used in) financing activities		2,205			(8,356	)
Effect of exchange-rate changes on cash and cash equivalents		(266	)		378

Net increase (decrease) in cash and cash equivalents		1,367			(674	)
Adjustment for change in cash and cash equivalents of operations held-for-sale (a) (b)		(91	)		556
Cash and cash equivalents at beginning of year		11,670			14,788

Cash and cash equivalents at March 31,	$	12,946		$	14,670

Supplemental disclosures
Cash paid for
Interest	$	1,465		$	1,217
Income taxes		305			167
Noncash items
Increase in finance receivables and loans due to a change in accounting principle (c)		—			17,990
Increase in long-term debt due to a change in accounting principle (c)		—			17,054
Transfer of mortgage servicing rights into trading securities through certification		266			—
Other disclosures
Proceeds from sales and repayments of mortgage loans held-for-investment originally designated as held-for-sale		58			150

(a)	The amounts are net of cash and cash equivalents of $7 million at March 31, 2011, and $745 million at March 31, 2010, of business units at the time of dispositon.

(b)	Cash flows of discontinued operations are reflected within operating, investing, and financing activities in the Condensed Consolidated Statement of Cash Flows. The cash balance of these operations are reported as assets of operations held-for-sale on the Condensed Consolidated Balance Sheet.

(c)	Relates to the adoption of ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.

The Notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.	Description of Business, Basis of Presentation, and Changes in Significant Accounting Policies

Ally Financial Inc. (formerly GMAC Inc. and referred to herein as Ally, we, our, or us) is a leading, independent, globally diversified, financial services firm. Founded in 1919, we are a leading automotive financial services company with over 90 years experience providing a broad array of financial products and services to automotive dealers and their customers. We are also one of the largest residential mortgage companies in the United States. We became a bank holding company on December 24, 2008, under the Bank Holding Company Act of 1956, as amended. Our banking subsidiary, Ally Bank, is an indirect wholly owned subsidiary of Ally Financial Inc. and a leading franchise in the growing direct (online and telephonic) banking market.

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP). Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and that affect income and expenses during the reporting period. In developing the estimates and assumptions, management uses all available evidence; however, actual results could differ because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes.

The Condensed Consolidated Financial Statements at March 31, 2011, and for the three months ended March 31, 2011, and 2010, are unaudited but reflect all adjustments that are, in management’s opinion, necessary for the fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements (and the related notes) included in our Annual Report on Form 10-K for the year ended December 31, 2010, as filed on February 25, 2011, with the U.S. Securities and Exchange Commission (SEC).

Residential Capital, LLC

Residential Capital, LLC (ResCap), one of our mortgage subsidiaries, was negatively impacted by the events and conditions in the mortgage banking industry and the broader economy beginning in 2007. The market deterioration led to fewer sources of, and significantly reduced levels of, liquidity available to finance ResCap’s operations. ResCap is highly leveraged relative to its cash flow and previously recognized credit and valuation losses resulting in a significant deterioration in capital. ResCap’s consolidated tangible net worth, as defined, was $884 million at March 31, 2011, and ResCap remained in compliance with all of its consolidated tangible net worth covenants. For this purpose, consolidated tangible net worth is defined as ResCap’s consolidated equity excluding intangible assets. There continues to be a risk that ResCap may not be able to meet its debt service obligations, may default on its financial debt covenants due to insufficient capital, and/or may be in a negative liquidity position in future periods.

ResCap actively manages its liquidity and capital positions and is continually working on initiatives to address its debt covenant compliance and liquidity needs including debt maturing in the next twelve months and other risks and uncertainties. ResCap’s initiatives could include, but are not limited to, the following: continuing to work with key credit providers to optimize all available liquidity options; possible further reductions in assets and other restructuring activities; focusing production on conforming and government-insured residential mortgage loans; and continued exploration of opportunities for funding and capital support from Ally and its affiliates. The outcomes of most of these initiatives are to a great extent outside of ResCap’s control resulting in increased uncertainty as to their successful execution.

During 2009 and 2010, we performed a strategic review of our mortgage business. As a result of this, we effectively exited the European mortgage market through the sale of our U.K. and continental Europe operations. We also completed the sale of certain higher-risk legacy mortgage assets and settled representation and warranty claims with certain counterparties. The ongoing focus of our Mortgage Origination and Servicing operations will be predominately the origination and sale of conforming and government-insured residential mortgages and mortgage servicing. While the opportunities for further risk mitigation remain, the risk in our Mortgage Legacy Portfolio and Other operations has been materially reduced as compared to recent levels.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the future, Ally and ResCap may take additional actions with respect to ResCap as each party deems appropriate. These actions may include Ally providing or declining to provide additional liquidity and capital support for ResCap; refinancing or restructuring some or all of ResCap’s existing debt; the purchase or sale of ResCap debt securities in the public or private markets for cash or other consideration; entering into derivative or other hedging or similar transactions with respect to ResCap or its debt securities; Ally purchasing assets from ResCap; or undertaking corporate transactions such as a tender offer or exchange offer for some or all of ResCap’s outstanding debt securities, asset sales, or other business reorganization or similar action with respect to all or part of ResCap and/or its affiliates. In this context, Ally and ResCap typically consider a number of factors to the extent applicable and appropriate including, without limitation, the financial condition, results of operations, and prospects of Ally and ResCap; ResCap’s ability to obtain third-party financing; tax considerations; the current and anticipated future trading price levels of ResCap’s debt instruments; conditions in the mortgage banking industry and general economic conditions; other investment and business opportunities available to Ally and/or ResCap; and any nonpublic information that ResCap may possess or that Ally receives from ResCap.

ResCap remains heavily dependent on Ally and its affiliates for funding and capital support, and there can be no assurance that Ally or its affiliates will continue such actions or that Ally will choose to execute any further strategic transactions with respect to ResCap or that any transactions undertaken will be successful.

Although our continued actions through various funding and capital initiatives demonstrate support for ResCap, there are currently no commitments or assurances for future capital support. Consequently, there remains substantial doubt about ResCap’s ability to continue as a going concern. Should we no longer continue to support the capital or liquidity needs of ResCap or should ResCap be unable to successfully execute other initiatives, it would have a material adverse effect on ResCap’s business, results of operations, and financial position.

Ally has extensive financing and hedging arrangements with ResCap that could be at risk of nonpayment if ResCap were to file for bankruptcy. At March 31, 2011, we had $1.9 billion in secured financing arrangements with ResCap of which $1.3 billion in loans was utilized. At March 31, 2011, there was no net exposure under the hedging arrangement because the arrangements were fully collateralized. Amounts outstanding under the secured financing and hedging arrangements fluctuate. If ResCap were to file for bankruptcy, ResCap’s repayments of its financing facilities, including those with us, could be slower. In addition, we could be an unsecured creditor of ResCap to the extent that the proceeds from the sale of our collateral are insufficient to repay ResCap’s obligations to us. It is possible that other ResCap creditors would seek to recharacterize our loans to ResCap as equity contributions or to seek equitable subordination of our claims so that the claims of other creditors would have priority over our claims. In addition, should ResCap file for bankruptcy, our $884 million investment related to ResCap’s equity position would likely be reduced to zero. If a ResCap bankruptcy were to occur and a substantial amount of our credit exposure is not repaid to us, it would have an adverse impact on our near-term net income and capital position, but we do not believe it would have a materially adverse impact on Ally’s consolidated financial position over the longer term.

Relationship and Transactions with General Motors Company (GM)

GM, GM dealers, and GM-related employees compose a significant portion of our customer base, and our Global Automotive Services operations are highly dependent on GM production and sales volume. As a result, a significant adverse change in GM’s business, including significant adverse changes in GM’s liquidity position and access to the capital markets, the production or sale of GM vehicles, the quality or resale value of GM vehicles, the use of GM marketing incentives, GM’s relationships with its key suppliers, GM’s relationship with the United Auto Workers and other labor unions, and other factors impacting GM or its employees could have a significant adverse effect on our profitability and financial condition.

