ALLY FINANCIAL INC. – 10-K – Management’s Discussion and Analysis of Financial Condition and Results of Operations

loans secured by 1-4 family residential properties that meet or conform to

       the underwriting standards established by the GSEs for inclusion in their        guaranteed mortgage securities programs.  

• Prime nonconforming mortgage loans - Prime credit quality first-lien

mortgage loans secured by 1-4 family residential properties that either

(1) do not conform to the underwriting standards established by the GSEs

because they had original principal amounts exceeding GSE limits, which

are commonly referred to as jumbo mortgage loans, or (2) have alternative

documentation requirements and property or credit-related features

(e.g., higher loan-to-value or debt-to-income ratios) but are otherwise

       considered prime credit quality due to other compensating factors.   •      Prime second-lien mortgage loans - Open- and closed-end mortgage loans        secured by a second or more junior-lien on single-family residences, which        include home equity mortgage loans and lines of credit. We ceased        originating prime second-lien mortgage loans during 2008.   •      Government mortgage loans - First-lien mortgage loans secured by 1-4

family residential properties that are insured by the Federal Housing

Administration or guaranteed by the Veterans Administration.

• Nonprime mortgage loans - First-lien and certain junior-lien mortgage

loans secured by single-family residences made to individuals with credit

profiles that do not qualify for a prime loan, have credit-related

features that fall outside the parameters of traditional prime mortgage

       products, or have performance characteristics that otherwise exposes us to        comparatively higher risk of loss. Nonprime includes mortgage loans the        industry characterizes as "subprime," as well as high combined        loan-to-value second-lien loans that fell out of our standard loan        programs due to noncompliance with one or more criteria. We ceased        originating nonprime mortgage loans during 2007.                                           59

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table summarizes consumer mortgage loan production by type for our Origination and Servicing operations.

                                             2011                                2010                                2009                                                      Dollar                              Dollar                              Dollar Year ended December 31, ($ in                       amount of                           amount of                           amount of millions)                      Number of loans        loans        Number of loans        loans        Number of loans        loans Prime conforming                      209,031     $    47,511             228,936     $    53,721             164,780     $    37,651 Prime nonconforming                     2,008           1,679               1,837           1,548               1,236             992 Prime second-lien                           -               -                   -               -                   3               1 Government                             35,686           7,068              71,289          14,273             137,550          26,087 Nonprime                                    -               -                   -               -                   -               - Total U.S. production                 246,725     $    56,258             302,062     $    69,542             303,569     $    64,731   U.S. Warehouse Lending We are a provider of warehouse-lending facilities to correspondent lenders and other mortgage originators in the United States. These facilities enable lenders and originators to finance residential mortgage loans until they are sold in the secondary mortgage loan market. We provide warehouse-lending facilities principally for prime conforming and government mortgage loans. We have continued to refine our warehouse-lending portfolio, offering such lending only to current Ally Bank correspondent clients. Advances under warehouse-lending facilities are collateralized by the underlying mortgage loans and bear interest at variable rates. At December 31, 2011, we had total warehouse line of credit commitments of $2.8 billion, against which we had $1.9 billion of advances outstanding. We also have $24 million of warehouse-lending receivables outstanding related to other offerings at December 31, 2011. We purchased approximately 35% of the mortgage loans financed by our warehouse-lending facilities in 2011. Loans Outstanding Consumer mortgage loans held-for-sale for our Origination and Servicing operations were as follows. December 31, ($ in millions)             2011        2010 Prime conforming                       $ 3,034     $ 5,585 Prime nonconforming                          -           - Prime second-lien                            -           - Government (a)                           3,274       3,434 Nonprime                                     -           - International                                -           - Total                                    6,308       9,019 Net premiums                                80         132

Fair value option election adjustment 87 (61 ) Lower-of-cost or fair value adjustment (5 ) (2 ) Total, net

$ 6,470$ 9,088

(a) Includes loans subject to conditional repurchase options of $2.3 billion and

$2.3 billion sold to Ginnie Mae-guaranteed securitizations at December 31,

2011 and 2010, respectively. The corresponding liability is recorded in

accrued expenses and other liabilities on the Consolidated Balance Sheet.

                                           60 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Consumer mortgage loans held-for-investment for our Origination and Servicing operations were as follows. December 31, ($ in millions)            2011        2010 Prime conforming                      $     -     $     - Prime nonconforming                     2,815       2,068 Prime second-lien                           -           - Government                                  -           - Nonprime                                    -           - International                               -           - Total                                   2,815       2,068 Net premiums                               20          11 Fair value option election adjustment       -           - Allowance for loan losses                 (16 )       (13 ) Total, net                            $ 2,819     $ 2,066   Consumer mortgage loans held-for-sale for our Legacy Portfolio and Other operations were as follows. December 31, ($ in millions)             2011        2010 Prime conforming                       $   311     $   336 Prime nonconforming                        571         674 Prime second-lien                          545         634 Government                                  20          18 Nonprime                                   561         637 International                               17         364 Total (a)                                2,025       2,663 Net discounts                             (301 )      (293 )

Fair value option election adjustment (27 ) (1 ) Lower-of-cost or fair value adjustment (55 ) (46 ) Total, net (b)

$ 1,642$ 2,323

(a) Includes unpaid principal balance write-downs of $1.5 billion and

$1.8 billion at December 31, 2011 and 2010, respectively. The amounts are for

write-downs taken upon the transfer of mortgage loans from

held-for-investment to held-for-sale during the fourth quarter of 2009 and

charge-offs taken in accordance with our charge-off policy.

(b) Includes loans subject to conditional repurchase options of $106 million and

$146 million sold to off-balance sheet private-label securitizations at     December 31, 2011 and 2010, respectively. The corresponding liability is     recorded in accrued expenses and other liabilities on the Consolidated     Balance Sheet.   Consumer mortgage loans held-for-investment for our Legacy Portfolio and Other operations were as follows. December 31, ($ in millions)            2011        2010 Prime conforming                      $   278     $   323 Prime nonconforming                     5,254       6,059 Prime second-lien                       2,200       2,642 Government                                  -           - Nonprime                                1,349       1,583 International                             422         862 Total                                   9,503      11,469 Net premiums                               18          26

Fair value option election adjustment (1,601 ) (1,890 ) Allowance for loan losses

                (479 )      (543 ) Total, net (a)                        $ 7,441     $ 9,062   

(a) At December 31, 2011 and 2010, the carrying value of mortgage loans

held-for-investment relating to securitization transactions accounted for as

on-balance sheet securitizations and pledged as collateral totaled $837

million and $1.0 billion, respectively. The investors in these on-balance

sheet securitizations have no recourse to our other assets beyond the loans

pledged as collateral other than market customary representation and warranty

    provisions.                                           61

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Mortgage Loan Servicing While we sell most of the residential mortgage loans we originate or purchase, we generally retain the rights to service these loans. The retained mortgage servicing rights consist of primary and master-servicing rights. When we act as primary servicer, we collect and remit mortgage loan payments, respond to borrower inquiries, account for principal and interest, hold custodial and escrow funds for payment of property taxes and insurance premiums, counsel or otherwise work with delinquent borrowers, supervise foreclosures and property dispositions, and generally administer the loans. When we act as master servicer, we collect mortgage loan payments from primary servicers and distribute those funds to investors in mortgage-backed and mortgage-related asset-backed securities and whole-loan packages. Key services in this regard include loan accounting, claims administration, oversight of primary servicers, loss mitigation, bond administration, cash flow waterfall calculations, investor reporting, and tax-reporting compliance. In return for performing primary and master-servicing functions, we receive servicing fees equal to a specified percentage of the outstanding principal balance of the loans being serviced and may also be entitled to other forms of servicing compensation, such as late payment fees or prepayment penalties. Servicing compensation also includes interest income or the float earned on collections that are deposited in various custodial accounts between their receipt and the scheduled/contractual distribution of the funds to investors. Refer to Note 12 to the Consolidated Financial Statements for additional information. The value of mortgage servicing rights is sensitive to changes in interest rates and other factors. We have developed and implemented an economic hedge program to, among other things, mitigate the overall risk of loss due to a change in the fair value of our mortgage servicing rights. Accordingly, we hedge the change in the total fair value of our mortgage servicing rights. The effectiveness of this economic hedging program may have a material effect on the results of operations. Refer to the Critical Accounting Estimates section of this MD&A and Note 24 to the Consolidated Financial Statements for further discussion. The following table summarizes our primary consumer mortgage loan-servicing portfolio by product category. December 31, ($ in millions)                 2011         2010         2009 U.S. primary servicing portfolio Prime conforming                          $ 226,239    $ 220,762    $ 210,914 Prime nonconforming                          47,767       52,643       58,103 Prime second-lien                             6,871       10,851       14,729 Government                                   49,027       48,550       40,230 Nonprime                                     20,753       22,874       25,837

International primary servicing portfolio 5,773 5,087 25,941 Total primary servicing portfolio (a) $ 356,430$ 360,767$ 375,754

(a) Excludes loans for which we acted as a subservicer. Subserviced loans totaled

$26.4 billion, $24.2 billion, and $28.7 billion at December 31, 2011, 2010,

     and 2009, respectively.   

Mortgage Foreclosure Matters Refer to Note 31 to the Consolidated Financial Statements for information related to these matters.

                                       62 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Corporate and Other The following table summarizes the activities of Corporate and Other excluding discontinued operations for the periods shown. Corporate and Other primarily consists of our centralized corporate treasury and deposit gathering activities, such as management of the cash and corporate investment securities portfolios, short- and long-term debt, retail and brokered deposit liabilities, derivative instruments, the amortization of the discount associated with new debt issuances and bond exchanges, most notably from the December 2008 bond exchange, and the residual impacts of our corporate funds-transfer pricing and treasury ALM activities. Corporate and Other also includes our Commercial Finance Group, certain equity investments, and reclassifications and eliminations between the reportable operating segments.                                                                           

Favorable/ Favorable/

                                                                          (unfavorable)   (unfavorable) Year ended December 31, ($ in                                              2011-2010       2010-2009 millions)                           2011         2010         2009         % change        % change Net financing loss Total financing revenue and other interest income            $    138     $    165     $    (78 )           (16 )           n/m Interest expense Original issue discount amortization                          925        1,204        1,143              23              (5 ) Other interest expense                907        1,060        1,239              14              14 Total interest expense              1,832        2,264        2,382              19               5 Net financing loss                 (1,694 )     (2,099 )     (2,460 )            19              15 Other revenue (Loss) gain on extinguishment of debt                                  (64 )       (123 )        661              48            (119 ) Other gain on investments, net        119          146           85             (18 )            72 Other income, net of losses           135          (65 )        194             n/m            (134 ) 

Total other revenue (expense) 190 (42 ) 940

    n/m            (104 ) Total net expense                  (1,504 )     (2,141 )     (1,520 )            30             (41 ) Provision for loan losses             (89 )        (42 )        491             112             109 Noninterest expense Compensation and benefits expense                               475          614          405              23             (52 ) Other operating expense                17          (88 )         74            (119 )           n/m Total noninterest expense             492          526          479               6             (10 ) Loss from continuing operations before income tax expense        $ (1,907 )   $ (2,625 )   $ (2,490 )            27              (5 ) Total assets                     $ 29,641     $ 28,561     $ 32,714               4             (13 )   n/m = not meaningful The following table summarizes the components of net financing losses for Corporate and Other. At and for the year ended December 31, ($ in millions)              2011         2010         2009 Original issue discount amortization   2008 bond exchange amortization                                $   (886 ) 

$ (1,158 ) $ (1,108 )

   Other debt issuance discount amortization                           (39 )        (46 )        (35 ) Total original issue discount amortization (a)                       (925 ) 

(1,204 ) (1,143 ) Net impact of the funds transfer pricing methodology Cost of liquidity

                                                    (708 )       (617 )       (655 ) Funds-transfer pricing / cost of funds mismatch                      (342 )       (391 )       (672 ) Benefit (cost) of net non-earning assets                              186            8         (110 ) Total net impact of the funds transfer pricing methodology           (864 )     (1,000 )     (1,437 ) Other (including Commercial Finance Group net financing revenue)       95          105          120 Total net financing losses for Corporate and Other               $ (1,694 )   $ (2,099 )   $ (2,460 ) Outstanding original issue discount balance                      $  2,194   

$ 3,169$ 4,373

   (a) Amortization is included as interest on long-term debt in the Consolidated     Statement of Income.                                           63

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  The following table presents the scheduled amortization of the original issue discount. Year ended December 31,                                                                 2017 and ($ in millions)           2012        2013        2014        2015        2016       thereafter (a)       Total Original issue discount Outstanding balance     $ 1,844     $ 1,581     $ 1,391     $ 1,334     $ 1,272     $             - Total amortization (b)      350         263         190          57          62               1,272     $ 2,194 2008 bond exchange amortization (c)            320         241         166          43          53               1,125       1,948  

(a) The maximum annual scheduled amortization for any individual year is $158

million in 2030 of which $152 million is related to 2008 bond exchange

amortization.

(b) The amortization is included as interest on long-term debt in the

Consolidated Statement of Income.

(c) 2008 bond exchange amortization is included in total amortization.

   2011 Compared to 2010 Loss from continuing operations before income tax expense for Corporate and Other was $1.9 billion for the year ended December 31, 2011, compared to $2.6 billion for the year ended December 31, 2010. Corporate and Other's loss from continuing operations before income tax expense for both periods is driven by net financing losses, which primarily represents original issue discount amortization expense and the net impact of our FTP methodology, which includes the unallocated cost of maintaining our liquidity and investment portfolios and other unassigned funding costs and unassigned equity. The improvement in the loss from continuing operations before income tax expense for the year ended December 31, 2011, was primarily due to a decrease in original issue discount amortization expense related to bond maturities and normal monthly amortization and favorable net impact of the FTP methodology. The net FTP methodology improvement was primarily the result of favorable unallocated interest costs due to lower non-earning assets and unamortized original issue discount balance. Additionally, 2011 was favorably impacted by a $121 million gain on the early settlement of a loss holdback provision related to certain historical automotive whole-loan forward flow agreements, a reduction in debt fees driven by the restructuring of our secured facilities and the termination of our automotive forward flow agreements, and by a lower loss on the extinguishment of certain Ally debt (which included accelerated amortization of original issue discount of $50 million for the year ended December 31, 2011, compared to $101 million in 2010). Corporate and Other also includes the results of our Commercial Finance Group. Our Commercial Finance Group earned income from continuing operations before income tax expense of $186 million for the year ended December 31, 2011, compared to $177 million for the year ended December 31, 2010. The increase was primarily due to improved efficiencies, continued improvement in portfolio credit quality, and recoveries on previously charged-off accounts. This increase was partially offset by lower commercial revenue primarily due to lower asset levels. 2010 Compared to 2009 Loss from continuing operations before income tax expense for Corporate and Other was $2.6 billion for the year ended December 31, 2010, compared to $2.5 billion for the year ended December 31, 2009. The losses in 2010 and 2009 were driven by $1.2 billion and $1.1 billion of original issue discount amortization expenses primarily related to our 2008 bond exchange and the net impact of our FTP methodology. The unfavorable results for 2010 were also impacted by net derivative activity, higher marketing expenses, and higher FDIC fees. Additionally, we recognized a $123 million loss related to the extinguishment of certain Ally debt, which includes $101 million of accelerated amortization of original issue discount compared to a $661 million gain in the prior year. Partially offsetting the unfavorable results were lower professional and legal fees. Our Commercial Finance Group earned income from continuing operations before income tax expense of $177 million for the year ended December 31, 2010, compared to a net loss from continuing operations before income tax expense of $537 million for the year ended December 31, 2009. The increase in income was primarily due to significant provision for loan losses in 2009. The $533 million decrease in provision expense from 2009 was driven by lower specific reserves in both the resort finance portfolio and in our European operations. In addition, we recognized a recovery in 2010 from the sale of the resort finance portfolio. Additionally, the favorable variance was impacted by the absence of an $87 million fair value impairment recognized upon transfer of the resort finance portfolio from held-for-sale to held-for-investment during 2009 and lower interest expense related to a reduction in borrowing levels consistent with a lower asset base.                                         64 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Cash and Securities The following table summarizes the composition of the cash and securities portfolio held at fair value by Corporate and Other. December 31, ($ in millions)          2011        2010 Cash Noninterest-bearing cash            $  1,768    $  1,637 Interest-bearing cash                  9,781       7,964 Total cash                            11,549       9,601 Trading assets U.S. Treasury                              -          75 Mortgage-backed                          589          25 Asset-backed                               -          93 Total trading assets                     589         193 Available-for-sale securities Debt securities U.S. Treasury and federal agencies     1,051       3,097 States and political subdivisions          1           2 Foreign government                       106         499 Mortgage-backed                        6,722       4,973 Asset-backed                           2,520       1,936 Corporate debt                             -           - Other debt (a)                           305         151 Total debt securities                 10,705      10,658 Equity securities                          4           -

Total available-for-sale securities 10,709 10,658 Total cash and securities

$ 22,847$ 20,452

(a) Includes intersegment eliminations.

                                       65 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Risk Management Managing the risk to reward trade-off is a fundamental component of operating our businesses. Our risk management process is overseen by the Ally Board of Directors (the Board), various risk committees, and the executive leadership team. The Board sets the risk appetite across our company while the risk committees and executive leadership team identify and monitor potential risks and manage the risk to be within our risk appetite. Ally's primary risks include credit, market, lease residual, operational, liquidity, country and legal and compliance risk. •      Credit risk - The risk of loss arising from a borrower not meeting its        financial obligations to our firm.  

