Residential Capital LLC needs to do more to ensure it is protecting consumer privacy for homeowners under bankruptcy law in the sales of its mortgage loan and servicing businesses, the U.S. Trustee said in court papers on Monday.
Tracy Hope Davis, who represents the U.S. Justice Department in the bankruptcy, also challenged the potential break-up fee and other parts of an auction process for those businesses. She said they would discourage bidders from participating.
ResCap, the mortgage unit of Ally Financial, filed for bankruptcy in May with a plan to sell its mortgage servicing business for about $2.4 billion to Nationstar Mortgage Holdings, owned by Fortress Investment Group. It also plans to sell some mortgage loans to Ally for about $1.4 billion.
Ally is the former in-house financing arm for General Motors Co, and was previously known as GMAC. Ally is not in bankruptcy.
At the time of the ResCap bankruptcy, the mortgage company filed court papers detailing procedures it plans to follow for the sales.