As a result of the conversion of $5.5 billion of Ally Mandatorily Convertible Preferred (MCP) stock held by the U.S. Department of Treasury (Treasury) into common stock on December 30, 2010, and consequent dilution of the equity interests held by GM and the GM Trust, GM and the GM Trust are no longer considered related parties for purposes of applicable disclosure within the Notes to Condensed Consolidated Financial Statements, as they collectively have less than 10% of the voting interests in Ally and do not control or have the ability to significantly influence the management and policies of Ally. In addition, as a result of the conversion, the Federal Reserve has determined that GM will no longer be considered an “affiliate” of Ally Bank for purposes of Sections 23A and 23B of the Federal Reserve Act, which impose limitations on transactions between banks and their affiliates.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Refer to Note 26 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K for a summary of related party transactions with GM during 2010.

Significant Accounting Policies

Earnings per Common Share

We compute earnings (loss) per common share by dividing net income (loss) (after deducting dividends on preferred stock) by the weighted-average number of common shares outstanding during the period. We compute diluted earnings (loss) per common share by dividing net income (loss) (after deducting dividends on preferred stock) by the weighted-average number of common shares outstanding during the period plus the dilution resulting from the conversion of convertible preferred stock, if applicable.

Refer to Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K regarding additional significant accounting policies.

Recently Adopted Accounting Standards

Receivables — Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20)

During the three months ended March 31, 2011, Accounting Standards Update (ASU) 2010-20 required us to disclose a rollforward of the allowance for loan losses, additional activity-based disclosures for both financing receivables, and the allowance for each reporting period. We early adopted the rollforward requirement during the December 31, 2010, reporting period. As of January 19, 2011, the Financial Accounting Standards Board (FASB) issued ASU 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20, which effectively defers the disclosure requirements in ASU 2010-20 related to troubled debt restructurings while they deliberate on other potential changes to the accounting for troubled debt restructurings. This deferral ended with the issuance of ASU 2011-02 in April 2011 as discussed in the section in this note titled Recently Issued Accounting Standards. Since the guidance relates only to disclosures, adoption did not have a material impact on our consolidated financial condition or results of operations.

Revenue Recognition — Revenue Arrangements with Multiple Deliverables (ASU 2009-13)

As of January 1, 2011, we adopted ASU 2009-13, which amends Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. The guidance significantly changed the accounting for revenue recognition in arrangements with multiple deliverables and eliminated the residual method, which allocated the discount of a multiple deliverable arrangement among the delivered items. The guidance requires entities to allocate the total consideration to all deliverables at inception using the relative selling price and to allocate any discount in the arrangement proportionally to each deliverable based on each deliverable’s selling price. The adoption did not have a material impact to our consolidated financial condition or results of operations.

Intangibles – Goodwill and Other (ASU 2010-28)

As of January 1, 2011, we adopted ASU 2010-28, which amends ASC Topic 350, Intangibles — Goodwill and Other, to modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test. Additionally, when determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The adoption did not have a material impact to our consolidated financial condition or results of operations.

Recently Issued Accounting Standards

Financial Services — Insurance — Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (ASU 2010-26)

In December 2010, the FASB issued ASU 2010-26, which amends ASC 944, Financial Services — Insurance. The amendments in this ASU specify which costs incurred in the acquisition of new and renewal insurance contracts should be capitalized. All other acquisition-related costs should be expensed as incurred. If the initial application of the amendments in

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

this ASU results in the capitalization of acquisition costs that had not been previously capitalized, an entity may elect not to capitalize those types of costs. The ASU will be effective for us on January 1, 2012. We do not expect the adoption to have a material impact to our consolidated financial condition or results of operations.

Receivables — A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring (ASU 2011-02)

In April 2011, the FASB issued ASU 2011-02, which amends ASC 310, Receivables. The amendments in this ASU clarify which loan modifications constitute a troubled debt restructuring. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. The ASU will be effective for us on July 1, 2011, and must be applied retrospectively to modifications made subsequent to the beginning of the annual period of adoption, which is January 1, 2011, for us.

If, as a result of applying these amendments, we identify receivables that are newly considered impaired, we are required to apply the measurement portion of the amendments to these newly identified impairments at the end of the reporting period of adoption. We will also be required to disclose the total amount of receivables and the allowance for credit losses as of the end of the period of adoption related to those receivables that are newly considered impaired for which impairment was previously measured under ASC 450-20, Contingencies — Loss Contingencies.

Early adoption is permitted. We have not yet determined the impact upon adoption.

2.	Discontinued and Held-for-sale Operations

Discontinued Operations

We classified certain operations as discontinued using generally accepted accounting principles in the United States of America, as the associated operations and cash flows will be eliminated from our ongoing operations and we will not have any significant continuing involvement in their operations after the respective sale transactions. For all periods presented, all of the operating results for these operations were removed from continuing operations and are presented separately as discontinued operations, net of tax. The Notes to the Condensed Consolidated Financial Statements were adjusted to exclude discontinued operations unless otherwise noted.

Select Insurance Operations

During 2009, we committed to sell the U.K. consumer property and casualty insurance business, which provides vehicle and home insurance through a number of distribution channels including independent agents, affinity groups, and the internet. In April 2011, we entered into a definitive sales agreement and expect to complete the sale during the second or third quarter of 2011.

Select International Automotive Finance Operations

We completed the sale of our Ecuador operations during the first quarter of 2011. We expect to complete the sale of our Venezuela operations during 2011.

Select Financial Information

The pretax income or loss recognized for the discontinued operations, including the direct costs to transact a sale, could differ from the ultimate sales price due to the fluidity of ongoing negotiations, price volatility, changing interest rates, changing foreign-currency rates, and future economic conditions.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Selected financial information of discontinued operations is summarized below.


	Three months ended March 31,
($ in millions)	2011			2010
Select Insurance operations
Total net revenue	$	56		$	239
Pretax income including direct costs to transact a sale (a)		7			—
Tax expense		—			4
Select International operations
Total net revenue	$	5		$	41
Pretax (loss) income including direct costs to transact a sale (a)		(31	)		4
Tax expense		—			8
Select Mortgage — Legacy and Other operations
Total net revenue	$	—		$	28
Pretax income including direct costs to transact a sale		—			13
Tax expense		—			—
Select Commercial Finance operations
Total net revenue	$	—		$	8
Pretax income including direct costs to transact a sale		—			10
Tax expense		—			4

(a)	Includes certain income tax activity recognized by Corporate and Other.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Held-for-sale Operations

The assets and liabilities of operations held-for-sale are summarized below.


March 31, 2011 ($ in millions)	Select Insurance operations (a)			Select International operations (b)			Total held-for-sale operations
Assets
Cash and cash equivalents
Noninterest-bearing	$	4		$	58		$	62
Interest-bearing		61			19			80

Total cash and cash equivalents		65			77			142
Investment securities		384			—			384
Finance receivables and loans, net
Finance receivables and loans, net		—			19			19
Allowance for loan losses		—			(1	)		(1	)

Total finance receivables and loans, net		—			18			18
Premiums receivable and other insurance assets		190			—			190
Other assets		142			2			144
Impairment on assets of held-for-sale operations		(221	)		(134	)(c)		(355	)

Total assets	$	560		$	(37	)	$	523

Liabilities
Interest-bearing deposit liabilities	$	—		$	5		$	5
Unearned insurance premiums and service revenue		125			—			125
Reserves for insurance losses and loss adjustment expenses		382			—			382
Accrued expenses and other liabilities		33			1			34

Total liabilities	$	540		$	6		$	546

December 31, 2010
Assets
Cash and cash equivalents
Noninterest-bearing	$	5		$	14		$	19
Interest-bearing		—			33			33

Total cash and cash equivalents		5			47			52
Investment securities		435			—			435
Finance receivables and loans, net
Finance receivables and loans, net		—			242			242
Allowance for loan losses		—			(3	)		(3	)

Total finance receivables and loans, net		—			239			239
Premiums receivable and other insurance assets		169			—			169
Other assets		138			16			154
Impairment on assets of held-for-sale operations		(224	)		(135	) (c)		(359	)

Total assets	$	523		$	167		$	690

Liabilities
Interest-bearing deposit liabilities	$	—		$	6		$	6
Short-term borrowings		—			47			47
Long-term debt		—			115			115
Interest payable		—			2			2
Unearned insurance premiums and service revenue		115			—			115
Reserves for insurance losses and loss adjustment expenses		362			—			362
Accrued expenses and other liabilities		33			—			33

Total liabilities	$	510		$	170		$	680

(a)	Includes the U.K. consumer property and casualty insurance business.