• Market risk - The risk of loss arising from changes in the fair value of

our assets or liabilities (including derivatives) caused by movements in

       market variables, such as interest rates, foreign-exchange rates, and        equity and commodity prices.   •      Lease Residual risk- The risk of loss arising from the possibility that        the actual proceeds realized upon the sale of returned vehicles will be

lower than the projection of the values used in establishing the pricing

at lease inception.

• Operational risk - The risk of loss arising from inadequate or failed

processes or systems, human factors, or external events.

• Liquidity risk - The risk that our financial condition or overall safety

and soundness is adversely affected by an inability, or perceived

inability, to meet our financial obligations, and to withstand unforeseen

liquidity stress events (see Liquidity Management, Funding, and Regulatory

Capital discussion within this MD&A).

• Country risk - The risk that economic, social and political conditions,

       and events in foreign countries will adversely affect our financial        interests.  

• Legal and compliance risk - The risk of legal or regulatory sanctions,

financial loss, or damage to reputation resulting from failure to comply

with laws, regulations, rules, other regulatory requirements, or codes of

conduct and other standards of self-regulatory organizations.

   While risk oversight is ultimately the responsibility of the Board, our governance structure starts within each line of business where committees are established to oversee risk in their respective areas. The lines of business are responsible for executing on risk strategies, policies, and controls that are compliant with global risk management policies and with applicable laws and regulations. The line of business risk committees, which report up to the Risk and Compliance Committee, a subcommittee of the Board, monitor the performance within each portfolio and determine whether to amend any risk practices based upon portfolio trends. In addition, the Global Risk Management and Compliance organizations are accountable for independently monitoring, measuring, and reporting on our various risks. They are also responsible for monitoring that our risks remain within the tolerances established by the Board, developing and maintaining policies, and implementing risk management methodologies. All lines of business and global functions are subject to full and unrestricted audits by Corporate Audit. Corporate Audit reports to the Ally Audit Committee and is primarily responsible for assisting the Audit Committee in fulfilling its governance and oversight responsibilities. Corporate Audit is granted free and unrestricted access to any and all of our records, physical properties, technologies, management, and employees. In addition, our Global Loan Review Group provides an independent assessment of the quality of Ally's credit risk portfolios and credit risk management practices. This group reports its findings directly to the Risk and Compliance Committee. The findings of this group help to strengthen our risk management practices and processes throughout the organization.                                         66 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Loan and Lease Exposure The following table summarizes the exposures from our loan and lease activities. December 31, ($ in millions)                 2011         2010 Finance receivables and loans Global Automotive Services                $ 100,734    $  86,888 Mortgage operations                          12,753       13,423 Corporate and Other                           1,268        2,102 Total finance receivables and loans         114,755      102,413 Held-for-sale loans Global Automotive Services                      425            - Mortgage operations                           8,112       11,411 Corporate and Other                              20            - Total held-for-sale loans                     8,557       11,411 Total on-balance sheet loans              $ 123,312    $ 113,824 Off-balance sheet securitized loans Global Automotive Services                $       -    $       - Mortgage operations                         326,975      326,830 Corporate and Other                               -            - Total off-balance sheet securitized loans $ 326,975    $ 326,830 Operating lease assets Global Automotive Services                $   9,275    $   9,128 Mortgage operations                               -            - Corporate and Other                               -            - Total operating lease assets              $   9,275    $   9,128 Serviced loans and leases Global Automotive Services                $ 122,881    $ 114,379 Mortgage operations (a)                     356,430      360,767 Corporate and Other                           1,762        2,448 Total serviced loans and leases           $ 481,073    $ 477,594   

(a) Includes primary mortgage loan-servicing portfolio only.

   The risks inherent in our loan and lease exposures are largely driven by changes in the overall economy, used vehicle pricing, unemployment levels, and its impact to our borrowers. The potential financial statement impact of these exposures varies depending on the accounting classification and future expected disposition strategy. We retain the majority of our automobile loans as they complement our core business model. We primarily originate mortgage loans with the intent to sell them and, as such, retain only a small percentage of the loans that we originate or purchase. Loans that we do not intend to retain are sold to investors, primarily securitizations guaranteed by GSEs. However, we may retain an interest or right to service these loans. We ultimately manage the associated risks based on the underlying economics of the exposure. •      Finance receivables and loans - Loans that we have the intent and ability 

to hold for the foreseeable future or until maturity or loans associated

with an on-balance sheet securitization classified as secured financing.

These loans are recorded at the principal amount outstanding, net of

unearned income and premiums and discounts. Probable credit-related losses

inherent in our finance receivables and loans carried at historical cost

are reflected in our allowance for loan losses and recognized in current

period earnings. We manage the economic risks of these exposures,

including credit risk, by adjusting underwriting standards and risk

limits, augmenting our servicing and collection activities (including loan

modifications and restructurings), and optimizing our product and

geographic concentrations. Additionally, we have elected to carry certain

mortgage loans at fair value. Changes in the fair value of these loans are

recognized in a valuation allowance separate from the allowance for loan

losses and are reflected in current period earnings. We use market-based

instruments, such as derivatives, to hedge changes in the fair value of

these loans. Refer to the Critical Accounting Estimates discussion within

this MD&A and Note 1 to the Consolidated Financial Statements for further

       information.   •      Held-for-sale loans - Loans that we have the intent to sell. These loans        are recorded on our balance sheet at the lower of cost or estimated fair        value and are evaluated by portfolio and product type. Changes in the        recorded value are recognized in a valuation allowance and reflected in

current period earnings. We manage the economic risks of these exposures,

       including market and credit                                           67

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  risks, in various ways including the use of market-based instruments such as derivatives. Refer to the Critical Accounting Estimates discussion within this MD&A and Note 1 to the Consolidated Financial Statements for further information. •      Off-balance sheet securitized loans - Loans that we transferred        off-balance sheet to nonconsolidated variable interest entities. We        primarily report this exposure as cash, servicing rights, or retain        interests (if applicable). Similar to finance receivables and loans, we        manage the economic risks of these exposures, including credit risk,        through activities including servicing and collections. Refer to the        Critical Accounting Estimates discussion within this MD&A and Note 1 to        the Consolidated Financial Statements for further information.  

• Operating lease assets - The net book value of the automobile assets we

       leased are based on the expected residual value upon remarketing the        vehicle at the end of the lease. An impairment to the carrying value of        the assets may be deemed necessary if there is an unfavorable and

unrecoverable change in the value of the recorded asset. We are exposed to

fluctuations in the expected residual value upon remarketing the vehicle

at the end of the lease, and as such, we manage the risks of these

exposures at inception by setting minimum lease standards for projected

residual values. A valuation allowance is recorded directly against the

lease rent receivable balance which is a component of Other Assets. Refer

to the Critical Accounting Estimates discussion within this MD&A and Note

1 to the Consolidated Financial Statements for further information.

• Serviced loans and leases -Loans that we service on behalf of our

customers or another financial institution. As such, these loans can be on

or off our balance sheet. For our mortgage servicing rights, we record an

asset or liability (at fair value) based on whether the expected servicing

benefits will exceed the expected servicing costs. Changes in the fair

value of the mortgage servicing rights are recognized in current period

earnings. We also service consumer automobile loans. We do not record

servicing rights assets or liabilities for these loans because we either

receive a fee that adequately compensates us for the servicing costs or

because the loan is of a short-term revolving nature. We manage the

economic risks of these exposures, including market and credit risks,

through market-based instruments such as derivatives and securities. Refer

to the Critical Accounting Estimates discussion within this MD&A and Note

1 to the Consolidated Financial Statements for further information.

   Credit Risk Management Credit risk is defined as the potential failure to receive payments when due from a borrower in accordance with contractual obligations. Therefore, credit risk is a major source of potential economic loss to us. To mitigate the risk, we have implemented specific processes across all lines of business utilizing both qualitative and quantitative analyses. Credit risk management is overseen through our risk committee structure and by the Risk organization, which reports to the Ally Risk and Compliance Committee. Together they establish the minimum standards for managing credit risk exposures in a safe-and-sound manner by identifying, measuring, monitoring, and controlling the risks while also permitting acceptable variations for a specific line of business with proper approval. In addition, our Global Loan Review Group provides an independent assessment of the quality of our credit risk portfolios and credit risk management practices. We have policies and practices that are committed to maintaining an independent and ongoing assessment of credit risk and quality. Our policies require an objective and timely assessment of the overall quality of the consumer and commercial loan and lease portfolios. This includes the identification of relevant trends that affect the collectability of the portfolios, segments of the portfolios that are potential problem areas, loans and leases with potential credit weaknesses, and assessment of the adequacy of internal credit risk policies and procedures to monitor compliance with relevant laws and regulations. In addition, we maintain limits and underwriting guidelines that reflect our risk appetite. We manage credit risk based on the risk profile of the borrower, the source of repayment, the underlying collateral, and current market conditions. Our business is primarily focused on consumer automobile loans and leases and mortgage loans in addition to automobile-related commercial lending. We monitor the credit risk profile of individual borrowers and the aggregate portfolio of borrowers either within a designated geographic region or a particular product or industry segment. To mitigate risk concentrations, we may take part in loan sales and syndications. Additionally, we have implemented numerous initiatives in an effort to mitigate loss and provide ongoing support to customers in financial distress. For automobile loans, we offer several types of assistance to aid our customers. Loss mitigation includes changing the due date, extending payments, and rewriting the loan terms. We have implemented these actions with the intent to provide the borrower with additional options in lieu of repossessing their vehicle. For mortgage loans, as part of our participation in certain governmental programs, we offer mortgage loan modifications to qualified borrowers. We have also implemented periodic foreclosure moratoriums that are designed to provide borrowers with extra time to sort out their financial difficulties while allowing them to stay in their homes. During 2011, the United States financial markets experienced some improvement; however, high unemployment and the distress in the housing market persisted, creating uncertainty for the financial services sector as a whole. During the financial crisis, we saw both the housing and vehicle markets significantly decline, affecting the credit quality for both our consumer and commercial portfolios. However, we have seen signs of economic stabilization in some housing, vehicle, and manufacturing markets and have also seen improvement in our loan portfolio as a result of our proactive credit risk initiatives.                                         68 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  On-balance Sheet Loan Portfolio Our on-balance sheet portfolio includes both finance receivables and loans and held-for-sale loans. At December 31, 2011 this primarily included $101.2 billion of automobile finance receivables and loans and $20.9 billion of mortgage finance receivables and loans. Within our on-balance sheet portfolio, we have elected to account for certain mortgage loans at fair value. The valuation allowance recorded on fair value-elected loans is separate from the allowance for loan losses. Changes in the fair value of loans are classified as gain on mortgage and automotive loans, net, in the Consolidated Statement of Income. During the year ended December 31, 2011, we further executed on our strategy of discontinuing and selling or liquidating nonstrategic operations. Additionally, we committed to sell the Canadian mortgage operations of ResMor Trust. Refer to Note 2 to the Consolidated Financial Statements for additional information on specific actions taken. Within our Automotive Finance operations, we exited certain underperforming dealer relationships and countries in which we previously operated. Within our Mortgage operations, in order to proactively address changes in the mortgage industry as a whole, we took action to reduce the focus on the correspondent mortgage lending channel; however, we will maintain correspondent relationships with key customers. The following table presents our total on-balance sheet consumer and commercial finance receivables and loans reported at carrying value before allowance for loan losses.                                                                                                Accruing past due                               Outstanding                Nonperforming (a)                    90 days or more (b) December 31, ($ in millions)                 2011          2010             2011            2010                 2011                 2010 Consumer Finance receivables and loans Loans at historical cost                   $  73,452     $  62,002     $      567         $     768     $         4                $        6 Loans at fair value          835         1,015            210               260               -                         - Total finance receivables and loans     74,287        63,017            777             1,028               4                         6 Loans held-for-sale        8,537        11,411          2,820             3,273              73                        25 Total consumer loans      82,824        74,428          3,597             4,301              77                        31 Commercial Finance receivables and loans Loans at historical cost                      40,468        39,396            339               740               -                         - Loans at fair value            -             -              -                 -               -                         - Total finance receivables and loans     40,468        39,396            339               740               -                         - Loans held-for-sale           20             -              -                 -               -                         - Total commercial loans    40,488        39,396            339               740               -                         - Total on-balance sheet loans                  $ 123,312     $ 113,824     $    3,936         $   5,041     $        77                $       31   

(a) Includes nonaccrual troubled debt restructured loans of $934 million and

$684 million at December 31, 2011 and 2010, respectively.

(b) Generally, loans that are 90 days past due and still accruing represent loans

with government guarantees. This includes troubled debt restructured loans

classified as 90 days past due and still accruing of $42 million and $13

million as December 31, 2011 and December 31, 2010, respectively.

   Total on-balance sheet loans outstanding at December 31, 2011, increased $9.5 billion to $123.3 billion from December 31, 2010, reflecting an increase of $8.4 billion in the consumer portfolio and $1.1 billion in the commercial portfolio. The increase in total on-balance sheet loans outstanding was primarily driven by increased automobile consumer loan originations which outpaced portfolio runoff, due to improved industry sales and higher GM and Chrysler market share. The increase was partially offset by a decrease in mortgage originations in our consumer mortgage business. The total troubled debt restructurings (TDRs) outstanding at December 31, 2011, increased $495 million to $1.9 billion from December 31, 2010. This increase was driven primarily by our continued foreclosure prevention and loss mitigation procedures along with our participation in a variety of government modification programs. Additionally, the implementation of ASU 2011-02, A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring, contributed to the increase. Refer to Note 1 and Note 9 to the Consolidated Financial Statements for additional information. Total nonperforming loans at December 31, 2011, decreased $1.1 billion to $3.9 billion from December 31, 2010, reflecting a decrease of $704 million of consumer nonperforming loans and a decrease of $401 million of commercial nonperforming loans. The decrease in nonperforming loans from December 31, 2010, was largely due to improvements within our consumer mortgage and commercial automobile portfolios.                                         69 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table includes consumer and commercial net charge-offs from finance receivables and loans at historical cost and related ratios reported at carrying value before allowance for loan losses.

                                                  Net charge-offs            Net charge-off ratios (a) Year ended December 31, ($ in millions)        2011            2010           2011             2010 

Consumer

 Finance receivables and loans at historical cost                           $      514        $     796           0.7 %             1.5 % 

Commercial

 Finance receivables and loans at historical cost                                   39              402           0.1               1.1 Total finance receivables and loans at historical cost                           $      553        $   1,198           0.5               1.3   

(a) Net charge-off ratios are calculated as net charge-offs divided by average

outstanding finance receivables and loans excluding loans measured at fair

value and loans held-for-sale during the year for each loan category.

   Our net charge-offs were $553 million for the year ended December 31, 2011 compared to $1.2 billion for the year ended December 31, 2010. This decline was driven primarily by an improved mix of loans reflecting previously tightened underwriting standards and strategic actions to wind-down non-core commercial assets, including resort finance. Loans held-for-sale are accounted for at the lower-of-cost or fair value, and therefore we do not record charge-offs. The Consumer Credit Portfolio and Commercial Credit Portfolio discussions that follow relate to consumer and commercial finance receivables and loans recorded at historical cost. Finance receivables and loans recorded at historical cost have an associated allowance for loan losses. Finance receivables and loans measured at fair value were excluded from these discussions since those exposures are not accounted for within our allowance for loan losses. Consumer Credit Portfolio Our consumer portfolio primarily consists of automobile loans, first mortgages, and home equity loans (we ceased originating home equity loans in 2009), with a focus on serving the prime secured consumer credit market. Loan losses in our consumer portfolio are influenced by general business and economic conditions including unemployment rates, bankruptcy filings, and home and used vehicle prices. Additionally, our consumer credit exposure is significantly concentrated in automobile lending (primarily through GM and Chrysler dealerships). Due to our subvention relationships, we are able to mitigate some interest income exposure to certain consumer defaults by receiving a rate support payment directly from the automotive manufacturers at origination. Credit risk management for the consumer portfolio begins with the initial underwriting and continues throughout a borrower's credit cycle. We manage consumer credit risk through our loan origination and underwriting policies, credit approval process, and servicing capabilities. We use credit-scoring models to differentiate the expected default rates of credit applicants enabling us to better evaluate credit applications for approval and to tailor the pricing and financing structure according to this assessment of credit risk. We regularly review the performance of the credit scoring models and update them for historical information and current trends. These and other actions mitigate but do not eliminate credit risk. Improper evaluations of a borrower's creditworthiness, fraud, and changes in the applicant's financial condition after approval could negatively affect the quality of our receivables portfolio, resulting in loan losses. Our servicing activities are another key factor in managing consumer credit risk. Servicing activities consist largely of collecting and processing customer payments, responding to customer inquiries such as requests for payoff quotes, and processing customer requests for account revisions (such as payment extensions and refinancings). Servicing activities are generally consistent across our operations; however, certain practices may be influenced by local laws and regulations. During the year ended December 31, 2011, the credit performance of the consumer portfolio continued to improve overall as our nonperforming financial receivables and loans and charge-offs declined. For information on our consumer credit risk practices and policies regarding delinquencies, nonperforming status, and charge-offs, refer to Note 1 to the Consolidated Financial Statements.                                         70 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  The following table includes consumer finance receivables and loans recorded at historical cost reported at carrying value before allowance for loan losses.                                                                                                    Accruing past due                               Outstanding                  Nonperforming (a)                      90 days or more (b) December 31, ($ in millions)                 2011          2010              2011              2010                  2011                   2010 Domestic Consumer automobile    $  46,576     $  34,604     $      139            $     129     $          -                  $        - Consumer mortgage 1st Mortgage               6,867         6,917            258                  388                1                           1 Home equity                3,102         3,441             58                   61                -                           - Total domestic            56,545        44,962            455                  578                1                           1 Foreign Consumer automobile       16,883        16,650             89                   78                3                           5 Consumer mortgage 1st Mortgage (c)              24           390             23                  112                -                           - Home equity                    -             -              -                    -                -                           - Total foreign             16,907        17,040            112                  190                3                           5 Total consumer finance receivables and loans  $  73,452     $  62,002     $      567            $     768     $          4                  $        6   

(a) Includes nonaccrual troubled debt restructured loans of $180 million and

$204 million at December 31, 2011 and 2010, respectively.