(b)	The balances at March 31, 2011, include the International Automotive Finance operation of Venezuela. The balances at December 31, 2010, include the International Automotive Finance operations of Ecuador and Venezuela.

(c)	Includes $94 million of unfavorable accumulated translation adjustments at both March 31, 2011, and December 31, 2010.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

3.	Other Income, Net of Losses

Details of other income, net of losses, were as follows.


	Three months ended March 31,
($ in millions)	2011			2010
Mortgage processing fees and other mortgage income	$	44		$	54
Remarketing fees		37			31
Late charges and other administrative fees		33			37
Income from equity-method investments		22			12
Full-service leasing fees		15			28
Real estate services, net		—			6
Fair value adjustment on derivatives (a)		(14	)		(55	)
Change due to fair value option elections (b)		(17	)		(73	)
Other, net		96			42

Total other income, net of losses	$	216		$	82

(a)	Refer to Note 19 for a description of derivative instruments and hedging activities.

(b)	Refer to Note 21 for a description of fair value option elections.

4.	Other Operating Expenses

Details of other operating expenses were as follows.


	Three months ended March 31,
($ in millions)	2011			2010
Insurance commissions	$	125		$	146
Technology and communications		120			139
Professional services		68			57
Advertising and marketing		54			24
Lease and loan administration		44			31
Regulatory and licensing fees		37			31
Vehicle remarketing and repossession		36			55
State and local non-income taxes		31			24
Mortgage representation and warranty, net		26			49
Premises and equipment depreciation		26			18
Occupancy		23			26
Full-service leasing vehicle maintenance costs		11			29
Restructuring		(3	)		43
Other		174			210

Total other operating expenses	$	772		$	882

5.	Trading Securities

The fair value for our portfolio of trading securities was as follows.


($ in millions)	March 31, 2011		December 31, 2010
U.S. Treasury	$	—	$	77
Mortgage-backed residential		75		69
Asset-backed		—		94

Total trading securities	$	75	$	240

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

6.	Investment Securities

Our portfolio of securities includes bonds, equity securities, asset- and mortgage-backed securities, notes, interests in securitization trusts, and other investments. The cost, fair value, and gross unrealized gains and losses on available-for-sale securities were as follows.


	March 31, 2011									December 31, 2010
	Cost		Gross unrealized					Fair value		Cost		Gross unrealized					Fair value
($ in millions)	Cost		gains		losses			Fair value		Cost		gains		losses			Fair value
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	2,902	$	8	$	(20	)	$	2,890	$	3,307	$	22	$	(11	)	$	3,318
States and political subdivisions		3		—		—			3		3		—		(1	)		2
Foreign government		1,309		14		(6	)		1,317		1,231		19		(2	)		1,248
Mortgage-backed residential (a)		5,920		49		(108	)		5,861		5,844		60		(79	)		5,825
Asset-backed		2,262		38		(3	)		2,297		1,934		15		(1	)		1,948
Corporate debt		1,376		13		(10	)		1,379		1,537		34		(13	)		1,558
Other		489		—		—			489		152		—		(1	)		151

Total debt securities (b)		14,261		122		(147	)		14,236		14,008		150		(108	)		14,050
Equity securities		1,134		69		(38	)		1,165		766		60		(30	)		796

Total available-for-sale securities (c)	$	15,395	$	191	$	(185	)	$	15,401	$	14,774	$	210	$	(138	)	$	14,846

(a)	Residential mortgage-backed securities include agency-backed bonds totaling $4,208 million and $4,503 million at March 31, 2011, and December 31, 2010, respectively.

(b)	In connection with certain borrowings and letters of credit relating to certain assumed reinsurance contracts, $57 million and $153 million of primarily U.K. Treasury securities were pledged as collateral at March 31, 2011, and December 31, 2010, respectively.

(c)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $15 million and $12 million at March 31, 2011, and December 31, 2010, respectively.

The maturity distribution of available-for-sale debt securities outstanding is summarized in the following tables. Prepayments may cause actual maturities to differ from scheduled maturities.

Total

Due in
one year
or less

Due after
one year
through
five years

Due after
five years
through
ten years

Due after
ten years (a)

March 31, 2011 ($ in millions)

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

Amount

Yield

Fair value of available-for-sale debt securities (b)

U.S. Treasury and federal agencies

2,890

1.3

0.6

2,693

1.2

100

3.7

—

States and political subdivisions

8.7

—

8.7

Foreign government

1,317

3.4

3.2

1,103

3.3

193

3.7

4.1

Mortgage-backed residential

5,861

3.3

—

6.3

4.5

5,803

3.3

Asset-backed

2,297

2.7

2.6

1,149

2.2

443

2.5

618

3.8

Corporate debt

1,379

4.3

5.4

557

3.6

653

5.0

147

4.0

Other

489

1.4

489

1.4

—

Total available-for-sale debt securities

14,236

2.9

715

1.6

5,505

2.1

1,444

3.9

6,572

3.4

Amortized cost of available-for-sale debt securities

14,261

714

5,498

1,438

6,611

(a)	Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.

(b)	Yields on tax-exempt obligations are computed on a tax-equivalent basis.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Total					Due in one year or less					Due after one year through five years					Due after five years through ten years					Due after ten years (a)
December 31, 2010 ($ in millions)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Fair value of available-for-sale debt securities (b)
U.S. Treasury and federal agencies	$	3,318		1.4	%	$	124		1.2	%	$	3,094		1.3	%	$	100		3.7	%	$	—		—	%
States and political subdivisions		2		8.7			—		—			—		—			—		—			2		8.7
Foreign government		1,248		3.1			7		2.2			1,092		3.1			149		3.5			—		—
Mortgage-backed residential		5,825		3.8			—		—			57		3.2			64		4.4			5,704		3.8
Asset-backed		1,948		2.5			—		—			1,146		2.2			500		2.4			302		4.0
Corporate debt		1,558		3.9			22		5.7			811		3.5			593		4.3			132		4.0
Other		151		1.5			151		1.5			—		—			—		—			—		—

Total available-for-sale debt securities	$	14,050		3.0		$	304		1.7		$	6,200		2.1		$	1,406		3.5		$	6,140		3.8

Amortized cost of available-for-sale debt securities	$	14,008				$	305				$	6,152				$	1,388				$	6,163

(a)	Investments with no stated maturities are included as contractual maturities of greater than 10 years. Actual maturities may differ due to call or prepayment options.

(b)	Yields on tax-exempt obligations are computed on a tax-equivalent basis.

The balances of cash equivalents were $5.4 billion and $5.3 billion at March 31, 2011, and December 31, 2010, respectively, and were composed primarily of money market accounts and short-term securities, including U.S. Treasury bills.

The following table presents gross gains and losses realized upon the sales of available-for-sale securities. During the three months ended March 31, 2011 and 2010, we did not recognize other-than-temporary impairment on available-for-sale securities.


	Three months ended March 31,
($ in millions)	2011			2010
Gross realized gains	$	94		$	151
Gross realized losses		(10	)		(8	)

Net realized gains	$	84		$	143

The following table presents interest and dividends on available-for-sale securities.


	Three months ended March 31,
($ in millions)	2011		2010
Taxable interest	$	99	$	90
Taxable dividends		5		3
Interest and dividends exempt from U.S. federal income tax		—		6

Total interest and dividends on available-for-sale securities	$	104	$	99

The table below summarizes available-for-sale securities in an unrealized loss position in accumulated other comprehensive income. Based on the methodology described below that was applied to these securities, we believe that the unrealized losses relate to factors other than credit losses in the current market environment. As of March 31, 2011, we did not have the intent to sell the debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As of March 31, 2011, we had the ability and intent to hold equity securities with an unrealized loss position in accumulated other comprehensive income. As a result, we believe that the securities with an unrealized loss position in accumulated other

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

comprehensive income are not considered to be other-than-temporarily impaired at March 31, 2011. Refer to Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K for additional information related to investment securities and our methodology for evaluating potential other-than-temporary impairments.


	March 31, 2011										December 31, 2010
	Less than 12 months					12 months or longer					Less than 12 months					12 months or longer
($ in millions)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	1,647	$	(20	)	$	—	$	—		$	702	$	(11	)	$	—	$	—
States and political subdivisions		2		—			—		—			2		(1	)		—		—
Foreign government		729		(6	)		—		—			323		(2	)		—		—
Mortgage-backed residential		3,623		(107	)		11		(1	)		3,159		(77	)		11		(2	)
Asset-backed		336		(3	)		1		—			238		(1	)		2		—
Corporate debt		646		(10	)		6		—			653		(13	)		5		—
Other		83		—			—		—			80		(1	)		—		—

Total temporarily impaired debt securities		7,066		(146	)		18		(1	)		5,157		(106	)		18		(2	)
Temporarily impaired equity securities		411		(34	)		44		(4	)		250		(27	)		26		(3	)

Total temporarily impaired available-for-sale securities	$	7,477	$	(180	)	$	62	$	(5	)	$	5,407	$	(133	)	$	44	$	(5	)

7.	Loans Held-for-sale, Net

The composition of loans held-for-sale, net, was as follows.


	March 31, 2011						December 31, 2010
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer mortgage
1st Mortgage	$	6,605	$	74	$	6,679	$	10,191	$	364	$	10,555
Home equity		811		—		811		856		—		856

Total consumer mortgage (a)		7,416		74		7,490		11,047		364		11,411
Commercial
Commercial and industrial
Other		6		—		6		—		—		—

Total commercial		6		—		6		—		—		—

Total loans held-for-sale (b)	$	7,422	$	74	$	7,496	$	11,047	$	364	$	11,411

(a)	Fair value option-elected domestic consumer mortgages were $2.9 billion and $6.4 billion at March 31, 2011, and December 31, 2010, respectively. Refer to Note 21 for additional information.

(b)	Totals are net of unamortized premiums and discounts and deferred fees and costs of $243 million and $161 million at March 31, 2011, and December 31, 2010, respectively.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes held-for-sale mortgage loans reported at carrying value by higher-risk loan type.


($ in millions)	March 31, 2011		December 31, 2010
High original loan-to-value (greater than 100%) mortgage loans	$	323	$	331
Payment-option adjustable-rate mortgage loans		16		16
Interest-only mortgage loans		430		481
Below-market rate (teaser) mortgages		134		151

Total (a)	$	903	$	979

(a)	The majority of these loans are held by our Mortgage Legacy Portfolio and Other operations at March 31, 2011, and December 31, 2010.

8.	Finance Receivables and Loans, Net

The composition of finance receivables and loans, net, reported at carrying value before allowance for loan losses was as follows.


	March 31, 2011						December 31, 2010
($ in millions)	Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer automobile	$	39,903	$	16,965	$	56,868	$	34,604	$	16,650	$	51,254
Consumer mortgage
1st Mortgage		6,893		328		7,221		6,917		390		7,307
Home equity		3,347		—		3,347		3,441		—		3,441

Total consumer mortgage		10,240		328		10,568		10,358		390		10,748
Commercial
Commercial and industrial
Automobile		24,716		9,222		33,938		24,944		8,398		33,342
Mortgage		820		40		860		1,540		41		1,581
Other		1,596		295		1,891		1,795		312		2,107
Commercial real estate
Automobile		2,090		220		2,310		2,071		216		2,287
Mortgage		—		53		53		1		78		79

Total commercial		29,222		9,830		39,052		30,351		9,045		39,396
Loans at fair value (a)		645		326		971		663		352		1,015

Total finance receivables and loans (b)	$	80,010	$	27,449	$	107,459	$	75,976	$	26,437	$	102,413

(a)	Includes domestic consumer mortgages at fair value as a result of fair value option election. Refer to Note 21 for additional information.

(b)	Totals are net of unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.9 billion at both March 31, 2011, and December 31, 2010, respectively.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables present an analysis of the activity in the allowance for loan losses on finance receivables and loans.


($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at January 1, 2011	$	970		$	580		$	323		$	1,873
Charge-offs
Domestic		(139	)		(60	)		(6	)		(205	)
Foreign		(42	)		—			(31	)		(73	)

Total charge-offs		(181	)		(60	)		(37	)		(278	)

Recoveries
Domestic		50			3			6			59
Foreign		19			—			11			30

Total recoveries		69			3			17			89

Net charge-offs		(112	)		(57	)		(20	)		(189	)
Provision for loan losses		53			40			20			113
Other		5			—			4			9

Allowance at March 31, 2011	$	916		$	563		$	327		$	1,806

Allowance for loan losses
Individually evaluated for impairment	$	—		$	98		$	103		$	201
Collectively evaluated for impairment		900			465			224			1,589
Loans acquired with deteriorated credit quality		16			—			—			16
Finance receivables and loans at historical cost
Ending balance		56,868			10,568			39,052			106,488
Individually evaluated for impairment		—			529			1,164			1,693
Collectively evaluated for impairment		56,724			10,039			37,888			104,651
Loans acquired with deteriorated credit quality		144			—			—			144


($ in millions)	Consumer automobile			Consumer mortgage			Commercial			Total
Allowance at January 1, 2010	$	1,024		$	640		$	781		$	2,445
Cumulative effect of change in accounting principles (a)		222			—			—			222
Charge-offs
Domestic		(289	)		(32	)		(61	)		(382	)
Foreign		(56	)		(2	)		(4	)		(62	)

Total charge-offs		(345	)		(34	)		(65	)		(444	)

Recoveries
Domestic		105			4			4			113
Foreign		15			—			—			15

Total recoveries		120			4			4			128

Net charge-offs		(225	)		(30	)		(61	)		(316	)
Provision for loan losses		108			18			18			144
Discontinued operations		2			(1	)		—			1
Other		(11	)		7			(12	)		(16	)

Allowance at March 31, 2010	$	1,120		$	634		$	726		$	2,480

Allowance for loan losses
Individually evaluated for impairment	$	—		$	94		$	434		$	528
Collectively evaluated for impairment		1,090			540			292			1,922
Loans acquired with deteriorated credit quality		30			—			—			30
Finance receivables and loans at historical cost
Ending balance		38,114			11,242			37,112			86,468
Individually evaluated for impairment		—			336			1,852			2,188
Collectively evaluated for impairment		37,865			10,906			35,260			84,031
Loans acquired with deteriorated credit quality		249			—			—			249

(a)	Effect of change in accounting principle due to adoption of ASU 2009-17.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Loans are considered impaired when we determine it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement.

The following table presents information about our impaired finance receivables and loans.


($ in millions)	Unpaid principal balance		Carrying value before allowance		Impaired with no allowance		Impaired with an allowance		Allowance for impaired loans
March 31, 2011
Consumer mortgage
1st Mortgage	$	446	$	440	$	—	$	440	$	55
Home equity		88		89		—		89		42

Total consumer mortgage		534		529		—		529		97
Commercial
Commercial and industrial
Automobile		333		333		35		298		16
Mortgage		43		43		3		40		15
Other		122		119		21		98		39
Commercial real estate
Automobile		150		150		78		72		31
Mortgage		49		49		13		36		2

Total commercial		697		694		150		544		103

Total consumer and commercial	$	1,231	$	1,223	$	150	$	1,073	$	200

December 31, 2010
Consumer mortgage
1st Mortgage	$	410	$	404	$	—	$	404	$	59
Home equity		82		83		—		83		40

Total consumer mortgage		492		487		—		487		99
Commercial
Commercial and industrial
Automobile		340		356		33		323		23
Mortgage		44		40		—		40		14
Other		135		133		20		113		51
Commercial real estate
Automobile		206		197		108		89		29
Mortgage		71		71		28		43		10

Total commercial		796		797		189		608		127

Total consumer and commercial	$	1,288	$	1,284	$	189	$	1,095	$	226

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents average balance and interest income for our impaired finance receivables and loans.