(b) There were no troubled debt restructured loans classified as 90 days past due

and still accruing at December 31, 2011 and 2010.

(c) Refer to Note 2 to the Consolidated Financial Statements for additional

information on our commitment to sell our Canadian residential mortgage

portfolio.

   Total outstanding consumer finance receivables and loans increased $11.5 billion at December 31, 2011, compared with December 31, 2010. This increase was driven by domestic automobile consumer loan originations, which outpaced portfolio runoff, primarily due to improved industry sales and higher GM and Chrysler market share. Total consumer nonperforming finance receivables and loans at December 31, 2011 decreased $201 million to $567 million from December 31, 2010, reflecting a decrease of $222 million of consumer mortgage nonperforming finance receivables and loans and an increase of $21 million of consumer automobile nonperforming finance receivables and loans. Nonperforming consumer mortgage finance receivables and loans decreased primarily due to the continued runoff of lower quality legacy loans. Nonperforming consumer automotive finance receivables and loans increased primarily due to the implementation of ASU 2011-02 which resulted in additional loans being classified as TDRs and placed on nonaccrual status. Refer to Note 1 to the Consolidated Financial Statements for additional information. Nonperforming consumer finance receivables and loans as a percentage of total outstanding consumer finance receivables and loans were 0.8% and 1.2% at December 31, 2011 and 2010, respectively. Consumer domestic automobile finance receivables and loans accruing and past due 30 days or more decreased $19 million to $783 million at December 31, 2011, compared with December 31, 2010. This decline was primarily due to increased quality of newer vintages reflecting tightened underwriting standards.                                         71 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table includes consumer net charge-offs from finance receivables and loans at historical cost and related ratios reported at carrying value before allowance for loan losses.

                                                      Net charge-offs             Net charge-off ratios (a) Year ended December 31, ($ in millions)            2011             2010           2011             2010 Domestic Consumer automobile                          $      249          $     457           0.6 %             1.7 % Consumer mortgage 1st Mortgage                                        115                128           1.7               1.8 Home equity                                          74                 85           2.3               2.4 Total domestic                                      438                670           0.8               1.8 Foreign Consumer automobile                                  72                123           0.4               0.8 Consumer mortgage 1st Mortgage                                          4                  3           1.2               0.8 Home equity                                           -                  -             -                 - Total foreign                                        76                126           0.4               0.8

Total consumer finance receivables and loans $ 514 $ 796

          0.7               1.5   

(a) Net charge-off ratios are calculated as net charge-offs divided by average

outstanding finance receivables and loans excluding loans measured at fair

value and loans held-for-sale during the year for each loan category.

   Our net charge-offs from total consumer automobile finance receivables and loans decreased $259 million for the year ended December 31, 2011, compared to 2010. The decrease in net charge-offs was primarily due to lower loss frequency and improvements in loss severity as a result of increased quality of newer vintages reflecting tightened underwriting standards and strong used vehicle pricing. Our net charge-offs from total consumer mortgage finance receivables and loans were $193 million for the year ended December 31, 2011, compared to $216 million in 2010. The decrease was driven by the improved mix of remaining loans as the lower quality legacy loans continued to runoff. The following table summarizes the unpaid principal balance of total consumer loan originations for the periods shown. Total consumer loan originations include loans classified as finance receivables and loans and loans held-for-sale during the period. Year ended December 31, ($ in millions)    2011         2010 Domestic Consumer automobile                     $  32,933    $  27,681 Consumer mortgage 1st Mortgage                               56,258       69,542 Home equity                                     -            - Total domestic                             89,191       97,223 Foreign Consumer automobile                         9,983        8,818 Consumer mortgage 1st Mortgage                                1,403        1,503 Home equity                                     -            - Total foreign                              11,386       10,321

Total consumer loan originations $ 100,577$ 107,544

   Total domestic automobile-originated loans increased $5.3 billion for the year ended December 31, 2011, compared to 2010, primarily due to improved industry sales and higher GM and Chrysler market share. Total foreign automobile originations increased $1.2 billion for the year ended December 31, 2011, driven by higher Germany, Brazil, and United Kingdom production. Total domestic mortgage-originated loans decreased $13.3 billion for the year ended December 31, 2011. The decreases were, in part, the result of lower industry volume and fewer government-insured residential mortgage loans.                                         72 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Consumer loan originations retained on-balance sheet as held-for-investment increased $9.5 billion to $44.6 billion at December 31, 2011, compared to 2010. The increase was primarily due to improved automotive industry sales and higher GM and Chrysler market share. The following table shows the percentage of the total consumer finance receivables and loans recorded at historical cost reported at carrying value before allowance for loan losses by state and foreign concentration. Total automobile loans were $63.5 billion and $51.3 billion at December 31, 2011 and 2010, respectively. Total mortgage and home equity loans were $10.0 billion and $10.7 billion at December 31, 2011 and 2010, respectively.                                                2011(a)                        2010                                                    1st Mortgage                  1st Mortgage                                                      and home                      and home December 31,                         Automobile       equity       Automobile       equity Texas                                      9.5 %          5.5 %          9.2 %          4.4 % California                                 4.6           25.7            4.6           24.5 Florida                                    4.8            4.0            4.4            4.1 Michigan                                   4.0            4.8            3.7            5.0 Illinois                                   3.1            5.0            2.8            4.7 New York                                   3.5            2.3            3.4            2.4 Pennsylvania                               3.6            1.6            3.2            1.7 Ohio                                       2.9            1.0            2.5            1.0 Georgia                                    2.5            1.8            2.2            1.8 North Carolina                             2.2            2.1            2.0            2.0 Other United States                       32.9           45.9           29.4           44.7 Canada                                    11.8            0.2           14.2            3.6 Brazil                                     4.7              -            5.2              - Germany                                    4.3              -            5.7              - Other foreign                              5.6            0.1            7.5            0.1 Total consumer finance receivables and loans                                100.0 %        100.0 %        

100.0 % 100.0 %

(a) Presentation is in descending order as a percentage of total consumer finance

receivables and loans at December 31, 2011.

   We monitor our consumer loan portfolio for concentration risk across the geographies in which we lend. The highest concentrations of loans in the United States are in Texas and California, which represented an aggregate of 16.4% of our total outstanding consumer finance receivables and loans at December 31, 2011. Concentrations in our Mortgage operations are closely monitored given the volatility of the housing markets. Our consumer mortgage loan concentrations in California, Florida, and Michigan receive particular attention as the real estate value depreciation in these states has been the most severe. Repossessed and Foreclosed Assets We classify an asset as repossessed or foreclosed (included in other assets on the Consolidated Balance Sheet) when physical possession of the collateral is taken. We dispose of the acquired collateral in a timely fashion in accordance with regulatory requirements. For more information on repossessed and foreclosed assets, refer to Note 1 to the Consolidated Financial Statements. Repossessed assets in our Automotive Finance operations at December 31, 2011, increased $10 million to $56 million from December 31, 2010. Foreclosed mortgage assets at December 31, 2011, decreased $61 million to $77 million from December 31, 2010. Higher-risk Mortgage Loans During the year ended December 31, 2011, we primarily focused our origination efforts on prime conforming and government-insured residential mortgages in the United States and high-quality government-insured residential in Canada. Refer to Note 2 to the Consolidated Financial Statements for additional information on our commitment to sell our Canadian residential mortgage portfolio. However, we continued to hold mortgage loans originated in prior years that have features that expose us to potentially higher credit risk including high original loan-to-value mortgage loans (prime or nonprime), payment-option adjustable-rate mortgage loans (prime nonconforming), interest-only mortgage loans (classified as prime conforming or nonconforming for domestic production and prime nonconforming or nonprime for international production), and teaser-rate mortgages (prime or nonprime).                                         73 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  In circumstances when a loan has features such that it falls into multiple categories, it is classified to a category only once based on the following hierarchy: (1) high original loan-to-value mortgage loans, (2) payment-option adjustable-rate mortgage loans, (3) interest-only mortgage loans, and (4) below-market rate (teaser) mortgages. Given the continued stress within the housing market, we believe this hierarchy provides the most relevant risk assessment of our nontraditional products. •      High loan-to-value mortgages - Defined as first-lien loans with original 

loan-to-value ratios equal to or in excess of 100% or second-lien loans

that when combined with the underlying first-lien mortgage loan result in

an original loan-to-value ratio equal to or in excess of 100%. We ceased

originating these loans with the intent to retain during 2009.

• Payment-option adjustable-rate mortgages - Permit a variety of repayment

options. The repayment options include minimum, interest-only, fully

amortizing 30-year, and fully amortizing 15-year payments. The minimum

payment option generally sets the monthly payment at the initial interest

rate for the first year of the loan. The interest rate resets after the

first year, but the borrower can continue to make the minimum payment. The

interest-only option sets the monthly payment at the amount of interest

       due on the loan. If the interest-only option payment would be less than        the minimum payment, the interest-only option is not available to the

borrower. Under the fully amortizing 30- and 15-year payment options, the

borrower's monthly payment is set based on the interest rate, loan

balance, and remaining loan term. We ceased originating these loans during

2008.

• Interest-only mortgages - Allow interest-only payments for a fixed time.

       At the end of the interest-only period, the loan payment includes        principal payments and can increase significantly. The borrower's new        payment, once the loan becomes amortizing (i.e., includes principal

payments), will be greater than if the borrower had been making principal

       payments since the origination of the loan. We ceased originating these        loans with the intent to retain during 2010.  

• Below-market rate (teaser) mortgages - Contain contractual features that

       limit the initial interest rate to a below-market interest rate for a        specified time period with an increase to a market interest rate in a        future period. The increase to the market interest rate could result in a

significant increase in the borrower's monthly payment amount. We ceased

originating these loans during 2008.

   The following table summarizes the higher-risk mortgage loan originations unpaid principal balance for the periods shown. These higher-risk mortgage loans are classified as finance receivables and loans and are recorded at historical cost. Year ended December 31, ($ in millions)  2011     2010 Interest-only mortgage loans            $   -    $ 209 

Below-market rate (teaser) mortgages - - Total

                                   $   -    $ 209

The following table summarizes mortgage finance receivables and loans by higher-risk type. These finance receivables and loans are recorded at historical cost and reported at carrying value before allowance for loan losses.

                                                2011                                                  2010                                                                  Accruing                                              Accruing                                                                  past due                                              past due December 31, ($ in                                                90 days                                               90 days millions)                  Outstanding       Nonperforming        or more        Outstanding       Nonperforming        or more Interest-only mortgage loans (a)                $       2,947     $           147     $         -     $       3,681     $           207     $         - Below-market rate (teaser) mortgages                 248                   6               -               284                   4               - Total                    $       3,195     $           153     $         -     $       3,965     $           211     $         -  

(a) The majority of the interest-only mortgage loans are expected to start

principal amortization in 2015 or beyond.

Allowance for loan losses was $167 million or 5.2% of total higher-risk mortgage finance receivables and loans recorded at historical cost based on carrying value outstanding before allowance for loan losses at December 31, 2011.

                                       74 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  The following tables include our five largest state and foreign concentrations within our higher-risk finance receivables and loans recorded at historical cost and reported at carrying value before allowance for loan losses.                                                         Below-market            All                                     Interest-only      rate (teaser)        higher-risk December 31, ($ in millions)       mortgage loans        mortgages        mortgage loans 2011 California                        $            748    $            78    $            826 Virginia                                       274                 10                 284 Maryland                                       217                  6                 223 Michigan                                       199                  9                 208 Illinois                                       153                  8                 161 Other United States                          1,356                137               1,493 Total                             $          2,947    $           248    $          3,195 2010 California                        $            993    $            89    $          1,082 Virginia                                       330                 12                 342 Maryland                                       256                  7                 263 Michigan                                       225                 10                 235 Illinois                                       197                  8                 205 Other United States and foreign              1,680                158               1,838 Total                             $          3,681    $           284    $          3,965   Commercial Credit Portfolio Our commercial portfolio consists primarily of automotive loans (wholesale floorplan, dealer term loans including real estate loans, and automotive fleet financing), and some commercial finance loans. In general, the credit risk of our commercial portfolio is impacted by overall economic conditions in the countries in which we operate and the financial health of the automotive manufacturers that provide the inventory we floorplan. As part of our floorplan financing arrangements, we typically require repurchase agreements with the automotive manufacturer to repurchase new vehicle inventory under certain circumstances. Our credit risk on the commercial portfolio is markedly different from that of our consumer portfolio. Whereas the consumer portfolio represents smaller-balance homogeneous loans that exhibit fairly predictable and stable loss patterns, the commercial portfolio exposures can be less predictable. We utilize an internal credit risk rating system that is fundamental to managing credit risk exposure consistently across various types of commercial borrowers and captures critical risk factors for each borrower. The ratings are used for many areas of credit risk management, such as loan origination, portfolio risk monitoring, management reporting, and loan loss reserves analyses. Therefore, the rating system is critical to an effective and consistent credit risk management framework. During the year ended December 31, 2011, the credit performance of the commercial portfolio improved as nonperforming finance receivables and loans and net charge-offs declined. For information on our commercial credit risk practices and policies regarding delinquencies, nonperforming status, and charge-offs, refer to Note 1 to the Consolidated Financial Statements.                                         75 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table includes total commercial finance receivables and loans reported at carrying value before allowance for loan losses.

                                                                                                    Accruing past due                               Outstanding                  Nonperforming (a)                      90 days or more (b) December 31, ($ in millions)                 2011          2010              2011              2010                  2011                   2010 Domestic Commercial and industrial Automobile             $  26,552     $  24,944     $      105            $     261     $          -                  $        - Mortgage                   1,887         1,540              -                    -                -                           - Other (c)                  1,178         1,795             22                   37                -                           - Commercial real estate Automobile                 2,331         2,071             56                  193                -                           - Mortgage                       -             1              -                    1                -                           - Total domestic            31,948        30,351            183                  492                -                           - Foreign Commercial and industrial Automobile                 8,265         8,398            118                   35                -                           - Mortgage                      24            41              -                   40                -                           - Other (c)                     63           312             15                   97                -                           - Commercial real estate Automobile                   154           216             11                    6                -                           - Mortgage                      14            78             12                   70                -                           - Total foreign              8,520         9,045            156                  248                -                           - Total commercial finance receivables and loans              $  40,468     $  39,396     $      339            $     740     $          -                  $        -  

(a) Includes nonaccrual troubled debt restructured loans of $21 million and

$9 million at December 31, 2011 and 2010, respectively.

(b) There were no troubled debt restructured loans classified as 90 days past due

and still accruing at December 31, 2011 and 2010, respectively.

(c) Other commercial primarily includes senior secured commercial lending.

   Total commercial finance receivables and loans outstanding increased $1.1 billion to $40.5 billion at December 31, 2011, from December 31, 2010. Commercial and industrial outstandings increased $939 million primarily due to improved automotive industry sales and corresponding increase in inventories partially offset by the continued wind-down of non-core commercial assets. Total commercial nonperforming finance receivables and loans were $339 million, a decrease of $401 million compared to December 31, 2010, primarily due to improvement in dealer performance and continued wind-down of non-core commercial assets. Total nonperforming commercial finance receivables and loans as a percentage of outstanding commercial finance receivables and loans were 0.8% and 1.9% at December 31, 2011 and 2010, respectively.                                         76 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table includes total commercial net charge-offs from finance receivables and loans at historical cost and related ratios reported at carrying value before allowance for loan losses.

                                                   Net charge-offs (recoveries)         Net charge-off ratios (a) Year ended December 31, ($ in millions)             2011                2010             2011             2010 Domestic Commercial and industrial Automobile                                     $         7         $          18            -  %            0.1  % Mortgage                                                (3 )                  (3 )       (0.3 )            (0.2 ) Other (b)                                               (7 )                 158         (0.5 )             6.7 Commercial real estate Automobile                                               6                    47          0.3               2.3 Mortgage                                                (1 )                  44          n/m             136.3 Total domestic                                           2                   264            -               0.9 Foreign Commercial and industrial Automobile                                              (1 )                  16            -               0.2 Mortgage                                                 8                     3         25.0               3.9 Other                                                    2                    69          0.8              19.0 Commercial real estate Automobile                                               1                     2          0.3               1.0 Mortgage                                                27                    48         60.9              38.7 Total foreign                                           37                   138          0.4               1.5

Total commercial finance receivables and loans $ 39 $

  402          0.1               1.1   

(a) Net charge-off ratios are calculated as net charge-offs divided by average

outstanding finance receivables and loans excluding loans measured at fair

value and loans held-for-sale during the year for each loan category.

(b) Includes $148 million of Resort finance charge offs during the year ended

December 31, 2010.