	2011				2010
Three months ended March 31, ($ in millions)	Average balance		Interest income		Average balance		Interest income
Consumer mortgage
1st Mortgage	$	423	$	4	$	247	$	2
Home equity		85		1		43		1

Total consumer mortgage		508		5		290		3
Commercial
Commercial and industrial
Automobile		336		—		414		—
Mortgage		42		5		—		—
Other		128		1		961		—
Commercial real estate
Automobile		178		—		284		—
Mortgage		63		1		256		1

Total commercial		747		7		1,915		1

Total consumer and commercial	$	1,255	$	12	$	2,205	$	4

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

At March 31, 2011, and December 31, 2010, commercial commitments to lend additional funds to debtors owing receivables whose terms had been modified in a troubled debt restructuring were $11 million and $15 million, respectively.

The following table presents an analysis of our past due finance receivables and loans.


($ in millions)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans
March 31, 2011
Consumer automobile	$	688	$	129	$	176	$	993	$	55,875	$	56,868
Consumer mortgage
1st Mortgage		110		57		185		352		6,869		7,221
Home equity		20		9		11		40		3,307		3,347

Total consumer mortgage		130		66		196		392		10,176		10,568
Commercial
Commercial and industrial
Automobile		—		3		57		60		33,878		33,938
Mortgage		3		—		40		43		817		860
Other		—		—		6		6		1,885		1,891
Commercial real estate
Automobile		2		—		64		66		2,244		2,310
Mortgage		—		—		49		49		4		53

Total commercial		5		3		216		224		38,828		39,052

Total consumer and commercial	$	823	$	198	$	588	$	1,609	$	104,879	$	106,488

December 31, 2010
Consumer automobile	$	828	$	175	$	197	$	1,200	$	50,054	$	51,254
Consumer mortgage
1st Mortgage		115		67		205		387		6,920		7,307
Home equity		20		12		13		45		3,396		3,441

Total consumer mortgage		135		79		218		432		10,316		10,748
Commercial
Commercial and industrial
Automobile		21		19		85		125		33,217		33,342
Mortgage		—		36		4		40		1,541		1,581
Other		—		—		20		20		2,087		2,107
Commercial real estate
Automobile		—		4		78		82		2,205		2,287
Mortgage		—		—		71		71		8		79

Total commercial		21		59		258		338		39,058		39,396

Total consumer and commercial	$	984	$	313	$	673	$	1,970	$	99,428	$	101,398

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the carrying amount of our finance receivables and loans on nonaccrual status.


($ in millions)	March 31, 2011		December 31, 2010
Consumer automobile	$	187	$	207
Consumer mortgage
1st Mortgage		367		500
Home equity		45		61

Total consumer mortgage		412		561
Commercial
Commercial and industrial
Automobile		284		296
Mortgage		43		40
Other		119		134
Commercial real estate
Automobile		150		199
Mortgage		49		71

Total commercial		645		740

Total consumer and commercial	$	1,244	$	1,508

Management performs a quarterly analysis of the consumer automobile, consumer mortgage, and commercial portfolios using a range of credit quality indicators to assess the adequacy of the allowance based on historical and current trends. The tables below present select credit quality indicators that are used in the determination of allowance for our consumer automobile, consumer mortgage, and commercial portfolios.

The following table presents performing and nonperforming credit quality indicators in accordance with our internal accounting policies for our consumer finance receivables and loans.


	March 31, 2011						December 31, 2010
($ in millions)	Performing		Nonperforming		Total		Performing		Nonperforming		Total
Consumer automobile	$	56,681	$	187	$	56,868	$	51,047	$	207	$	51,254
Consumer mortgage
1st Mortgage		6,854		367		7,221		6,807		500		7,307
Home equity		3,302		45		3,347		3,380		61		3,441

Total consumer mortgage	$	10,156	$	412	$	10,568	$	10,187	$	561	$	10,748

The following table presents pass and criticized credit quality indicators based on regulatory definitions for our commercial finance receivables and loans.


	March 31, 2011						December 31, 2010
($ in millions)	Pass		Criticized (a)		Total		Pass		Criticized (a)		Total
Commercial
Commercial and industrial
Automobile	$	31,602	$	2,336	$	33,938	$	31,254	$	2,088	$	33,342
Mortgage		804		56		860		1,504		77		1,581
Other		959		932		1,891		1,041		1,066		2,107
Commercial real estate
Automobile		2,021		289		2,310		2,013		274		2,287
Mortgage		1		52		53		—		79		79

Total commercial	$	35,387	$	3,665	$	39,052	$	35,812	$	3,584	$	39,396

(a)	Includes loans classified as special mention, substandard, or doubtful. These classifications are based on regulatory definitions and generally represent loans within our portfolio that are of higher default risk.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

9.	Investment in Operating Leases, Net

Investments in operating leases were as follows.


($ in millions)	March 31, 2011			December 31, 2010
Vehicles and other equipment	$	12,355		$	13,571
Accumulated depreciation		(3,457	)		(4,443	)

Investment in operating leases, net	$	8,898		$	9,128

Depreciation expense on operating lease assets includes remarketing gains and losses recognized on the sale of operating lease assets. The following summarizes the components of depreciation expense on operating lease assets.


	Three months ended March 31,
($ in millions)	2011			2010
Depreciation expense on operating lease assets (excluding remarketing gains)	$	403		$	840
Gross remarketing gains		(118	)		(184	)

Depreciation expense on operating lease assets	$	285		$	656

10.

Securitizations and Variable Interest Entities

Overview

We are involved in several types of securitization and financing transactions that utilize special-purpose entities (SPEs). An SPE is an entity that is designed to fulfill a specified limited need of the sponsor. Our principal use of SPEs is to obtain liquidity and favorable capital treatment by securitizing certain of our financial assets.

The SPEs involved in securitization and other financing transactions are generally considered VIEs. VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the ability to control the entity’s activities.

Securitizations

We provide a wide range of consumer and commercial automobile loans, operating leases, and mortgage loan products to a diverse customer base. We often securitize these loans and leases (which we collectively describe as loans or financial assets) through the use of securitization entities, which may or may not be consolidated on our Condensed Consolidated Balance Sheet. We securitize consumer and commercial automobile loans through private-label securitizations. We securitize consumer mortgage loans through either the GSEs or nonagency mortgages securitization. During the three months ended March 31, 2011 and 2010, our consumer mortgage loans were primarily securitized through the GSEs.

In executing a securitization transaction, we typically sell pools of financial assets to a wholly owned, bankruptcy-remote SPE, which then transfers the financial assets to a separate, transaction-specific securitization entity for cash, servicing rights, and in some transactions, other retained interests. The securitization entity is funded through the issuance of beneficial interests in the securitized financial assets. The beneficial interests take the form of either notes or trust certificates, which are sold to investors and/or retained by us. These beneficial interests are collateralized by the transferred loans and entitle the investors to specified cash flows generated from the securitized loans. In the aggregate, these beneficial interests have the same average life as the transferred financial assets. In addition to providing a source of liquidity and cost-efficient funding, securitizing these financial assets also reduces our credit exposure to the borrowers beyond any economic interest we may retain. We securitize conforming residential mortgage loans through GSE securitizations and nonconforming mortgage loans through nonagency securitizations.

Each securitization is governed by various legal documents that limit and specify the activities of the securitization entity. The securitization entity is generally allowed to acquire the loans, to issue beneficial interests to investors to fund the

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

acquisition of the loans, and to enter into derivatives or other yield maintenance contracts (e.g., bond insurance) to hedge or mitigate certain risks related to the financial assets or beneficial interests of the entity. Additionally, the securitization entity is required to service the assets it holds and the beneficial interests it issues. A servicer, who is generally us, is appointed pursuant to the underlying legal documents to perform these functions. Servicing functions include, but are not limited to, making certain payments of property taxes and insurance premiums, default and property maintenance payments, as well as advancing principal and interest payments before collecting them from individual borrowers. Our servicing responsibilities, which constitute continued involvement in the transferred financial assets, consist of primary servicing (i.e., servicing the underlying transferred financial assets) and/or master servicing (i.e., servicing the beneficial interests that result from the securitization transactions). Certain securitization entities also require the servicer to advance scheduled principal and interest payments due on the beneficial interests issued by the entity regardless of whether cash payments are received on the underlying transferred financial assets. Accordingly, we are required to provide these servicing advances when applicable. Refer to Note 11 for additional information regarding our servicing rights.

The GSEs provide a guarantee of the payment of principal and interest on the beneficial interests issued in securitizations. In private-label securitizations, cash flows from the assets initially transferred into the securitization entity represent the sole source for payment of distributions on the beneficial interests issued by the securitization entity and for payments to the parties that perform services for the securitization entity, such as the servicer or the trustee. In certain nonagency securitization transactions, a liquidity facility may exist to provide temporary liquidity to the entity. The liquidity provider generally is reimbursed prior to other parties in subsequent distribution periods. Monoline insurance may also exist to cover certain shortfalls to certain investors in the beneficial interests issued by the securitization entity. As noted above, in certain nonagency securitizations, the servicer is required to advance scheduled principal and interest payments due on the beneficial interests regardless of whether cash payments are received on the underlying transferred financial assets. The servicer is allowed to reimburse itself for these servicing advances. Additionally, certain nonagency securitization transactions may allow for the acquisition of additional loans subsequent to the initial loan transfer. Principal collections on other loans and/or the issuance of new beneficial interests, such as variable funding notes, generally fund these loans; we are often contractually required to invest in these new interests.

We may retain beneficial interests in our nonagency securitizations, which may represent a form of significant continuing economic interest. These retained interests include, but are not limited to, senior or subordinate mortgage- or asset-backed securities, interest-only strips, principal-only strips, and residuals. Certain of these retained interests provide credit enhancement to the trust as they may absorb credit losses or other cash shortfalls. Additionally, the securitization agreements may require cash flows to be directed away from certain of our retained interests due to specific over-collateralization requirements, which may or may not be performance-driven.

We generally hold certain conditional repurchase options that allow us to repurchase assets from the securitization entity. The majority of the securitizations provide us, as servicer, with a call option that allows us to repurchase the remaining transferred financial assets or outstanding beneficial interests at our discretion once the asset pool reaches a predefined level, which represents the point where servicing becomes burdensome (a clean-up call option). The repurchase price is typically the par amount of the loans plus accrued interest. Additionally, we may hold other conditional repurchase options that allow us to repurchase a transferred financial asset if certain events outside our control are met. The typical conditional repurchase option is a delinquent loan repurchase option that gives us the option to purchase the loan or contract if it exceeds a certain prespecified delinquency level. We have complete discretion regarding when or if we will exercise these options, but generally, we would do so only when it is in our best interest.

Other than our customary representation and warranty provisions, these securitizations are nonrecourse to us, thereby transferring the risk of future credit losses to the extent the beneficial interests in the securitization entities are held by third parties. Our obligation to provide support is limited to the customary representation and warranty provisions. Representation and warranty provisions generally require us to repurchase loans or indemnify the investor for incurred losses to the extent it is determined that the loans were ineligible or were otherwise defective at the time of sale. Refer to Note 24 for detail on representation and warranty provisions. We did not provide any noncontractual financial support to any of these entities during the three months ended March 31, 2011 and 2010.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Other Variable Interest Entities

Servicer Advance Funding Entity

To assist in the financing of our servicer advance receivables, we formed an SPE that issues term notes to third-party investors that are collateralized by servicer advance receivables. These servicer advance receivables are transferred to the SPE and consist of delinquent principal and interest advances we made as servicer to various investors; property taxes and insurance premiums advanced to taxing authorities and insurance companies on behalf of borrowers; and amounts advanced for mortgages in foreclosure. The SPE funds the purchase of the receivables through financing obtained from the third-party investors and subordinated loans or an equity contribution from our mortgage activities. This SPE is consolidated on our balance sheet at March 31, 2011, and December 31, 2010. The beneficial interest holder of this SPE does not have legal recourse to our general credit. We do not have a contractual obligation to provide any type of financial support in the future, nor have we provided noncontractual financial support to the entity during the three months ended March 31, 2011 and 2010.

Other

In 2010, we sold a portfolio of resort finance-backed receivables to a third party that financed the acquisition through an SPE. We provided seller financing for the purchase of these assets and also hold a contingent value right in the SPE, which were both recorded at fair value. We do not consolidate the SPE because we have no control over the activities of the SPE.

We have involvements with various other on-balance sheet, immaterial SPEs. Most of these SPEs are used for additional liquidity whereby we sell certain financial assets into the VIE and issue beneficial interests to third parties for cash.

We also provide long-term guarantee contracts to certain nonconsolidated affordable housing entities. Since we do not have control over the entities or the power to make decisions, we do not consolidate the entities and our involvement is limited to the guarantee.

Involvement with Variable Interest Entities

The determination of whether financial assets transferred by us to these VIEs (and related liabilities) are consolidated on our balance sheet (also referred to as on-balance sheet) or not consolidated on our balance sheet (also referred to as off-balance sheet) depends on the terms of the related transaction and our continuing involvement (if any) with the SPE. Subsequent to the adoption of ASU 2009-17 on January 1, 2010, we are deemed the primary beneficiary and therefore consolidate VIEs for which we have both (a) the power, through voting rights or similar rights, to direct the activities that most significantly impact the VIE’s economic performance, and (b) a variable interest (or variable interests) that (i) obligates us to absorb losses that could potentially be significant to the VIE and/or (ii) provides us the right to receive residual returns of the VIE that could potentially be significant to the VIE. We determine whether we hold a significant variable interest in a VIE based on a consideration of both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We assess whether we are the primary beneficiary of a VIE on an ongoing basis.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Our involvement with consolidated and nonconsolidated VIEs in which we hold variable interests is presented below.


($ in millions)	Consolidated involvement with VIEs			Assets of nonconsolidated VIEs (a)			Maximum exposure to loss in nonconsolidated VIEs
March 31, 2011
On-balance sheet variable interest entities
Consumer automobile	$	21,257		$	—		$	—
Consumer mortgage — nonagency		1,308			—			—
Commercial automobile		17,886			—			—
Other		976			—			—
Off-balance sheet variable interest entities
Consumer mortgage — Ginnie Mae		2,889	(b)		42,007			42,007	(c)
Consumer mortgage — CMHC		103	(b)		4,751			103	(d)
Consumer mortgage — nonagency		186	(b)		5,232			5,232	(c)
Consumer mortgage — other		—			—	(e)		—	(e)
Commercial other		440	(f)		—	(g)		649

Total	$	45,045		$	51,990		$	47,991

December 31, 2010
On-balance sheet variable interest entities
Consumer automobile	$	20,064		$	—		$	—
Consumer mortgage — nonagency		1,397			—			—
Commercial automobile		15,114			—			—
Other		1,035			—			—
Off-balance sheet variable interest entities
Consumer mortgage — Ginnie Mae		2,909	(b)		43,595			43,595	(c)
Consumer mortgage — CMHC		124	(b)		4,222			124	(d)
Consumer mortgage — nonagency		183	(b)		5,371			5,371	(c)
Commercial other		483	(f)		—	(g)		698

Total	$	41,309		$	53,188		$	49,788

(a)	Asset values represent the current unpaid principal balance of outstanding consumer finance receivables and loans within the VIEs.