   Our net charge-offs from commercial finance receivables and loans totaled $39 million for the year ended December 31, 2011, compared to $402 million in 2010. The decrease in net charge-offs were largely driven by an improved mix of loans in the existing portfolio driven by the wind-down of certain commercial resort finance and real estate assets in prior periods and improvement in dealer performance.                                         77 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Commercial Real Estate The commercial real estate portfolio consists of finance receivables and loans issued primarily to automotive dealers. Commercial real estate finance receivables and loans were $2.5 billion and $2.4 billion at December 31, 2011 and 2010, respectively. The following table shows the percentage of total commercial real estate finance receivables and loans by geographic region and property type. These finance receivables and loans are reported at carrying value before allowance for loan losses. December 31,                                                      2011        2010 Geographic region Michigan                                                           14.1 %      10.1 % Texas                                                              12.4        10.5 Florida                                                            12.4        10.3 California                                                          9.3         9.6 Virginia                                                            4.1         4.4 New York                                                            3.5         3.8 Pennsylvania                                                        2.9         3.7 Alabama                                                             2.6         2.4 Georgia                                                             2.5         2.7 North Carolina                                                      2.1         1.9 Other United States                                                27.5        28.1 Canada                                                              3.5         4.4 United Kingdom                                                      1.8         5.0 Mexico                                                              1.0         2.4 Other foreign                                                       0.3         0.7 Total outstanding commercial real estate finance receivables and loans                                                         100.0 %     100.0 % Property type Automotive dealers                                                 99.4 %      91.8 % Other                                                               0.6         8.2

Total outstanding commercial real estate finance receivables and loans

                                                         100.0 %   

100.0 %

   Commercial Criticized Exposure Finance receivables and loans classified as special mention, substandard, or doubtful are deemed criticized. These classifications are based on regulatory definitions and generally represent finance receivables and loans within our portfolio that have a higher default risk or have already defaulted. These finance receivables and loans require additional monitoring and review including specific actions to mitigate our potential economic loss. The following table shows the percentage of total commercial criticized finance receivables and loans by industry concentrations. These finance receivables and loans reported at carrying value before allowance for loan losses. December 31,                                               2011      2010 Industry Automotive                                                 82.9 %    66.5 % Real estate                                                 4.5      12.1 Banks and finance companies                                 4.2       1.0 Other                                                       8.4      20.4

Total commercial criticized finance receivables and loans 100.0 % 100.0 %

Total criticized exposure decreased $528 million to $3.1 billion from December 31, 2010, primarily due to the continued wind-down of non-core commercial assets in the real estate and health/medical (within Other) industries. The increase in our automotive criticized concentration rate was driven primarily by the decrease in overall criticized outstanding.

                                       78 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Selected Loan Maturity and Sensitivity Data The table below shows the commercial finance receivables and loans portfolio and the distribution between fixed and floating interest rates based on the stated terms of the commercial loan agreements. This portfolio is reported at carrying value before allowance for loan losses. December 31, 2011 ($ in millions)     Within 1 year (a)       1-5 years       After 5 years       Total (b) Commercial and industrial           $            28,247     $     1,296     $            74     $    29,617 Commercial real estate                              295           1,751                 285           2,331 Total domestic                                   28,542           3,047                 359          31,948 Foreign                                           8,007             489                  24           8,520 Total commercial finance receivables and loans               $            36,549     $     3,536     $           383     $    40,468 Loans at fixed interest rates                               $     1,386     $           305 Loans at variable interest rates                                  2,150                  78 Total commercial finance receivables and loans                                       $     3,536     $           383  

(a) Includes loans (e.g., floorplan) with revolving terms.

(b) Loan maturities are based on the remaining maturities under contractual

terms.

   Allowance for Loan Losses The following table presents an analysis of the activity in the allowance for loan losses on finance receivables and loans.                                Consumer        Consumer          Total ($ in millions)               automobile       mortgage        consumer        Commercial        Total Allowance at January 1, 2011                        $       970      $       580     $     1,550     $       323      $    1,873 Charge-offs Domestic                           (435 )           (205 )          (640 )           (27 )          (667 ) Foreign                            (145 )             (5 )          (150 )           (63 )          (213 ) Total charge-offs                  (580 )           (210 )          (790 )           (90 )          (880 ) Recoveries Domestic                            186               16             202              25             227 Foreign                              73                1              74              26             100 Total recoveries                    259               17             276              51             327 Net charge-offs                    (321 )           (193 )          (514 )           (39 )          (553 ) Provision for loan losses           154              129             283             (64 )           219 Other                               (37 )              -             (37 )             1             (36 ) Allowance at December 31, 2011           $       766      $       516     $     1,282     $       221      $    1,503 Allowance for loan losses to finance receivables and loans outstanding at December 31, 2011 (a)               1.2 %            5.2 %           1.7 %           0.5 %           1.3 % Net charge-offs to average finance receivables and loans outstanding at December 31, 2011 (a)               0.5 %            1.9 %           0.7 %           0.1 %           0.5 % Allowance for loan losses to total nonperforming finance receivables and loans at December 31, 2011 (a)             335.8 %          152.1 %         226.0 %          65.3 %         165.9 % Ratio of allowance for loans losses to net charge-offs at December 31, 2011                   2.4              2.7             2.5             5.7             2.7  

(a) Coverage percentages are based on the allowance for loan losses related to

finance receivables and loans excluding those loans held at fair value as a

percentage of the unpaid principal balance, net of premiums and discounts.

                                           79 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K                                Consumer        Consumer          Total ($ in millions)              automobile       mortgage        consumer        Commercial        Total Allowance at January 1, 2010             $     1,024     $       640     $     1,664     $       781      $    2,445 Cumulative effect of change in accounting principles (a)                                 222               -             222               -             222 Charge-offs Domestic                           (776 )          (239 )        (1,015 )          (282 )        (1,297 ) Foreign                            (194 )            (4 )          (198 )          (151 )          (349 ) Total charge-offs                  (970 )          (243 )        (1,213 )          (433 )        (1,646 ) Recoveries Domestic                            319              26             345              18             363 Foreign                              71               1              72              13              85 Total recoveries                    390              27             417              31             448 Net charge-offs                    (580 )          (216 )          (796 )          (402 )        (1,198 ) Provision for loan losses           304             164             468             (26 )           442 Discontinued operations               -               -               -              (4 )            (4 ) Other                                 -              (8 )            (8 )           (26 )           (34 ) Allowance at December 31, 2010           $       970     $       580     $     1,550     $       323      $    1,873 Allowance for loan losses to finance receivables and loans outstanding at December 31, 2010 (b)               1.9 %           5.4 %           2.5 %           0.8 %           1.8 % Net charge-offs to average finance receivables and loans outstanding at December 31, 2010 (b)               1.4 %           2.0 %           1.5 %           1.1 %           1.3 % Allowance for loan losses to total nonperforming finance receivables and loans at December 31, 2010 (b)             469.2 %         103.4 %         202.0 %          43.7 %         124.3 % Ratio of allowance for loans losses to net charge-offs at December 31, 2010                   1.7             2.7             1.9             0.8             1.6  

(a) Includes adjustment to the allowance due to adoption of ASU 2009-17,

Improvements to Financial Reporting by Enterprises Involved with Variable

Interest Entities.

(b) Coverage percentages are based on the allowance for loan losses related to

finance receivables and loans excluding those loans held at fair value as a

percentage of the unpaid principal balance, net of premiums and discounts.

   The allowance for consumer loan losses was $1.3 billion at December 31, 2011, compared to $1.6 billion at December 31, 2010. The decline reflected overall improved credit quality of newer vintages reflecting tightened underwriting standards which was partially offset by an increase in loans outstanding. The allowance for commercial loan losses was $221 million at December 31, 2011, compared to $323 million at December 31, 2010. The decline was primarily related to improvement in dealer performance and continued wind-down of non-core commercial assets.                                         80 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Allowance for Loan Losses by Type The following table summarizes the allocation of the allowance for loan losses by product type.                                                2011                                                   2010                                                              Allowance as                                           Allowance as                                             Allowance as        a % of                             Allowance as        a % of December 31, ($ in       Allowance for      a % of loans     allowance for      Allowance for      a % of loans     allowance for millions)                 loan losses       outstanding       loan losses        loan losses       outstanding       loan losses Consumer Domestic Consumer automobile    $           600            1.3 %            39.9 %     $           769            2.2 %            41.0 % Consumer mortgage 1st Mortgage                       275            4.0              18.3                   322            4.7              17.2 Home equity                        237            7.7              15.8                   256            7.5              13.7 Total domestic                   1,112            2.0              74.0                 1,347            3.0              71.9 Foreign Consumer automobile                166            1.0              11.1                   201            1.2              10.7 Consumer mortgage 1st Mortgage                         4           14.5               0.2                     2            0.4               0.1 Home equity                          -              -                 -                     -              -                 - Total foreign                      170            1.0              11.3                   203            1.2              10.8 Total consumer loans             1,282            1.7              85.3                 1,550            2.5              82.7 Commercial Domestic Commercial and industrial Automobile                          62            0.2               4.0                    73            0.3               3.9 Mortgage                             1              -               0.1                     -              -                 - Other                               52            4.4               3.5                    97            5.4               5.2 Commercial real estate Automobile                          39            1.7               2.6                    54            2.6               2.9 Mortgage                             -              -                 -                     -              -                 - Total domestic                     154            0.5              10.2                   224            0.7              12.0 Foreign Commercial and industrial Automobile                          48            0.6               3.2                    33            0.4               1.7 Mortgage                            10           43.1               0.7                    12           30.5               0.7 Other                                1            1.9               0.1                    39           12.6               2.1 Commercial real estate Automobile                           3            1.7               0.2                     2            0.9               0.1 Mortgage                             5           33.2               0.3                    13           16.9               0.7 Total foreign                       67            0.8               4.5                    99            1.1               5.3 Total commercial loans             221            0.5              14.7                   323            0.8              17.3 Total allowance for loan losses            $         1,503            1.3             100.0 %     $         1,873            1.8             100.0 %                                           81

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Provision for Loan Losses The following table summarizes the provision for loan losses by product type. Year ended December 31, ($ in millions)  2011      2010       2009 Consumer Domestic Consumer automobile                     $ 102     $ 228     $   493 Consumer mortgage 1st Mortgage                               68        72       2,360 Home equity                                55        90       1,588 Total domestic                            225       390       4,441 Foreign Consumer automobile                        52        76         262 Consumer mortgage 1st Mortgage                                6         2           2 Home equity                                 -         -           - Total foreign                              58        78         264 Total consumer loans                      283       468       4,705 Commercial Domestic Commercial and industrial Automobile                                 (3 )       2          54 Mortgage                                   (3 )     (13 )        36 Other                                     (51 )     (47 )       348 Commercial real estate Automobile                                (10 )      34           - Mortgage                                   (1 )     (10 )       255 Total domestic                            (68 )     (34 )       693 Foreign Commercial and industrial Automobile                                 16        (2 )        32 Mortgage                                    5        (5 )        17 Other                                     (38 )       5         142 Commercial real estate Automobile                                  1         2           - Mortgage                                   20         8          14 Total foreign                               4         8         205 Total commercial loans                    (64 )     (26 )       898

Total provision for loan losses $ 219$ 442$ 5,603

   Lease Residual Risk Management We are exposed to residual risk on vehicles in the consumer lease portfolio. This lease residual risk represents the possibility that the actual proceeds realized upon the sale of returned vehicles will be lower than the projection of these values used in establishing the pricing at lease inception. The following factors most significantly influence lease residual risk. For additional information on our valuation of automobile lease assets and residuals, refer to the Critical Accounting Estimates - Valuation of Automobile Lease Assets and Residuals section within this MD&A. •      Used vehicle market - We have exposure to changes in used vehicle prices.        General economic conditions, used vehicle supply and demand, and new        vehicle market prices most heavily influence used vehicle prices.  

• Residual value projections -We establish risk adjusted residual values at

lease inception by consulting independently published guides and

periodically reviewing these residual values during the lease term. These

       values are projections of expected values in the                                           82

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

future (typically between two and four years) based on current assumptions for the respective make and model. Actual realized values often differ. • Remarketing abilities - Our ability to efficiently process and effectively

market off-lease vehicles affects the disposal costs and the proceeds

realized from vehicle sales.

• Manufacturer vehicle and marketing programs - Automotive manufacturers

       influence lease residual results in the following ways:   ?         The brand image of automotive manufacturers and consumer demand for           their products affect residual risk.   ?         Automotive manufacturer marketing programs may influence the used

vehicle market for those vehicles through programs such as incentives

on new vehicles, programs designed to encourage lessees to terminate

their leases early in conjunction with the acquisition of a new vehicle

(referred to as pull-ahead programs), and special rate used vehicle

programs.

? Automotive manufacturers may provide support to us for certain residual

deficiencies.

   The following table summarizes the volume of serviced lease terminations in the United States over recent periods. It also summarizes the average sales proceeds on 24-, 36-, and 48-month scheduled lease terminations for those same periods at auction. The mix of terminated vehicles in 2011 was used to normalize results over previous periods to more clearly demonstrate market pricing trends. Year ended December 31,                                        2011         2010         2009 Off-lease vehicles remarketed (in units)                     248,624      376,203      369,981 Sales proceeds on scheduled lease terminations ($ per unit) 24-month (a)                                                     n/m          n/m          n/m 36-month                                                    $ 20,157     $ 19,061     $ 16,958 48-month                                                      16,106       14,908       12,611  

n/m = not meaningful (a) During 2011, 24-month lease terminations were not materially sufficient to

create an historical multi-year comparison from that term due to our

temporary curtailment of leasing in late 2008 through 2009.

   The number of off-lease vehicles marketed in 2011 declined 34% from 2010. The decrease was due to our temporary curtailment of leasing in late 2008 through 2009. Proceeds increased from 2009 as market conditions for pricing of used vehicles improved. The improvement in proceeds was driven primarily by lower used vehicle supply, large decreases in new vehicle sales and leasing activity after the 2008 economic downturn, and subsequent corporate restructurings in the automotive industry. For information on our Investment in Operating Leases, refer to Note 1 and Note 10 to the Consolidated Financial Statements. Country Risk We have exposures to obligors domiciled in foreign countries; and therefore, our portfolio is subject to country risk. Country risk is the risk that conditions in a foreign country will impair the value of our assets, restrict our ability to repatriate equity or profits, or adversely impact the ability of the guarantor to uphold their obligations to us. Country risk includes risks arising from the economic, political, and social conditions prevalent in a country, as well as the strengths and weaknesses in the legal and regulatory framework. These conditions may have potentially favorable or unfavorable consequences for our investments in a particular country. Country risk is measured by determining our cross-border outstandings in accordance with Federal Financial Institutions Examination Council guidelines. Cross-border outstandings are reported as assets within the country of which the obligor or guarantor resides. Furthermore, outstandings backed by tangible collateral are reflected under the country in which the collateral is held. For securities received as collateral, cross-border outstandings are assigned to the domicile of the issuer of the securities. Resale agreements are presented based on the domicile of the counterparty.                                         83 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table lists all countries in which cross-border outstandings exceed 1.0% of consolidated assets.

                                                         Net                               Total                                                     local country                       cross-border ($ in millions)  Banks     Sovereign      Other         assets        

Derivatives      outstandings 2011 (a) Canada          $  343    $       250    $  451    $         3,746    $          20    $       4,810 Germany             47             32         5              3,219              576            3,879 United Kingdom     311              6        13                962            1,356            2,648 2010 Canada          $  343    $       361    $  349    $         4,678    $          19    $       5,750 Germany            587             40       111              3,485               76            4,299 United Kingdom     627              9        37              1,133               83            1,889  

(a) As of December 31, 2011, our total cross-border exposure to Portugal,

Ireland, Italy, Greece, and Spain was $327 million, all of which was

nonsovereign exposure.

   Market Risk Our automotive financing, mortgage, and insurance activities give rise to market risk representing the potential loss in the fair value of assets or liabilities and earnings caused by movements in market variables, such as interest rates, foreign-exchange rates, equity prices, market perceptions of credit risk, and other market fluctuations that affect the value of securities and assets held-for-sale. We are primarily exposed to interest rate risk arising from changes in interest rates related to financing, investing, and cash management activities. More specifically, we have entered into contracts to provide financing, to retain mortgage servicing rights, and to retain various assets related to securitization activities all of which are exposed in varying degrees to changes in value due to movements in interest rates. Interest rate risk arises from the mismatch between assets and the related liabilities used for funding. We enter into various financial instruments, including derivatives, to maintain the desired level of exposure to the risk of interest rate fluctuations. Refer to Note 24 to the Consolidated Financial Statements for further derivative information. We are also exposed to foreign-currency risk arising from the possibility that fluctuations in foreign-exchange rates will affect future earnings or asset and liability values related to our global operations. We may enter into hedges to mitigate foreign exchange risk. We also have exposure to equity price risk, primarily in our Insurance operations, which invests in equity securities that are subject to price risk influenced by capital market movements. We enter into equity options to economically hedge our exposure to the equity markets. Although the diversity of our activities from our complementary lines of business may partially mitigate market risk, we also actively manage this risk. We maintain risk management control systems to monitor interest rates, foreign-currency exchange rates, equity price risks, and any of their related hedge positions. Positions are monitored using a variety of analytical techniques including market value, sensitivity analysis, and value at risk models.                                         84 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Fair Value Sensitivity Analysis The following table and subsequent discussion presents a fair value sensitivity analysis of our assets and liabilities using isolated hypothetical movements in specific market rates. The analysis assumes adverse instantaneous, parallel shifts in market-exchange rates, interest rate yield curves, and equity prices. The analysis does not consider the financial offsets available through derivative activities. Additionally, since only adverse fair value impacts are included, the natural offset between asset and liability rate sensitivities that arise within a diversified balance sheet, such as ours, is not considered.                                                          2011                           2010 December 31, ($ in millions)                  Nontrading       Trading       Nontrading       Trading Financial instruments exposed to changes in: Interest rates Estimated fair value                                 (a)     $      549             (a)     $      240 Effect of 10% adverse change in rates                (a)             (2 )           (a)             (1 ) Foreign-currency exchange rates Estimated fair value                         $     6,724     $        -     $     7,079     $       94 Effect of 10% adverse change in rates               (672 )            -            (708 )           (9 ) Equity prices Estimated fair value                         $     1,059     $        -     $       796     $        - Effect of 10% decrease in prices                    (106 )            -             (80 )            -   

(a) Refer to the next section titled Net Interest Income Sensitivity Analysis for

information on the interest rate sensitivity of our nontrading financial

instruments.