(b)

Includes $2.4 billion and $2.5 billion classified as mortgage loans held-for-sale, $138 million and $162 million classified as trading securities or other assets, and $621 million and $569 million classified as MSRs at March 31, 2011, and December 31, 2010, respectively. CMHC is the Canada Mortgage and Housing Corporation.

(c)

Maximum exposure to loss represents the current unpaid principal balance of outstanding loans based on our customary representation and warranty provisions. This measure is based on the unlikely event that all of the loans have underwriting defects or other defects that trigger a representation and warranty provision and the collateral supporting the loans are worthless. This required disclosure is not an indication of our expected loss.

(d)

Due to combination of the credit loss insurance on the mortgages and the guarantee by CMHC on the issued securities, the maximum exposure to loss would be limited to the amount of the retained interests. Additionally, the maximum loss would occur only in the event that CMHC dismisses ResMor as servicer of the loans due to servicer performance or insolvency.

(e)

Includes a VIE for which we have no management oversight and therefore we are not able to provide the total assets of the VIE. However, in March 2011 we sold excess servicing rights valued at $266 million to the VIE. Our maximum exposure to loss in this VIE is a component of servicer advances made that are allocated to the trust. No servicer advances have been made to the trust at March 31, 2011, and the amount of maximum exposure does not consider advances that may be made in future periods, as they cannot be reliably predicted.

(f)	Includes $472 million and $515 million classified as finance receivables and loans, net, and $20 million and $20 million classified as other assets, offset by $52 million and $52 million classified as accrued expenses and other liabilities at March 31, 2010, and December 31, 2010, respectively.

(g)	Includes VIEs for which we have no management oversight and therefore we are not able to provide the total assets of the VIEs. However, in 2010 we sold loans with an unpaid principal balance of $1.5 billion into these VIEs.

On-balance Sheet Variable Interest Entities

We engage in securitization and other financing transactions that do not qualify for off-balance sheet treatment. In these situations, we hold beneficial interests or other interests in the VIE, which represent a form of significant continuing economic

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

interest. The interests held include, but are not limited to, senior or subordinate mortgage- or asset-backed securities, interest-only strips, principal-only strips, residuals, and servicing rights. Certain of these retained interests provide credit enhancement to the securitization entity as they may absorb credit losses or other cash shortfalls. Additionally, the securitization documents may require cash flows to be directed away from certain of our retained interests due to specific over-collateralization requirements, which may or may not be performance-driven. Because these securitization entities are consolidated, these retained interests and servicing rights are not recognized as separate assets on our Condensed Consolidated Balance Sheet.

Subsequent to adoption of ASU 2009-17 as of January 1, 2010, we consolidated certain of these entities because we had a controlling financial interest in the VIE, primarily due to our servicing activities, and because we hold a significant variable interest in the VIE. Under ASC 810, as amended by ASU 2009-17, we are generally the primary beneficiary of automobile securitization entities, as well as certain mortgage nonagency securitization entities for which we perform servicing activities and have retained a significant variable interest in the form of a beneficial interest. In cases where we did not meet sale accounting under previous guidance, unless we have made modifications to the overall transaction, we do not meet sale accounting under current guidance as we are not permitted to revisit sale accounting guidelines under the current guidance. In cases where substantive modifications are made, we then reassess the transaction under the amended guidance, based on the new circumstances.

The consolidated VIEs included in the Condensed Consolidated Balance Sheet represent separate entities with which we are involved. The third-party investors in the obligations of consolidated VIEs have legal recourse only to the assets of the VIEs and do not have such recourse to us, except for the customary representation and warranty provisions or when we are the counterparty to certain derivative transactions involving the VIE. In addition, the cash flows from the assets are restricted only to pay such liabilities. Thus, our economic exposure to loss from outstanding third-party financing related to consolidated VIEs is significantly less than the carrying value of the consolidated VIE assets. All assets are restricted for the benefit of the beneficial interest holders. Refer to Note 21 for discussion of the assets and liabilities for which the fair value option has been elected.

Off-balance Sheet Variable Interest Entities

The nature, purpose, and activities of nonconsolidated securitization entities are similar to those of our consolidated securitization entities with the primary difference being the nature and extent of our continuing involvement. The cash flows from the assets of nonconsolidated securitization entities generally are the sole source of payment on the securitization entities’ liabilities. The creditors of these securitization entities have no recourse to us with the exception of market customary representation and warranty provisions as described in Note 24.

Subsequent to the adoption of ASU 2009-17 as of January 1, 2010, nonconsolidated VIEs include entities for which we either do not hold significant variable interests or do not provide servicing or asset management functions for the financial assets held by the securitization entity. Additionally, to qualify for off-balance sheet treatment, transfers of financial assets must meet the sale accounting conditions in ASC 860. Our residential mortgage loan securitizations consist of GSEs and nonagency securitizations. Under ASU 2009-17, we are not the primary beneficiary of any GSE loan securitization transaction because we do not have the power to direct the significant activities of such entities. Additionally, under ASU 2009-17, we do not consolidate certain nonagency mortgage securitizations because we do not have a variable interest that could potentially be significant or we do not have power to direct the activities that most significantly impact the performance of the VIE.

For nonconsolidated securitization entities, the transferred financial assets are removed from our balance sheet provided the conditions for sale accounting are met. The financial assets obtained from the securitization are primarily reported as cash, servicing rights, or retained interests (if applicable). Typically, we conclude that the fee we are paid for servicing consumer automobile finance receivables represents adequate compensation, and consequently, we do not recognize a servicing asset or liability. As an accounting policy election, we elected fair value treatment for our existing MSR portfolio. Liabilities incurred as part of these securitization transactions, such as representation and warranty provisions, are recorded at fair value at the time of sale and are reported as accrued expenses and other liabilities on our Condensed Consolidated Balance Sheet. Upon the sale of the loans, we recognize a gain or loss on sale for the difference between the assets recognized, the assets derecognized, and the liabilities recognized as part of the transaction.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following summarizes all pretax gains and losses recognized on financial assets sold into nonconsolidated securitization and similar asset-backed financing entities.


Three months ended March 31, ($ in millions)	2011	2010
Consumer mortgage — GSEs	$(3)	$182
Consumer mortgage — nonagency	(1)	3

Total pretax (loss) gain	$(4)	$185

The following table summarizes cash flows received from and paid related to securitization entities, asset-backed financings, or other similar transfers of financial assets where the transfer is accounted for as a sale and we have a continuing involvement with the transferred assets (e.g., servicing) that were outstanding during the three months ended March 31, 2011 and 2010. Additionally, this table contains information regarding cash flows received from and paid to nonconsolidated securitization entities that existed during each period.


Three months ended March 31, ($ in millions)	Consumer mortgage GSEs			Consumer mortgage nonagency
2011
Cash proceeds from transfers completed during the period	$	15,153		$	595
Cash flows received on retained interests in securitization entities		—			20
Servicing fees		220			43
Purchases of previously transferred financial assets		(554	)		(7	)
Representations and warranties obligations		(44	)		—
Other cash flows		70			62

2010
Cash proceeds from transfers completed during the period	$	14,497		$	200
Cash flows received on retained interests in securitization entities		—			17
Servicing fees		192			51
Purchases of previously transferred financial assets		(407	)		(8	)
Representations and warranties obligations		(148	)		(1	)
Other cash flows		11			(2	)

For consumer mortgage nonagency transactions, the following table summarizes the key economic assumptions and the sensitivity of the fair value of retained interests to immediate 10% and 20% adverse changes in those assumptions.