   The fair value of our foreign-currency exchange-rate sensitive financial instruments decreased during the year ended December 31, 2011, compared to 2010, due to increases in our foreign-denominated deposits. This increase consequently drove the decrease in the fair value estimate and associated adverse 10% change in rates impact. The increase in the fair value of our equity sensitive financial instruments was due to a higher equity investment balance compared to prior year. This change in equity exposure drove our increased sensitivity to a 10% decrease in equity prices. Net Interest Income Sensitivity Analysis We use net interest income sensitivity analysis to measure and manage the interest rate sensitivities of our nontrading financial instruments rather than the fair value approach. Interest rate risk represents the most significant market risk to the nontrading exposures. We actively monitor the level of exposure so that movements in interest rates do not adversely affect future earnings. Simulations are used to estimate the impact on our net interest income in numerous interest rate scenarios. These simulations measure how the interest rate scenarios will impact net interest income on the financial instruments on the balance sheet including debt securities, loans, deposits, debt, and derivative instruments. The simulations incorporate assumptions about future balance sheet changes including loan and deposit pricing, changes in funding mix, and asset/liability repricing, prepayments, and contractual maturities. We prepare forward-looking forecasts of net interest income, which take into consideration anticipated future business growth, asset/liability positioning, and interest rates based on the implied forward curve. Simulations are used to assess changes in net interest income in multiple interest rates scenarios relative to the baseline forecast. The changes in net interest income relative to the baseline are defined as the sensitivity. The net interest income sensitivity tests measure the potential change in our pretax net interest income over the following twelve months. A number of alternative rate scenarios are tested including immediate parallel shocks to the forward yield curve, nonparallel shocks to the forward yield curve, and stresses to certain term points on the yield curve in isolation to capture and monitor a number of risk types. Our twelve-month pretax net interest income sensitivity based on the forward-curve was as follows. Year ended December 31, ($ in millions)  2011     2010 Parallel rate shifts  -100 basis points                      $ 73     $ 54  +100 basis points                       (84 )    (99 )  +200 basis points                        88      (28 )   Our net interest income was liability sensitive to parallel moves in interest rates of -100 and +100 basis points in both years ended 2011 and 2010. The positive change in net interest income in the +200 basis interest rate move in 2011 and limited adverse change in 2010 was mainly due to income on certain commercial loans that have rate index floors. Interest income on these loans increases significantly as interest rates and the related rate index rises above the level of the floor. The change in net interest income sensitivity from December 31, 2010 was due to the change in the level of forward short-term interest                                         85 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  rates, the impact of the change in interest rates on the commercial loans with rate index floors and balance sheet growth increasing the absolute level of net interest income. Additionally, we added net pay fixed interest rate swaps hedging certain borrowings and reduced our net receive fixed interest rate swaps hedging the debt portfolio as part of our normal ALM activities, which contributed to the change. Operational Risk We define operational risk as the risk of loss resulting from inadequate or failed processes or systems, human factors, or external events. Operational risk is an inherent risk element in each of our businesses and related support activities. Such risk can manifest in various ways, including errors, business interruptions, and inappropriate behavior of employees, and can potentially result in financial losses and other damage to us. To monitor and control such risk, we maintain a system of policies and a control framework designed to provide a sound and well-controlled operational environment. This framework employs practices and tools designed to maintain risk governance, risk and control assessment and testing, risk monitoring, and transparency through risk reporting mechanisms. The goal is to maintain operational risk at appropriate levels in view of our financial strength, the characteristics of the businesses and the markets in which we operate, and the related competitive and regulatory environment. Notwithstanding these risk and control initiatives, we may incur losses attributable to operational risks from time to time, and there can be no assurance these losses will not be incurred in the future.                                         86 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Liquidity Management, Funding, and Regulatory Capital Overview The purpose of liquidity management is to ensure our ability to meet changes in loan and lease demand, debt maturities, deposit withdrawals, and other cash commitments under both normal operating conditions as well as periods of economic or financial stress. Our primary objective is to maintain cost-effective, stable and diverse sources of funding capable of sustaining the organization throughout all market cycles. Sources of liquidity include both retail and brokered deposits and secured and unsecured market-based funding across various maturity, interest rate, currency, and investor profiles. Further liquidity is available through a pool of unencumbered highly liquid securities, borrowing facilities, whole-loan asset sales, as well as funding programs supported by the Federal Reserve and the Federal Home Loan Bank of Pittsburgh (FHLB). We define liquidity risk as the risk that an institution's financial condition or overall safety and soundness is adversely affected by an inability, or perceived inability, to meet its financial obligations, and to withstand unforeseen liquidity stress events. Liquidity risk can arise from a variety of institution specific or market-related events that could negatively impact the cash flows available to the organization. Effective management of liquidity risk helps ensure an organization's ability to meet cash flow obligations that are uncertain as they are affected by external events. The ability of financial institutions to manage liquidity needs and contingent funding exposures has proven essential to the solvency of these same financial institutions. The Asset-Liability Committee (ALCO) is chaired by the Corporate Treasurer and is responsible for monitoring Ally's liquidity position, funding strategies and plans, contingency funding plans, and counterparty credit exposure arising from financial transactions. Corporate Treasury is responsible for managing the liquidity positions of Ally within prudent operating guidelines and targets approved by ALCO. We manage liquidity risk at the business segment, legal entity, and consolidated levels. Each business segment, along with Ally Bank and ResMor Trust, prepares periodic forecasts depicting anticipated funding needs and sources of funds with oversight and monitoring by Corporate Treasury. Corporate Treasury manages liquidity under baseline projected economic scenarios as well as more severe economically stressed environments. Corporate Treasury, in turn, plans, and executes our funding strategies. Ally uses multiple measures to frame the level of liquidity risk, manage the liquidity position, or identify related trends as early warning indicators. These measures include coverage ratios that measure the sufficiency of the liquidity portfolio and stability ratios that measure longer- term structural liquidity. In addition, we have established several internal management routines designed to review all aspects of liquidity and funding plans, evaluate the adequacy of liquidity buffers, review stress testing results, and assist senior management in the execution of its structured funding strategy and risk management accountabilities. We maintain available liquidity in the form of cash, unencumbered highly liquid securities, and available credit facility capacity that, taken together, are intended to allow us to operate and to meet our contractual and contingent obligations in the event of market-wide disruptions and enterprise-specific events. We maintain available liquidity at various entities and consider regulatory restrictions and tax implications that may limit our ability to transfer funds across entities. For additional information about our regulatory restrictions and tax implications, refer to Certain Regulatory Matters in Item 1 and Note 25 to the Consolidated Financial Statements. At December 31, 2011, we maintained $26.9 billion of total available parent company liquidity and $10.0 billion of total available liquidity at Ally Bank. Parent company liquidity is defined as our consolidated operations less our Insurance operations, ResCap, and Ally Bank. To optimize cash and secured facility capacity between entities, the parent company lends cash to Ally Bank from time to time under an intercompany loan agreement. At December 31, 2011, $4.9 billion was outstanding under the intercompany loan agreement. Amounts outstanding are repayable to the parent company upon demand, subject to five days notice. As a result, this amount is included in the parent company available liquidity and excluded from the available liquidity at Ally Bank in the above amounts. In December 2010, the Basel Committee on Banking Supervision issued "Basel III: International framework for liquidity risk measurement, standards and monitoring", which includes two minimum liquidity risk standards. The first standard is the Liquidity Coverage Ratio (LCR). The LCR measures the ratio of unencumbered, high-quality liquid assets to liquidity needs for a 30-calendar-day time horizon under a severe liquidity stress scenario. The second standard is the Net Stable Funding Ratio (NSFR). The NSFR measures the ratio of stable funding with a maturity greater than one year to the liquidity characteristics of assets plus contingent exposures. The Basel Committee on Banking Supervision expects the LCR to be implemented beginning in January 2015 and the NSFR beginning in January 2018. We continue to monitor developments and the potential impact of these evolving proposals and expect to be able to meet the final requirements. Funding Strategy Our liquidity and ongoing profitability are largely dependent on our timely access to funding and the costs associated with raising funds in different segments of the capital markets and raising deposits. We continue to be focused on maintaining and enhancing our liquidity. Our funding strategy largely focuses on the development of diversified funding sources across a global investor base to meet all our liquidity needs throughout different market cycles, including periods of financial distress. These funding sources include unsecured debt capital markets, public and private asset-backed securitizations, whole-loan asset sales, domestic and international committed and uncommitted credit facilities, brokered certificates of deposits, and retail deposits. We also supplement these sources with a modest amount of short-term borrowings, including Demand Notes, unsecured bank loans, and repurchase arrangements. The diversity of our funding sources enhances funding flexibility, limits dependence on any one source, and results in a more cost-effective funding strategy over the long term. We evaluate funding markets on an ongoing basis to achieve an appropriate balance of unsecured and secured funding sources and the maturity profiles of both. In addition, we further distinguish our funding strategy between Ally Bank funding and parent company or nonbank funding.                                         87 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  In addition, the FDIC indicated that it expected us to diversify  overall funding in order to reduce reliance on any one source of funding and to achieve a well-balanced funding portfolio across a spectrum of risk, duration, and cost of funds characteristics. Over the past few years, we have been focused on diversifying our funding sources, in particular at Ally Bank by expanding its securitization programs, through both public and private committed credit facilities, extending the maturity profile of our brokered deposit portfolio while not exceeding a $10 billion portfolio, establishing repurchase agreements, and continuing to access funds from the Federal Home Loan Banks. Since 2009, we have been directing new bank-eligible assets in the United States to Ally Bank in order to reduce and minimize our nonbanking exposures and funding requirements and utilize our growing consumer deposit-taking capabilities. This has allowed us to use bank funding for a wider array of our automotive finance assets and to provide a sustainable long-term funding channel for the business, while also improving the cost of funds for the enterprise. Ally BankAlly Bank raises deposits directly from customers through the direct banking channel via the internet and over the telephone. These deposits provide our automotive finance and mortgage loan operations with a stable and low-cost funding source. At December 31, 2011, Ally Bank had $39.6 billion of total external deposits, including $27.7 billion of retail deposits. We expect that our cost of funds will continue to improve over time as our deposit base grows. At December 31, 2011, Ally Bank maintained cash liquidity of $3.6 billion and highly liquid U.S. federal government and U.S. agency securities of $6.3 billion, excluding certain securities that were encumbered at December 31, 2011. In addition, at December 31, 2011, Ally Bank had unused capacity in committed secured funding facilities of $4.9 billion, including an equal allocation of shared unused capacity of $2.5 billion from a facility also available to the parent company. Our ability to access this unused capacity depends on having eligible assets to collateralize the incremental funding and, in some instances, the execution of interest rate hedges. Maximizing bank funding continues to be a key part of our long-term liquidity strategy. We have made significant progress in migrating assets to Ally Bank and growing our retail deposit base since becoming a bank holding company in December 2008. Retail deposit growth is key to further reducing our cost of funds and decreasing our reliance on the capital markets. We believe deposits provide a low-cost source of funds that are less sensitive to interest rate changes, market volatility, or changes in our credit ratings than other funding sources. We have continued to expand our deposit gathering efforts through our direct and indirect marketing channels. Current retail product offerings consist of a variety of savings products including certificates of deposits (CDs), savings accounts, money market accounts, IRA deposit products, as well as an online checking product. In addition, we utilize brokered deposits, which are obtained through third-party intermediaries. During 2011, the deposit base at Ally Bank grew $5.7 billion, ending the year at $39.6 billion from $33.9 billion at December 31, 2010. The growth in deposits has been primarily attributable to our retail deposit portfolio. Strong retention rates continue to materially contribute to our growth in retail deposits. In the fourth quarter of 2011 and full year 2011, we retained 92% and 89% of maturing CD balances, respectively. In addition to retail and brokered deposits, Ally Bank had access to funding through a variety of other sources including FHLB advances, public securitizations, private secured funding arrangements, and the Federal Reserve's Discount Window. At December 31, 2011, debt outstanding from the FHLB totaled $5.4 billion with no debt outstanding from the Federal Reserve. Also, as part of our liquidity and funding plans, Ally Bank utilizes certain securities as collateral to access funding from repurchase agreements with third parties. Repurchase agreements are generally short-term and often on an overnight basis. Funding from repurchase agreements is accounted for as debt on our Consolidated Balance Sheet. At December 31, 2011, and December 31, 2010, Ally Bank had no debt outstanding under repurchase agreements. Refer to Note 15 to the Consolidated Financial Statements for a summary of deposit funding by type. The following table shows Ally Bank's number of accounts and deposit balances by type as of the end of each quarter since 2010.                  4th Quarter  3rd Quarter  2nd Quarter  1st Quarter  4th Quarter  3rd Quarter  2nd Quarter  1st Quarter ($ in millions)     2011          2011         2011         2011         2010         2010         2010         2010 Number of retail accounts     976,877      919,670      851,991      798,622      726,104      676,419      616,665      573,388 Deposits Retail          $    27,685   $   26,254   $   24,562   $   23,469   $   21,817   $   20,504   $   18,690   $   17,672 Brokered              9,890        9,911        9,903        9,836        9,992        9,978        9,858        9,757 Other (a)             2,029        2,704        2,405        2,064       

2,108 2,538 2,267 1,914 Total deposits $ 39,604$ 38,869$ 36,870$ 35,369$ 33,917$ 33,020$ 30,815$ 29,343

(a) Other deposits include mortgage escrow and other deposits (excluding

intercompany deposits).

   In addition to building a larger deposit base, we continue to remain active in the securitization markets to finance our Ally Bank automotive loan portfolios. During 2011, Ally Bank completed 11 transactions and raised $9.3 billion of secured funding backed by retail automotive loans as well as dealer floorplan automotive loans. Continued structural efficiencies in securitizations combined with improving capital market conditions have resulted in a reduction in the cost of funds achieved through secured funding transactions, making them a very attractive source of funding. Additionally, for retail automotive loans and leases, the term structure of the transaction locks in funding for a specified pool of loans and leases for the life of the underlying asset making a very effective funding program. Also in 2011, Ally Bank raised $1.5 billion from whole-loan sales of U.S. retail automotive loans. We manage the execution risk arising from secured funding by maintaining                                         88 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  a diverse investor base and maintaining capacity in our committed secured facilities. At December 31, 2011, Ally Bank had exclusive access to $9.5 billion of funding capacity from committed credit facilities. Ally Bank also had access to a $4.1 billion committed facility that is shared with the parent company. Nonbank Funding At December 31, 2011, the parent company maintained cash liquidity in the amount of $7.9 billion and available liquidity from unused capacity in committed credit facilities of $13.2 billion, including an equal allocation of shared unused capacity of $2.5 billion from a facility also available to Ally Bank. Parent company funding is defined as our consolidated operations less our Insurance operations, ResCap, and Ally Bank. The unused capacity amount at December 31, 2011 also includes $3.1 billion of availability that is expected to be utilized during 2012 and that is sourced from committed funding arrangements reliant upon the origination of future automotive receivables. Our ability to access unused capacity in secured facilities depends on the availability of eligible assets to collateralize the incremental funding and, in some instances, the execution of interest rate hedges. Funding sources at the parent company generally consist of longer-term unsecured debt, committed credit facilities, asset-backed securitizations, and a modest amount of short-term borrowings. During 2011, we completed a total of $3.8 billion in funding through the debt capital markets. We will continue to access the unsecured debt capital markets on an opportunistic basis to help pre-fund upcoming debt maturities. In addition, we offer short-term and long-term unsecured debt through a retail debt program known as SmartNotes. SmartNotes are floating-rate instruments with fixed-maturity dates ranging from 9 months to 30 years that we have issued through a network of participating broker-dealers. There were $9.0 billion and $9.8 billion of SmartNotes outstanding at December 31, 2011, and December 31, 2010, respectively. We also obtain unsecured funding from the sale of floating-rate demand notes under our Demand Notes program. The holder has the option to require us to redeem these notes at any time without restriction. Demand Notes outstanding were $2.8 billion at December 31, 2011, compared to $2.0 billion at December 31, 2010. Unsecured short-term bank loans also provide short-term funding. At December 31, 2011, we had $4.5 billion in short-term unsecured debt outstanding, an increase of $0.3 billion from December 31, 2010. Refer to Note 16 and Note 17 to the Consolidated Financial Statements for additional information about our outstanding short-term borrowings and long-term unsecured debt, respectively. Secured funding continues to be a significant source of financing at the parent company. In the United States, during 2011, we completed private securitization transactions that raised $6.6 billion of funding, a $1.3 billion whole-loan sale of retail automotive loans, and two private transactions that provided new committed capacity totaling $4.5 billion. Internationally in 2011, we completed four term securitization transactions that raised $2.0 billion and we completed numerous private transactions that created new committed capacity totaling $7.8 billion. We continue to maintain significant credit capacity at the parent company to fund automotive-related assets, including a $7.5 billion syndicated facility that can fund U.S. and Canadian automotive retail and commercial loans, as well as leases. In addition to this facility, there are a variety of others that provide funding in various countries. At December 31, 2011, there was a total of $27.5 billion of committed capacity available exclusively for the parent company in various secured facilities around the globe. Recent Funding Developments In summary, during 2011, we completed funding transactions totaling over $38 billion and we renewed key existing funding facilities as we realized access to both the public and private markets. Key funding highlights from 2011 and 2012 were as follows: •      We issued $3.8 billion of public term unsecured debt in 2011. In February        2012, we accessed the unsecured debt capital markets for the first time        since the first half of 2011 and raised $1.0 billion.  