($ in millions)	March 31, 2011 (a)	December 31, 2010 (a)
Carrying value / fair value of retained interests (b)	$138	$162
Weighted average life (in years)	1.9–7.8	0.1–11.6
Annual prepayment rate	2.2–64.8%WAM	2.4–48.1%WAM
Impact of 10% adverse change	$—	$(2)
Impact of 20% adverse change	—	(3)
Loss assumption (c)	0.0–46.2%	0.0–46.4%
Impact of 10% adverse change	$—	$—
Impact of 20% adverse change	—	—
Discount rate	4.0–80.0%	0.3–80.0%
Impact of 10% adverse change	$(3)	$(2)
Impact of 20% adverse change	(5)	(4)
Market interest rate	0.3–3.2%	0.3–4.1%
Impact of 10% adverse change	$—	$—
Impact of 20% adverse change	—	(1)

(a)	There were no retained interests in consumer or commercial automobile off-balance sheet securitizations at March 31, 2011, or December 31, 2010.

(b)	These amounts are recorded in trading securities or other assets at fair value. Refer to Note 21 for fair value valuation methods.

(c)	The range of loss assumptions includes the constant prepayment rate related to balloon resets.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

These sensitivities are hypothetical and should be viewed with caution. Changes in fair value based on a 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (e.g., increased market interest rates may result in lower prepayments and increased credit losses), which may magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected change in the fair value of the instruments used to manage the interest rate and prepayment risks associated with these assets. Refer to Note 11 for further detail on sensitivities related to our mortgage servicing rights.The following table represents on-balance sheet loans held-for-sale and finance receivable and loans, off-balance sheet securitizations, and whole-loan sales where we have continuing involvement. The table presents quantitative information about delinquencies and net credit losses. Refer to Note 11 for further detail on total serviced assets.


	Total finance receivables and loans				Amount 60 days or more past due				Net credit losses
									Three months ended
($ in millions)	March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010		March 31, 2011		March 31, 2010
On-balance sheet loans
Consumer automobile	$	56,868	$	51,254	$	305	$	373	$	112	$	239
Consumer mortgage (a)		19,029		23,174		3,305		3,437		94		68
Commercial automobile		36,248		35,629		124		186		3		17
Commercial mortgage		913		1,660		89		110		16		41
Commercial other		1,897		2,107		6		20		1		3

Total on-balance sheet loans		114,955		113,824		3,829		4,126		226		368

Off-balance sheet securitization entities
Consumer mortgage — GSEs (b)		256,210		253,192		11,524		13,990		n/m		n/m
Consumer mortgage — nonagency		73,434		73,638		11,976		12,220		1,289		1,380

Total off-balance sheet securitization entities		329,644		326,830		23,500		26,210		1,289		1,380

Whole-loan transactions (c)		36,337		38,212		2,538		2,950		215		349

Total	$	480,936	$	478,866	$	29,867	$	33,286	$	1,730	$	2,097

n/m = not meaningful

(a)	Includes loans subject to conditional repurchase options of $2.3 billion and $2.3 billion guaranteed by the GSEs, and $136 million and $146 million sold to certain nonagency mortgage securitization entities at March 31, 2011, and December 31, 2010, respectively.

(b)	Anticipated credit losses are not meaningful due to the GSE guarantees.

(c)	Whole-loan transactions are not part of a securitization transaction, but represent consumer automobile and consumer mortgage pools of loans sold to nonagency investors.

Changes in Accounting for Variable Interest Entities

For the three months ended March 31, 2011 and 2010, there were no material changes in the accounting for variable interest entities except the initial adoption of ASU 2009-17 on January 1, 2010. Refer to Note 11 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K regarding this initial adoption.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11.

Servicing Activities

Mortgage Servicing Rights

The following table summarizes activity related to MSRs, which are carried at fair value.


Three months ended March 31, ($ in millions)	2011			2010
Estimated fair value at January 1,	$	3,738		$	3,554
Additions recognized on sale of mortgage loans		184			202
Additions from purchases of servicing rights		2			1
Subtractions from disposition of servicing assets		(266	)		—
Changes in fair value
Due to changes in valuation inputs or assumptions used in the valuation model		297			49
Other changes in fair value		(181	)		(244	)
Decrease due to change in accounting principle		—			(19	)

Estimated fair value at March 31,	$	3,774		$	3,543

Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model include all changes due to a revaluation by a model or by a benchmarking exercise. Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic runoff of the portfolio. The decrease due to change in accounting principle reflects the effect of the initial adoption of ASU 2009-17.

The key economic assumptions and sensitivity of the fair value of MSRs to immediate 10% and 20% adverse changes in those assumptions were as follows.


($ in millions)	March 31, 2011			December 31, 2010
Weighted average life (in years)		7.2			7.0
Weighted average prepayment speed		9.4	%		9.8	%
Impact on fair value of 10% adverse change	$	(149	)	$	(155	)
Impact on fair value of 20% adverse change		(287	)		(295	)

Weighted average discount rate		10.7	%		12.3	%
Impact on fair value of 10% adverse change	$	(57	)	$	(80	)
Impact on fair value of 20% adverse change		(112	)		(156	)

These sensitivities are hypothetical and should be considered with caution. Changes in fair value based on a 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (e.g., increased market interest rates may result in lower prepayments and increased credit losses) that could magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected change in the fair value of the instruments used to manage the interest rates and prepayment risks associated with these assets.

Risk Mitigation Activities

The primary risk of our servicing rights is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher-than-expected prepayments that could reduce the value of the MSRs. We economically hedge the impact of these risks with both derivative and nonderivative financial instruments. Refer to Note 19 for additional information regarding the derivative financial instruments used to economically hedge MSRs.

ALLY FINANCIAL INC.

NOTES TO CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The components of servicing valuation and hedge activities, net, were as follows.


Three months ended March 31, ($ in millions)	2011			2010
Change in estimated fair value of mortgage servicing rights	$	117		$	(196	)
Change in fair value of derivative financial instruments		(204	)		63

Servicing valuation and hedge activities, net	$	(87	)	$	(133	)

Mortgage Servicing Fees

The components of mortgage servicing fees were as follows.


Three months ended March 31, ($ in millions)	2011		2010
Contractual servicing fees, net of guarantee fees and including subservicing	$	270	$	257
Late fees		21		20
Ancillary fees		34		47

Total mortgage servicing fees	$	325	$	324

Mortgage Servicing Advances

In connection with our primary servicing activities (i.e., servicing of mortgage loans), we make certain payments of property taxes and insurance premiums, default and property maintenance payments, as well as advances of principal and interest payments before collecting them from individual borrowers. Servicing advances including contractual interest are priority cash flows in the event of a loan principal reduction or foreclosure and ultimate liquidation of the real estate-owned property, thus making their collection reasonably assured. These servicing advances are included in other assets on the Condensed Consolidated Balance Sheet and totaled $1.8 billion and $1.9 billion at March 31, 2011, and December 31, 2010, respectively. We maintain an allowance for uncollected primary servicing advances of $20 million and $25 million at March 31, 2011, and December 31, 2010, respectively. Our potential obligation is influenced by the loan’s performance and credit quality.

When we act as a subservicer of mortgage loans we perform the responsibilities of a primary servicer but do not own the corresponding primary servicing rights. We receive a fee from the primary servicer for such services. As the subservicer, we would have the same responsibilities of a primary servicer in that we would make certain payments of property taxes and insurance premiums, default and property maintenance, as well as advances of principal and interest payments before collecting them from individual borrowers. At March 31, 2011, and December 31, 2010, outstanding servicer advances related to subserviced loans were $135 million and $140 million, respectively, and we had a reserve for uncollected subservicer advances of $2 million and $1 million, respectively.

In many cases, where we act as master servicer, we also act as primary servicer. In connection with our master-servicing activities, we service the mortgage-backed and mortgage-related asset-backed securities and whole-loan packages sold to investors. As the master servicer, we collect mortgage loan payments from primary servicers and distribute those funds to investors in the mortgage-backed and mortgage-related asset-backed securities and whole-loan packages. As the master servicer, we are required to advance scheduled payments to the securitization trust or whole-loan investors. To the extent the primary servicer does not advance the payments, we are responsible for advancing the payment to the trust or whole-loan investors. Master-servicing advances, including contractual interest, are priority cash flows in the event of a default, thus making their collection reasonably assured. In most cases, we are required to advance the

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