• We raised $18.5 billion from the sale of asset-backed securities publicly

and privately in multiple jurisdictions and raised $2.8 billion from whole

loan sales of U.S. retail automotive loans. In 2012, we have continued to

       access the public asset backed securitization markets completing two U.S.        transactions that raised $2.4 billion and a Canadian transaction that        raised $516 million.  

• We created $13.3 billion of new funding capacity from the completion of

       new facilities and increases to existing facilities.   •      We renewed $25.0 billion of key funding facilities that fund our        Automotive Finance and Mortgage operations.   •      In March, we completed a key first step in our plan to repay the        U.S. taxpayer. Treasury was repaid $2.7 billion from the sale of all the

Trust Preferred Securities that Treasury held with Ally. This represented

the full value of Treasury's investment in these securities. Ally did not

receive any proceeds from the offering of the Trust Preferred Securities.

                                           89 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Funding Sources The following table summarizes debt and other sources of funding and the amount outstanding under each category for the periods shown. As a result of our funding strategy to maximize funding sources at Ally Bank and grow our retail deposit base, the percentage of funding sources from Ally Bank has increased in 2011 from 2010 levels. In addition, deposits represent a larger portion of the overall funding mix. December 31, ($ in millions)                   Bank     Nonbank    Total     % 2011 Secured financings                           $ 25,533  $ 27,432  $  52,965   37 Institutional term debt                             -    22,456     22,456   15 Retail debt programs (a)                            -    14,148     14,148   10

Temporary Liquidity Guarantee Program (TLGP) - 7,400 7,400

  5 Bank loans and other                                1     2,446      2,447    2 Total debt (b)                                 25,534    73,882     99,416   69 Deposits (c)                                   39,604     5,446     45,050   31 Total on-balance sheet funding               $ 65,138  $ 79,328  $ 144,466  

100

 Off-balance sheet securitizations Mortgage loans                               $      -  $ 60,630  $  60,630 Total off-balance sheet securitizations      $      -  $ 60,630  $  60,630 2010 Secured financings                           $ 20,199  $ 22,193  $  42,392   32 Institutional term debt                             -    27,257     27,257   21 Retail debt programs (a)                            -    14,249     14,249   10

Temporary Liquidity Guarantee Program (TLGP) - 7,400 7,400

  6 Bank loans and other                                1     2,374      2,375    2 Total debt (b)                                 20,200    73,473     93,673   71 Deposits (c)                                   33,917     5,131     39,048   29 Total on-balance sheet funding               $ 54,117  $ 78,604  $ 132,721  

100

 Off-balance sheet securitizations Mortgage loans                               $      -  $ 69,356  $  69,356 

Total off-balance sheet securitizations $ - $ 69,356$ 69,356

(a) Primarily includes $9.0 billion and $9.8 billion of Ally SmartNotes at

December 31, 2011 and 2010, respectively.

(b) Excludes fair value adjustment as described in Note 27 to the Consolidated

Financial Statements.

(c) Bank deposits include retail, brokered, mortgage escrow, and other deposits.

Nonbank deposits include dealer wholesale deposits and deposits at ResMor

Trust. Intercompany deposits are not included.

   Refer to Note 17 to the Consolidated Financial Statements for a summary of the scheduled maturity of long-term debt at December 31, 2011. Funding Facilities We utilize both committed and uncommitted credit facilities. The financial institutions providing the uncommitted facilities are not legally obligated to advance funds under them. The amounts outstanding under our various funding facilities are included on our Consolidated Balance Sheet. The total capacity in our committed funding facilities is provided by banks and other financial institutions through private transactions. The committed secured funding facilities can be revolving in nature and allow for additional funding during the commitment period, or they can be amortizing and not allow for any further funding after the closing date. At December 31, 2011, $32.0 billion of our $43.1 billion of committed capacity was revolving. Our revolving facilities generally have an original tenor ranging from 364 days to two years. As of December 31, 2011, we had $16.5 billion of committed funding capacity from revolving facilities with a remaining tenor greater than 364 days.                                         90 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

Committed Funding Facilities

                                         Outstanding               Unused capacity (a)               Total capacity December 31, ($ in billions)         2011         2010             2011              2010         2011          2010 Bank funding Secured                           $    5.8     $    6.4     $      3.7            $    1.9     $     9.5     $    8.3 Nonbank funding Unsecured Automotive Finance operations          0.3          0.8            0.5                   -           0.8          0.8 

Secured

 Automotive Finance operations (b)     14.3          8.3           13.2                 9.1          27.5         17.4 Mortgage operations                    0.7          1.0            0.5                 0.6           1.2          1.6 Total nonbank funding                 15.3         10.1           14.2                 9.7          29.5         19.8 Shared capacity (c)                    1.6          0.2            2.5                 3.9           4.1          4.1

Total committed facilities $ 22.7$ 16.7$ 20.4

$ 15.5$ 43.1$ 32.2

(a) Funding from committed secured facilities is available on request in the

event excess collateral resides in certain facilities or is available to the

extent incremental collateral is available and contributed to the facilities.

(b) Total unused capacity includes $4.9 billion as of December 31, 2011, and $1.2

billion as of December 31, 2010, from committed funding arrangements that are

reliant upon the origination of future automotive receivables and that are

available in 2012 and 2013.

(c) Funding is generally available for assets originated by Ally Bank or the

parent company, Ally Financial Inc.

Uncommitted Funding Facilities

                                    Outstanding          Unused capacity           Total capacity December 31, ($ in billions)       2011      2010         2011          2010       2011       2010 Bank funding Secured Federal Reserve funding programs $     -    $   -    $    3.2          $ 4.0    $     3.2    $  4.0 FHLB advances                        5.4      5.3           -            0.2          5.4       5.5 Total bank funding                   5.4      5.3         3.2            4.2          8.6       9.5 Nonbank funding Unsecured Automotive Finance operations        1.9      1.4         0.5            0.6          2.4       2.0 Secured Automotive Finance operations        0.1      0.1         0.1              -          0.2       0.1 Mortgage operations                    -        -         0.1            0.1          0.1       0.1 Total nonbank funding                2.0      1.5         0.7            0.7          2.7       2.2 Total uncommitted facilities     $   7.4    $ 6.8    $    3.9          $ 4.9    $    11.3    $ 11.7   Ally Bank Funding Facilities Facilities for Automotive Finance Operations - Secured At December 31, 2011, Ally Bank had exclusive access to $9.5 billion of funding capacity from committed credit facilities. Ally Bank's largest facility is a $7.5 billion revolving syndicated credit facility secured by automotive receivables. Half of this facility matures on March 28, 2012, with the remainder maturing on March 30, 2013. We are currently in the process of extending this entire facility for one year. At December 31, 2011, the amount outstanding under this facility was $5.0 billion. Ally Bank also had access to a $4.1 billion committed facility that is shared with the parent company. In the event these facilities are not renewed, the outstanding debt will be repaid over time as the underlying collateral amortizes. Nonbank Funding Facilities Facilities for Automotive Finance Operations - Unsecured Revolving credit facilities - At December 31, 2011, we maintained $486 million of commitments in our U.S. unsecured revolving credit facility maturing June 2012. We also maintained $268 million of committed unsecured bank facilities in Canada and $67 million in Europe. The Canadian facilities expire in June 2012 and the European facility expires in March 2012.                                         91 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Facilities for Automotive Finance Operations - Secured The parent company's largest facility is a $7.5 billion revolving syndicated credit facility secured by U.S. and Canadian automotive receivables. Half of this facility matures on March 28, 2012, with the remainder maturing on March 30, 2013. We are currently in the process of extending this entire facility for one year. In the event this facility is not renewed at maturity, the outstanding debt will be repaid over time as the underlying collateral amortizes. At December 31, 2011, there was $250 million of debt outstanding under this facility. In addition to our syndicated revolving credit facility, we also maintain various bilateral and multilateral secured credit facilities in multiple countries that fund our Automotive Finance operations. These are primarily private securitization facilities that fund a specific pool of automotive assets. Many of the facilities have revolving commitments and allow for the funding of additional assets during the commitment period. At December 31, 2011, the parent company maintained exclusive access to $27.5 billion of committed secured credit facilities and forward purchase commitments to fund automotive assets, and also had access to a $4.1 billion committed facility that is shared with Ally Bank. Facilities for Mortgage Operations - Secured At December 31, 2011, we had capacity of $500 million to fund eligible mortgage servicing rights and capacity of $475 million to fund mortgage servicer advances. We also maintain an additional $250 million of committed capacity to fund mortgage loans. Cash Flows Net cash provided by operating activities was $5.5 billion for the year ended December 31, 2011, compared to $11.6 billion in 2010. During the year ended December 31, 2011, the net cash inflow from sales and repayments of mortgage and automobile loans held-for-sale exceeded cash outflow from new originations and purchases of such loans by $0.9 billion. During the year ended December 31, 2010, this activity resulted in cash inflow of <money>$6.3 billion. Net cash used in investing activities was $14.1 billion for the year ended December 31, 2011, compared to $7.6 billion used in 2010. The cash outflow to purchase operating lease assets exceeded cash inflows from disposals of such assets by $1.0 billion for the year ended December 31, 2011. These activities resulted in a net cash inflow of $5.1 billion for the year ended December 31, 2010. The shift in net cash flow attributable to leasing activities compared to the prior year was primarily due to a year over year increase in lease origination activity. Cash used to purchase available-for-sale investment securities, net of sales and maturities, decreased $1.5 billion during the year ended December 31, 2011, compared to 2010. Net cash provided by financing activities for the year ended December 31, 2011, totaled $10.1 billion, compared to net cash used of $8.0 billion in 2010. Cash generated from long-term debt issuances exceeded cash used to repay such debt by $4.3 billion for the year ended December 31, 2011. For the comparable period in 2010, cash repayments exceeded proceeds from new issuances of long-term debt by $10.5 billion. Also contributing to the increase in cash inflow was an increase in short-term borrowing obligations of $4.1 billion for the year ended December 31, 2011, compared to 2010. Capital Planning and Stress Tests In December 2011, Ally became subject to a new capital planning and stress test regime generally applicable to bank holding companies with $50 billion or more of consolidated assets. The new regime requires Ally to conduct periodic stress tests and submit a proposed capital action plan to the FRB every January, which the FRB must take action on by the following March. The proposed capital action plan must include a description of all planned capital actions over a nine-quarter planning horizon, including any issuance of a debt or equity capital instrument, any capital distribution, and any similar action that the FRB determines could have an impact on Ally's consolidated capital. The proposed capital action plan must also include a discussion of how Ally will maintain capital above the minimum regulatory capital ratios and above a Tier 1 common equity-to-total risk-weighted assets ratio of 5 percent, and serve as a source of strength to Ally Bank. The FRB must approve Ally's proposed capital action plan before Ally may take any proposed capital action covered by the new regime. Ally submitted its capital plan in January 2012, and it is unknown whether the FRB will accept Ally's plan as submitted or require revisions. Regulatory Capital Refer to Note 23 to the Consolidated Financial Statements. Credit Ratings The cost and availability of unsecured financing are influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings result in higher borrowing costs and reduced access to capital markets. This is particularly true for certain institutional investors whose investment guidelines require investment-grade ratings on term debt and the two highest rating categories for short-term debt (particularly money market investors).                                         92 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Nationally recognized statistical rating organizations have rated substantially all our debt. The following table summarizes our current ratings and outlook by the respective nationally recognized rating agencies. Rating agency Commercial paper   Senior debt   Outlook    Date of last action Fitch                B               BB-       Negative   February 2, 2012 (a) Moody's          Not-Prime           B1         Stable    February 7, 2011 (b) S&P                  C               B+         Stable      May 4, 2011 (c) DBRS                R-4            BB-Low      Positive   February 4, 2011 (d)  

(a) Fitch downgraded our senior debt to BB- from BB, affirmed the commercial

paper rating of B, and changed the outlook to Negative on February 2, 2012.

(b) Moody's upgraded our senior debt rating to B1 from B3, affirmed the

commercial paper rating of Not-Prime, and affirmed the outlook of Stable on

February 7, 2011.

(c) Standard & Poor's upgraded our senior debt rating to B+ from B, affirmed the

commercial paper rating of C, and affirmed the outlook of Stable on

May 4, 2011.

(d) DBRS affirmed our senior debt rating of BB-Low, affirmed the commercial paper

rating of R-4, and changed the outlook to Positive on February 4, 2011.

   Insurance Financial Strength Ratings Substantially all of our U.S. Insurance operations have a Financial Strength Rating (FSR) and an Issuer Credit Rating (ICR) from A.M. Best Company. The FSR is intended to be an indicator of the ability of the insurance company to meet its senior most obligations to policyholders. Lower ratings generally result in fewer opportunities to write business as insureds, particularly large commercial insureds, and insurance companies purchasing reinsurance have guidelines requiring high FSR ratings. Our Insurance operations outside the United States are not rated. On July 20, 2010, A.M. Best removed our U.S. insurance companies from under review with developing implications and affirmed the FSR of B++ (good) and the ICR of BBB. Off-balance Sheet Arrangements Refer to Note 11 to the Consolidated Financial Statements. Securitization Securitization of assets allows us to diversify funding sources by enabling us to convert assets into cash earlier than what would have occurred in the normal course of business. Information regarding our securitization activities is further described in Note 11 to the Consolidated Financial Statements. As part of these activities, assets are generally sold to securitization entities. These securitization entities are separate legal entities that assume the risk and reward of ownership of the receivables. Neither we nor those subsidiaries are responsible for the other entities' debts, and the assets of the subsidiaries are not available to satisfy our claim or those of our creditors. In turn, the securitization entities establish separate trusts to which they transfer the assets in exchange for the proceeds from the sale of asset- or mortgage-backed securities issued by the trust. The trusts' activities are generally limited to acquiring the assets, issuing asset- or mortgage-backed securities, making payments on the securities, and periodically reporting to the investors. We may account for the transfer of assets as a sale if we either do not hold a significant variable interest or do not provide servicing or asset management functions for the financial assets held by the securitization entity. Certain of our securitization transactions, while similar in legal structure to the transaction described in the foregoing do not meet the required criteria to be accounted for as off-balance sheet arrangements; therefore, they are accounted for as secured financings. As secured financings, the underlying automobile finance retail contracts, wholesale loans, automobile leases, or mortgage loans remain on our Consolidated Balance Sheet with the corresponding obligation (consisting of the beneficial interests issued by the securitization entity) reflected as debt. We recognize interest income on the finance receivables, automobile leases and loans, and interest expense on the beneficial interests issued by the securitization entity; and we provide for loan losses on the finance receivables and loans as incurred or adjust to fair value for fair value-elected loans. At December 31, 2011 and 2010, $78.5 billion and $72.6 billion of our total assets, respectively, were related to secured financings. Refer to Note 17 to the Consolidated Financial Statements for further discussion. As part of our securitization activities, we typically agree to service the transferred assets for a fee, and we may earn other related ongoing income. The amount of the fees earned is disclosed in Note 12 to the Consolidated Financial Statements. We may also retain a portion of senior and subordinated interests issued by the trusts; these interests are reported as trading assets, investment securities, or other assets on our Consolidated Balance Sheet and are disclosed in Notes 6, 7, and 14 to the Consolidated Financial Statements. For secured financings, retained interests are not recognized as a separate asset on our Consolidated Balance Sheet. Subordinate interests typically provide credit support to the more highly rated senior interest in a securitization transaction and may be subject to all or a portion of the first loss position related to the sold assets. The FDIC, which regulates Ally Bank, promulgated a new safe harbor regulation for securitizations by banks which took effect on January 1, 2011. Compliance with this regulation requires the sponsoring bank to retain either five percent of each class of beneficial interests issued in the securitization or a representative sample of similar financial assets equal to five percent of the securitized financial assets. The retained interests or assets must be held for the life of the securitization and may not be sold, pledged or hedged, except that interest rate and currency hedging is permitted. This risk retention requirement adversely affects the efficiency of securitizations, because it reduces the                                         93 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  amount of funds that can be raised against a given pool of financial assets. We sometimes use derivative financial instruments to facilitate securitization activities, as further described in Note 24 to the Consolidated Financial Statements. Our economic exposure related to the securitization trusts is generally limited to cash reserves, our other interests retained in financial asset sales, and our customary representation and warranty provisions described in Note 11 to the Consolidated Financial Statements. The trusts have a limited life and generally terminate upon final distribution of amounts owed to investors or upon exercise by us, as servicer of a cleanup call option, when the servicing of the sold contracts becomes burdensome. In addition, the trusts do not invest in our equity or in the equity of any of our affiliates. Purchase Obligations Certain of the structures related to whole-loan sales, securitization transactions, and other off-balance sheet activities contain provisions that are standard in the whole-loan sale and securitization markets where we may (or, in certain limited circumstances, are obligated to) purchase specific assets from entities. Our obligations are as follows. Loan Repurchases and Obligations Related to Loan Sales Overview - Certain mortgage companies (Mortgage Companies) within our Mortgage operations sell loans that take the form of securitizations guaranteed by the GSEs, securitizations to private investors, and to whole-loan investors. In connection with a portion of our Mortgage Companies' private-label securitizations, the monolines insured all or some of the related bonds and guaranteed timely repayment of bond principal and interest when the issuer defaults. In connection with securitizations and loan sales, the trustee for the benefit of the related security holders and, if applicable, the related monoline insurer, are provided various representations and warranties related to the loans sold. The specific representations and warranties vary among different transactions and investors but typically relate to, among other things, the ownership of the loan, the validity of the lien securing the loan, the loan's compliance with the criteria for inclusion in the transaction, including compliance with underwriting standards or loan criteria established by the buyer, the ability to deliver required documentation and compliance with applicable laws. In general, the representations and warranties described above may be enforced against the applicable Mortgage Companies at any time unless a sunset provision is in place. Upon discovery of a breach of a representation or warranty, the breach is corrected in a manner conforming to the provisions of the sale agreement. This may require the applicable Mortgage Companies to repurchase the loan, indemnify the investor for incurred losses, or otherwise make the investor whole. We have entered into settlement agreements with both Fannie Mae and Freddie Mac that, subject to certain exclusions, limit our remaining exposure with the GSEs. See Government-sponsored Enterprises below. ResCap assumes all of the customary mortgage representation and warranty obligations for loans purchased from Ally Bank and subsequently sold into the secondary market, generally through securitizations guaranteed by the GSEs. In the event ResCap fails to meet these obligations, Ally Financial Inc. has provided Ally Bank a guaranteed coverage of certain of these liabilities. Originations - The total exposure of the applicable Mortgage Companies to mortgage representation and warranty claims is most significant for loans originated and sold between 2004 through 2008, specifically the 2006 and 2007 vintages that were originated and sold prior to enhanced underwriting standards and risk-mitigation actions implemented in 2008 and forward. Since 2009, we have focused primarily on originating domestic prime conforming and government-insured mortgages. In addition, we ceased offering interest-only jumbo mortgages in 2010. Representation and warranty risk-mitigation strategies include, but are not limited to, pursuing settlements with investors where economically beneficial in order to resolve a pipeline of demands in lieu of loan-by-loan assessments that could result in repurchasing loans, aggressively contesting claims we do not consider valid (rescinding claims), or seeking recourse against correspondent lenders from whom we purchased loans wherever appropriate. The following table summarizes domestic mortgage loans sold with contractual representation and warranty obligations by the type of investor (original unpaid principal balance). Year ended December 31, ($ in billions)           2011       2010       2009       2008       2007       2006        2005        2004 GSEs Fannie Mae              $ 33.9     $ 35.3     $ 21.2     $ 24.9     $ 31.6     $  33.5     $  31.8     $  30.5 Freddie Mac               15.8       15.7        8.7       12.3       15.5        12.6        16.1        13.7 Ginnie Mae                 8.1       16.2       24.9       12.5        3.2         3.6         4.2         4.8 Private-label securitizations Insured (monolines)          -          -          -          -        6.5        10.7        10.4        15.1 Uninsured                    -        0.3          -          -       29.1        63.6        53.5        35.9 Whole-loan/other           0.4        1.6        0.1        2.2        8.2        23.9        17.4        10.9 Total sales             $ 58.2     $ 69.1     $ 54.9     $ 51.9     $ 94.1     $ 147.9     $ 133.4     $ 110.9   Repurchase Process - After receiving a claim under representation and warranty obligations, the applicable Mortgage Companies will review the claim to determine the appropriate response (e.g. appeal and provide or request additional information) and take appropriate action (rescind, repurchase the loan, or remit indemnification payment). Historically, repurchase demands were generally related to loans that                                         94 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  became delinquent within the first few years following origination. As a result of market developments over the past several years, investor repurchase demand behavior has changed significantly. GSEs and investors are more likely to submit claims for loans at any point in their life cycle, including requests for loans that become delinquent or loans that incur a loss. Investors are more likely to submit claims for loans that become delinquent at any time while a loan is outstanding or when a loan incurs a loss. Representation and warranty claims are generally reviewed on a loan-by-loan basis to validate if there has been a breach requiring a potential repurchase or indemnification payment. The applicable Mortgage Companies actively contest claims to the extent they are not considered valid. The applicable Mortgage Companies are not required to repurchase a loan or provide an indemnification payment where claims are not valid. During the year ended December 31, 2011, we experienced a decrease in new claims compared to 2010, in part due to settlements with certain counterparties. The following table presents new claims by vintage (original unpaid principal balance). Year ended December 31, ($ in millions)  2011      2010 2004 and prior period                   $  36    $    46 2005                                       43         58 2006                                      291        235 2007                                      116        461 2008                                      147        255 Post 2008                                 157         60 Unspecified                                 -          4 Total claims (a)                        $ 790    $ 1,119  

(a) Excludes certain populations where counterparties have requested additional

information.

   The risk of repurchase or indemnification and the associated credit exposure is managed through underwriting and quality assurance practices and by servicing mortgage loans to meet investor standards. We believe that, in general, the longer a loan performs prior to default the less likely it is that an alleged breach of representation and warranty will be found to have a material and adverse impact on the loan's performance. When loans are repurchased, the applicable Mortgage Companies bear the related credit loss on the loans. Repurchased loans are classified as held-for-sale and initially recorded at fair value. Refer to Note 31 to the Consolidated Financial Statements for additional information related to representation and warranties. The following table summarizes the unpaid principal balance on mortgage loans repurchased in connection with our representation and warranty obligations. Year ended December 31, ($ in millions)  2011     2010 GSEs                                    $ 143    $ 389 Private-label securitizations Insured (monolines)                         1       13 Uninsured                                  37        - Whole-loan/other                            9       82 Total loan repurchases                  $ 190    $ 484   The following table summarizes indemnification payments made in connection with our representation and warranty obligations. Year ended December 31, ($ in millions)  2011     2010 GSEs                                    $  59    $ 228 Private-label securitizations Insured (monolines)                        13       27 Uninsured                                 167        - Whole-loan/other                           26       11 

Total indemnification payments $ 265$ 266

                                       95 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  

The following table presents the total number and original unpaid principal balance of loans related to unresolved representation and warranty demands (indemnification claims or repurchase demands). The table includes demands that we have requested be rescinded but which have not been agreed to by the investor.

                                                       2011                                    2010                                                             Dollar amount                           Dollar amount December 31, ($ in millions)           Number of loans        of loans         Number of loans        of loans GSEs                                              357     $            71                 833     $           170   (a) Monolines MBIA                                            7,314                 490               6,819                 466 FGIC                                            4,608                 369               1,109                 164 Other                                             730                  58                 278                  31 Whole-loan/other                                  513                  81                 392                  88 Total number of loans and unpaid principal balance (b)                          13,522     $         1,069               9,431     $           919   

(a) This amount is gross of any loans that would be removed due to the Fannie Mae

settlement. At December 31, 2010, $48 million of outstanding claims were

covered under the Fannie Mae settlement agreement.

(b) Excludes certain populations where counterparties have requested additional

documentation.

   We are currently in litigation with MBIA Insurance Corporation (MBIA) and Financial Guaranty Insurance Company (FGIC) with respect to certain of their private-label securitizations. Historically we have requested that most of the repurchase demands presented to us by both MBIA and FGIC be rescinded, consistent with the repurchase process described above. As the litigation process proceeds, additional loan reviews are expected and will likely result in additional repurchase demands. Representation and Warranty Obligation Reserve Methodology - The liability for representation and warranty obligations reflects management's best estimate of probable lifetime losses at the applicable Mortgage Companies. We consider historical and recent demand trends in establishing the reserve. The methodology used to estimate the reserve considers a variety of assumptions including borrower performance (both actual and estimated future defaults), repurchase demand behavior, historical loan defect experience, historical mortgage insurance rescission experience, and historical and estimated future loss experience, which includes projections of future home price changes as well as other qualitative factors including investor behavior. In cases where we do not have or have limited current or historical demand experience with an investor, it is difficult to predict and estimate the level and timing of any potential future demands. In such cases, we may not be able to reasonably estimate losses, and a liability is not recognized. Management monitors the adequacy of the overall reserve and makes adjustments to the level of reserve, as necessary, after consideration of other qualitative factors including ongoing dialogue and experience with counterparties. At the time a loan is sold, an estimate of the fair value of the liability is recorded and classified in accrued expenses and other liabilities on our Consolidated Balance Sheet and recorded as a component of gain (loss) on mortgage and automotive loans, net, in our Consolidated Statement of Income. We recognize changes in the liability when additional relevant information becomes available. Changes in the liability are recorded as other operating expenses in our Consolidated Statement of Income. The repurchase reserve at December 31, 2011, relates primarily to non-GSE exposure. Government-sponsored Enterprises - Between 2004 and 2008, the applicable Mortgage Companies sold $250.8 billion of loans to the GSEs. Each GSE has specific guidelines and criteria for sellers and servicers of loans underlying their securities. In addition, the risk of credit loss of the loan sold was generally transferred to investors upon sale of the securities into the secondary market. Conventional conforming loans were sold to either Freddie Mac or Fannie Mae, and government-insured loans were securitized with Ginnie Mae. For the year ended December 31, 2011, the applicable Mortgage Companies received repurchase claims relating to $441 million of original unpaid principal balance of which $285 million are associated with the 2004 through 2008 vintages. The remaining $156 million in repurchase claims relate to post-2008 vintages. During the year ended December 31, 2011, the applicable Mortgage Companies resolved claims with respect to $540 million of original unpaid principal balance, including settlement, repurchase, or indemnification payments related to $349 million of original unpaid principal balance, and rescinded claims related to $191 million of original unpaid principal balance. The applicable Mortgage Companies' representation and warranty obligation liability with respect to the GSEs considers the existing unresolved claims and the best estimate of future claims that could be received. The Mortgage Companies consider their experience with the GSE in evaluating its liability. During 2010, we reached agreements with Freddie Mac and Fannie Mae that, subject to certain exclusions, limits the remaining exposure of the applicable Mortgage Companies to each counterparty. In March 2010, certain of our Mortgage Companies entered into an agreement with Freddie Mac under which we made a one-time payment to Freddie Mac for the release of repurchase obligations relating to most of the mortgage loans sold to Freddie Mac prior to January 1, 2009. This agreement does not release obligations of the applicable Mortgage Companies with respect to exposure for private-label mortgage-backed securities (MBS) in which Freddie Mac had previously invested, loans where Ally Bank is the owner of the servicing, as well as defects in certain other specified categories of loans. Further, the applicable Mortgage Companies continue to be responsible for other contractual obligations we have with Freddie Mac, including all indemnification obligations that may arise in connection with the servicing of the mortgages. The total original unpaid principal balance of loans originated prior to January 1, 2009 and where Ally Bank was the owner of                                         96 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  the servicing was $10.9 billion. For the year ended December 31, 2011, the amount of losses taken on loans repurchased relating to defects where Ally Bank was the owner of the servicing was $31 million and the amount of losses taken on loans that we have repurchased relating to defects in the other specified categories was $15 million. These other specified categories include (i) loans subject to certain state predatory lending and similar laws; (ii) groups of 25 or more mortgage loans purchased, originated, or serviced by one of our mortgage subsidiaries, the purchase, origination, or sale of which all involve a common actor who committed fraud; (iii) "non-loan-level" representations and warranties which refer to representations and warranties that do not relate to specific mortgage loans (examples of such non-loan-level representations and warranties include the requirement that our mortgage subsidiaries meet certain standards to be eligible to sell or service loans for Freddie Mac or our mortgage subsidiaries sold or serviced loans for market participants that were not acceptable to Freddie Mac); and (iv) mortgage loans that are ineligible for purchase by Freddie Mac under its charter and other applicable documents. If, however, a mortgage loan was ineligible under Freddie Mac's charter solely because mortgage insurance was rescinded (rather than for example, because the mortgage loan is secured by a commercial property), and Freddie Mac required our mortgage subsidiary to repurchase that loan because of the ineligibility, Freddie Mac would pay our mortgage subsidiary any net loss we suffered on any later liquidation of that mortgage loan. Certain of our Mortgage Companies received subpoenas in July 2010 from the Federal Housing Finance Agency (FHFA), which is the conservator of Fannie Mae and Freddie Mac. The subpoenas relating to Fannie Mae investments have been withdrawn with prejudice. The FHFA indicated that documents provided in response to the remaining subpoenas will enable the FHFA to determine whether they believe issuers of private-label MBS are potentially liable to Freddie Mac for losses they might have incurred. Although Freddie Mac has not brought any representation and warranty claims against us with respect to private-label securities subsequent to the settlement, they may well do so in the future. The FHFA has commenced securities and related common law fraud litigation against Ally and certain of our Mortgage Companies with respect to certain of Freddie Mac's private-label securities investments. Refer to the Legal Proceedings described in Note 31 to the Consolidated Financial Statements for additional information. On December 23, 2010, certain of our mortgage subsidiaries entered into an agreement with Fannie Mae under which we made a one-time payment to Fannie Mae for the release of repurchase obligations related to most of the mortgage loans we sold to Fannie Mae prior to June 30, 2010. The agreement also covers potential exposure for private-label MBS in which Fannie Mae had previously invested. This agreement does not release the obligations of the applicable Mortgage Companies with respect to loans where Ally Bank is the owner of the servicing, as well as for defects in certain other specified categories of loans. Further, the applicable Mortgage Companies continue to be responsible for other contractual obligations they have with Fannie Mae, including all indemnification obligations that may arise in connection with the servicing of the mortgages, and the applicable Mortgage Companies continue to be obligated to indemnify Fannie Mae for litigation or third party claims (including by borrowers) for matters that may amount to breaches of selling representations and warranties. The total original unpaid principal balance of loans originated prior to January 1, 2009 and where Ally Bank was the owner of the servicing was$24.4 billion. For the year ended December 31, 2011, the amount of losses we have taken on loans that we have repurchased relating to defects where Ally Bank was the owner of the servicing was $66 million and the amount of losses we have taken on loans that we have repurchased relating to defects in the other specified categories of loans was $13 million. These other specified categories include, among others, (i) those that violate anti-predatory laws or statutes or related regulations or that otherwise violate other applicable laws and regulations; (ii) those that have non-curable defects in title to the secured property, or that have curable title defects, to the extent our mortgage subsidiaries do not cure such defects at our subsidiary's expense; (iii) any mortgage loan in which title or ownership of the mortgage loan was defective; (iv) groups of 13 or more mortgage loans, the purchase, origination, sale, or servicing of which all involve a common actor who committed fraud; and (v) mortgage loans not in compliance with Fannie Mae Charter Act requirements (e.g., mortgage loans on commercial properties or mortgage loans without required mortgage insurance coverage). If a mortgage loan falls out of compliance with Fannie Mae Charter Act requirements because mortgage insurance coverage has been rescinded and not reinstated or replaced, upon the borrower's default our mortgage subsidiaries would have to pay to Fannie Mae the amount of insurance proceeds that would have been paid by the mortgage insurer with respect to such mortgage loan. If the amount of the loss exceeded the amount of insurance proceeds, Fannie Mae would be responsible for such excess. The following table summarizes the changes in the original unpaid principal balance related to unresolved repurchase demands with respect to our GSE exposure. The table includes demands that we have requested be rescinded but which have not been agreed to by the investor. ($ in millions)          2011      2010 Balance at January 1,   $ 170     $ 296 New claims (a)            441       842 Resolved claims (b)      (349 )    (756 ) Rescinded claims/other   (191 )    (212 ) Balance at December 31, $  71     $ 170   

(a) Excludes certain populations where counterparties have requested additional

documentation.

(b) Includes losses, settlements, impairments on repurchased loans, and

indemnification payments.

   Monoline Insurers - Historically, the applicable Mortgage Companies securitized loans where the monolines insured all or some of the related bonds and guaranteed the timely repayment of bond principal and interest when the issuer defaults. Typically, any alleged breach requires the insurer to have both the ability to assert a claim as well as evidence that a defect has had a material and adverse effect on the interest of the security holders or the insurer. For the period 2004 through 2007, the Mortgage Companies sold $42.7 billion of loans into                                         97 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  these monoline-wrapped securitizations. During the year ended December 31, 2011, the Mortgage Companies received repurchase claims related to $265 million of original unpaid principal balance from the monolines associated with the 2004 through 2007 securitizations. The Mortgage Companies have resolved repurchase demands through indemnification payments related to $20 million of original unpaid principal balance. We are currently in litigation with MBIA and FGIC, and additional litigation with other monolines is likely. Refer to Note 31 to the Consolidated Financial Statements for information with respect to pending litigation. The following table summarizes the changes in our original unpaid principal balance related to unresolved repurchase demands with respect to our monoline exposure. The table includes demands that we have requested be rescinded but which have not been agreed to by the investor. ($ in millions)          2011      2010 Balance at January 1,   $ 661     $ 553 New claims (a)            265       151 Resolved claims (b)       (20 )     (36 ) Rescinded claims/other     11        (7 ) Balance at December 31, $ 917     $ 661   

(a) Excludes certain populations where counterparties have requested additional

documentation.

(b) Includes losses, settlements, impairments on repurchased loans, and

indemnification payments.

   Private-label Securitization - Historically, our Mortgage operations were very active in the securitization market selling whole loans into special-purpose entities and selling these private-label MBS to investors. The following table summarizes the original unpaid principal balance of our domestic uninsured private-label mortgage securitization activity issued from various shelf registration statements of our subsidiaries and its corresponding majority product type and current unpaid principal balance for securitizations completed during 2004 through 2007.                                                                    Current UPB at      UPB at December ($ in billions)                               Original UPB        December 31, 2011        31, 2010 RFMSI (Prime)                                $        21.8       $             8.3     $         10.0 RALI (Option ARM and Alt-A)                           66.7                    26.2               30.7 RAMP (HELOC and Subprime)                             55.9   (a)              12.9               15.0 RASC (Subprime)                                       36.8                     8.0                9.0 RFMSII (HELOC)                                         0.9                     0.3                0.3 Total                                        $       182.1       $            55.7     $         65.0  

(a) RAMP original unpaid principal balance comprises $37.7 billion subprime, $8.8

billion prime, and $9.4 billion other.

The following table summarizes the original unpaid principal balance of our domestic insured private-label mortgage securitization activity issued from various shelf registration statements of our Mortgage Subsidiaries and its corresponding majority product type and current unpaid principal balance for securitizations completed during 2004 through 2007.

                                                                   Current UPB at      UPB at December ($ in billions)                                Original UPB       December 31, 2011        31, 2010 RFMSI (Prime)                                $          1.7      $             0.5     $          0.6 RALI (Option ARM and Alt-A)                             1.4                    0.6                0.7 RAMP (HELOC and Subprime)                              26.5                    6.3                7.3 RASC (Subprime)                                         3.6                    0.6                0.7 RFMSII (HELOC)                                          9.5                    2.1                2.6 Total                                        $         42.7      $            10.1     $         11.9   In general, representations and warranties provided as part of our securitization activities are less rigorous than those provided to the GSEs and generally impose higher burdens on parties seeking repurchase. In order to successfully assert a claim, it is our position that a claimant must prove a breach of the representations and warranties that materially and adversely affects the interest of the investor in the allegedly defective loan. Securitization documents typically provide the investors with a right to request that the trustee investigate and initiate a repurchase claim. However, a class of investors generally is required to coordinate with other investors in that class comprising not less than 25%, and in some cases, 50%, of the percentage interest constituting a class of securities of that class issued by the trust to pursue                                         98 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  claims for breach of representations and warranties. In addition, our private-label securitizations generally require that the servicer or trustee give notice to the other parties whenever it becomes aware of facts or circumstances that reveal a breach of representation that materially and adversely affects the interest of the certificate holders. Regarding our securitization activities, certain of our Mortgage Companies have exposure to potential losses primarily through two avenues. First, investors, through trustees to the extent required by the applicable agreements (or monoline insurers in certain transactions), may request pursuant to applicable agreements that the applicable Mortgage Company repurchase loans or make the investor whole for losses incurred if it is determined that the applicable Mortgage Company violated representations and warranties made at the time of the sale, provided that such violations materially and adversely impacted the interests of the investor. Contractual representations and warranties are different based on the specific deal structure and investor. It is our position that litigation of these matters must proceed on a loan by loan basis. This issue is being disputed throughout the industry in various pending litigation matters. Similarly in dispute, as a matter of law, is the degree to which claimants will have to prove that the alleged breaches of representations and warranties actually caused the losses they claim to have suffered. Ultimate resolution by courts of these and other legal issues will impact litigation and treatment of non-litigated claims pursuant to similar contractual provisions. Second, investors in securitizations may attempt to achieve rescission of their investments or damages through litigation by claiming that the applicable offering documents were materially deficient. If an investor properly made and proved its allegations, the investor might attempt to claim that damages could include loss of market value on the investment even if there were little or no credit loss in the underlying loans. Whole-loan Sales - In addition to the settlements with the GSEs noted earlier, certain of our Mortgage Companies have settled with whole-loan investors concerning alleged breaches of underwriting standards. For the year ended December 31, 2011, certain of our Mortgage Companies have received $84 million of original unpaid principal balance in repurchase claims of which $83 million are associated with the 2004 through 2008 vintages of loans sold to whole-loan investors. Certain of our Mortgage Companies resolved claims related to $91 million of original unpaid principal balance, including settlements, repurchases, indemnification payments, and rescinded claims. The following table summarizes the changes in the original unpaid principal balance related to unresolved repurchase demands with respect to our whole-loan sales exposure. ($ in millions)          2011     2010 Balance at January 1,   $ 88     $ 70 New claims (a)            84      126 Resolved claims (b)      (34 )    (44 ) Rescinded claims/other   (57 )    (64 ) Balance at December 31, $ 81     $ 88   

(a) Excludes certain populations where counterparties have requested additional

documentation.

(b) Includes losses, settlements, impairments on repurchased loans, and

indemnification payments.

Private Mortgage Insurance</org> Mortgage insurance is required for certain consumer mortgage loans sold to the GSEs and certain securitization trusts and may have been in place for consumer mortgage loans sold to whole-loan investors. Mortgage insurance is typically required for first-lien consumer mortgage loans having a loan-to-value ratio at origination of greater than 80 percent. Mortgage insurers are, in certain circumstances, permitted to rescind existing mortgage insurance that covers consumer loans if they demonstrate certain loan underwriting requirements have not been met. Upon receipt of a rescission notice, the applicable Mortgage Companies will assess the notice and, if appropriate, refute the notice, or if the notice cannot be refuted, the applicable Mortgage Companies attempt to remedy the defect. In the event the mortgage insurance cannot be reinstated, the applicable Mortgage Companies may be obligated to repurchase the loan or provide an indemnification payment in the event of a loss, subject to contractual limitations. While the applicable Mortgage Companies make every effort to reinstate the mortgage insurance, they have had limited success and as a result, most of these requests result in rescission of the mortgage insurance. At December 31, 2011, the applicable Mortgage Companies have approximately $227 million in original unpaid principal balance of outstanding mortgage insurance rescission notices where we have not received a repurchase demand. However, this unpaid principal amount is not representative of expected future losses. Private-label Mortgage-backed Securities Litigation, Repurchase Obligations, and Related Claims We believe it is reasonably possible that losses beyond amounts currently reserved for the litigation matters described in Note 31 to the Consolidated Financial Statements and potential repurchase obligations and related claims with respect to our Mortgage Companies discussed above could occur, and such losses could have a material adverse impact on our results of operations, financial position, or cash flows. However, based on currently available information, we are unable to estimate a range of reasonably possible losses above reserves that have been established. Guarantees Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based on changes in an underlying agreement that is related to a guaranteed party. Our guarantees include standby letters of credit and certain contract provisions regarding securitizations and sales. Refer to Note 30 to the Consolidated Financial Statements for more information regarding our outstanding guarantees to third parties.                                         99 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Aggregate Contractual Obligations The following table provides aggregated information about our outstanding contractual obligations disclosed elsewhere in our Consolidated Financial Statements.                                                                 Payments due by period                                                          Less than        1-3          3-5         More than December 31, 2011 ($ in millions)           Total         1 year         years        years         5 years Description of obligation Long-term debt Total (a)                                $  93,930     $    26,535     $ 34,407     $ 11,292     $    21,696 Scheduled interest payments for fixed-rate long-term debt                   26,286           3,434        4,542        3,655          14,655 Estimated interest payments for variable-rate long-term debt (b)             1,516             594          864           52               6 Estimated net payments under interest rate swap agreements (b)                        72               -            -            -              72 Originate/purchase mortgages or securities                                   6,741           6,672            -            -              69 Commitments to provide capital to investees                                       56              35            3            8              10 Home equity lines of credit                  2,234             207          654          502             871 Lending commitments                          2,322           1,289          671          339              23 Lease commitments                              316              83          129           67              37 Purchase obligations                           777             291          418           47              21 Bank certificates of deposit                30,498          15,571        8,815        6,112               - Total                                    $ 164,748     $    54,711     $ 50,503     $ 22,074     $    37,460  

(a) Total amount reflects the remaining principal obligation and excludes

original issue discount of $2.2 billion related to the December 2008 bond

exchange and fair value adjustments of $1.1 billion related to fixed-rate

debt designated as a hedged item.

(b) Estimate utilized a forecasted variable interest model, when available, or

the applicable variable interest rate as of the most recent reset date prior

to December 31, 2011.

   The foregoing table does not include our reserves for insurance losses and loss adjustment expenses, which total $580 million at December 31, 2011. While payments due on insurance losses are considered contractual obligations because they related to insurance policies issued by us, the ultimate amount to be paid and the timing of payment for an insurance loss is an estimate subject to significant uncertainty. Furthermore, the timing on payment is also uncertain; however, the majority of the balance is expected to be paid out in less than five years. Similarly, due to uncertainty in the timing of future cash flows related to our unrecognized tax benefits, the contractual obligations detailed above do not include $198 million in unrecognized tax benefits. The following provides a description of the items summarized in the preceding table of contractual obligations. Long-term Debt Amounts represent the scheduled maturity of long-term debt at December 31, 2011, assuming that no early redemptions occur. The maturity of secured debt may vary based on the payment activity of the related secured assets. The amounts presented are before the effect of any unamortized discount or fair value adjustment. Refer to Note 16 and Note 17 to the Consolidated Financial Statements for additional information on our debt obligations. Originate/Purchase Mortgages or Securities As part of our Mortgage operations, we enter into commitments to originate and purchase mortgages and MBS. Refer to Note 30 to the Consolidated Financial Statements for additional information. Commitments to Provide Capital to Investees As part of arrangements with specific private equity funds, we are obligated to provide capital to investees. Refer to Note 30 to the Consolidated Financial Statements for additional information. Home Equity Lines of Credit We are committed to fund the future remaining balance on unused lines of credit on mortgage loans. The funding is subject to customary lending conditions, such as a satisfactory credit rating, delinquency status, and adequate home equity value. Refer to Note 30 to the Consolidated Financial Statements for additional information. Lending Commitments Our Automotive Finance operations, Mortgage operations, and Commercial Finance Group have outstanding revolving lending commitments with customers. The amounts presented represent the unused portion of those commitments at December 31, 2011. Refer to Note 30 to the Consolidated Financial Statements for additional information.                                        100 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Lease Commitments We have obligations under various operating lease arrangements (primarily for real property) with noncancelable lease terms that expire after December 31, 2011. Refer to Note 30 to the Consolidated Financial Statements for additional information. Purchase Obligations We enter into multiple contractual arrangements for various services. The arrangements represent fixed payment obligations under our most significant contracts and primarily relate to contracts with information technology providers. Refer to Note 30 to the Consolidated Financial Statements for additional information. Bank Certificates of Deposit Refer to Note 15 to the Consolidated Financial Statements for additional information. Critical Accounting Estimates Accounting policies are integral to understanding our Management's Discussion and Analysis of Financial Condition and Results of Operations. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make certain judgments and assumptions, on the basis of information available at the time of the financial statements, in determining accounting estimates used in the preparation of these statements. Our significant accounting policies are described in Note 1 to the Consolidated Financial Statements; critical accounting estimates are described in this section. An accounting estimate is considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made. If actual results differ from our judgments and assumptions, then it may have an adverse impact on the results of operations and cash flows. Our management has discussed the development, selection, and disclosure of these critical accounting estimates with the Audit Committee of the Board, and the Audit Committee has reviewed our disclosure relating to these estimates. Fair Value Measurements We use fair value measurements to record fair value adjustments to certain instruments and to determine fair value disclosures. Refer to Note 27 to the Consolidated Financial Statements for a description of valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized. We follow the fair value hierarchy set forth in Note 27 to the Consolidated Financial Statements in order to prioritize the inputs utilized to measure fair value. We review and modify, as necessary, our fair value hierarchy classifications on a quarterly basis. As such, there may be reclassifications between hierarchy levels. The following table summarizes assets and liabilities measured at fair value and the amounts measured using Level 3 inputs. The table includes recurring and nonrecurring measurements. Year ended December 31, ($ in millions)           2011         2010 Assets at fair value                           $ 30,172     $ 33,001 As a percentage of total assets                      16 %         19 % Liabilities at fair value                      $  6,299     $  4,832 As a percentage of total liabilities                  4 %          3 % 

Assets at fair value using Level 3 inputs $ 4,666$ 6,969 As a percentage of assets at fair value

              15 %         21 % 

Liabilities at fair value using Level 3 inputs $ 878$ 1,090 As a percentage of liabilities at fair value 14 % 23 %

   Level 3 assets declined 33% or $2.3 billion primarily due to a decline in mortgage servicing rights caused by a drop in interest rates and increased market volatility compared to favorable valuation adjustments in 2010. The decline in the Level 3 assets was also attributable to settlements of interests retained in securitization trusts and the fair value-elected finance receivables and loans, net. As the value of the finance receivable and loans, net declined, the value of the related on-balance sheet securitization debt also declined, which was the primary reason Level 3 liabilities declined by 19% or $212 million. The on-balance sheet securitization debt is also at fair value under the fair value option election. We have numerous internal controls in place to ensure the appropriateness of fair value measurements. Significant fair value measures are subject to detailed analytics and management review and approval. We have an established model validation policy and program in place that covers all models used to generate fair value measurements. This model validation program ensures a controlled environment is used for the development, implementation, and use of the models and change procedures. Further, this program uses a risk-based approach to select models to be reviewed and validated by an independent internal risk group to ensure the models are consistent with their intended use, the logic within the models is reliable, and the inputs and outputs from these models are appropriate. Additionally, a wide array of operational controls are in place to ensure the fair value measurements are reasonable, including controls over the inputs into and the outputs from the fair value measurement models. For example, we backtest the internal assumptions used within models against actual performance. We also monitor the market for recent trades, market surveys, or other market information that may be used to benchmark model inputs or outputs. Certain valuations will also be benchmarked to market indices when appropriate and available. We have scheduled model and/or input                                        101 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  recalibrations that occur on a periodic basis but will recalibrate earlier if significant variances are observed as part of the backtesting or benchmarking noted above. Considerable judgment is used in forming conclusions from market observable data used to estimate our Level 2 fair value measurements and in estimating inputs to our internal valuation models used to estimate our Level 3 fair value measurements. Level 3 inputs such as interest rate movements, prepayment speeds, credit losses, and discount rates are inherently difficult to estimate. Changes to these inputs can have a significant effect on fair value measurements. Accordingly, our estimates of fair value are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. Allowance for Loan Losses We maintain an allowance for loan losses (the allowance) to absorb probable loan credit losses inherent in the held-for-investment portfolio, excluding those measured at fair value in accordance with applicable accounting standards. The allowance is maintained at a level that management considers to be adequate based upon ongoing quarterly assessments and evaluations of collectability and historical loss experience in our lending portfolio. The allowance is management's estimate of incurred losses in our lending portfolio and involves significant judgment. Management performs quarterly analysis of these portfolios to determine if impairment has occurred and to assess the adequacy of the allowance based on historical and current trends and other factors affecting credit losses. Additions to the allowance are charged to current period earnings through the provision for loan losses; amounts determined to be uncollectible are charged directly against the allowance, while amounts recovered on previously charged-off accounts increase the allowance. Determining the appropriateness of the allowance requires management to exercise significant judgment about matters that are inherently uncertain, including the timing, frequency, and severity of credit losses that could materially affect the provision for loan losses and, therefore, net income. The methodology for determining the amount of the allowance differs between the consumer automobile, consumer mortgage, and commercial portfolio segments. For additional information regarding our portfolio segments and classes, refer to Note 9 to the Consolidated Financial Statements. While we attribute portions of the allowance across our lending portfolios, the entire allowance is available to absorb probable loan losses inherent in our total lending portfolio. The consumer portfolio segments consist of smaller-balance, homogeneous loans. Excluding certain loans that are identified as individually impaired, the allowance for each consumer portfolio segment (automobile and mortgage) is evaluated collectively. The allowance is based on aggregated portfolio segment evaluations that begin with estimates of incurred losses in each portfolio segment based on various statistical analyses. We leverage proprietary statistical models, including vintage and migration analyses, based on recent loss trends, to develop a systematic incurred loss reserve. These statistical loss forecasting models are utilized to estimate incurred losses and consider several credit quality indicators including, but not limited to, historical loss experience, estimated foreclosures or defaults based on observable trends, delinquencies, and general economic and business trends. Management believes these factors are relevant to estimate incurred losses and are updated on a quarterly basis in order to incorporate information reflective of the current economic environment, as changes in these assumptions could have a significant impact. In order to develop our best estimate of probable incurred losses inherent in the loan portfolio, management reviews and analyzes the output from the models and may adjust the reserves to take into consideration environmental, qualitative and other factors that may not be captured in the models. These adjustments are documented and reviewed through our risk management processes. Management reviews, updates, and validates its systematic process and loss assumptions on a periodic basis. This process involves an analysis of loss information, such as a review of loss and credit trends, a retrospective evaluation of actual loss information to loss forecasts, and other analyses. The commercial loan portfolio segment is primarily composed of larger-balance, nonhomogeneous exposures within our Automotive Finance operations, Commercial Finance Group, and Mortgage operations. These loans are primarily evaluated individually and are risk-rated based on borrower, collateral, and industry-specific information that management believes is relevant in determining the occurrence of a loss event and measuring impairment. A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on current information and events. Management establishes specific allowances for commercial loans determined to be individually impaired based on the present value of expected future cash flows, discounted at the loans' effective interest rate, observable market price or the fair value of collateral, whichever is determined to be the most appropriate. Estimated costs to sell or realize the value of the collateral on a discounted basis are included in the impairment measurement, when appropriate. In addition to the specific allowances for impaired loans, loans that are not identified as individually impaired are grouped into pools based on similar risk characteristics and collectively evaluated. These allowances are based on historical loss experience, concentrations, current economic conditions, and performance trends within specific geographic locations. The commercial historical loss experience is updated quarterly to incorporate the most recent data reflective of the current economic environment. The determination of the allowance is influenced by numerous assumptions and many factors that may materially affect estimates of loss, including volatility of loss given default, probability of default, and rating migration. The critical assumptions underlying the allowance include: (1) segmentation of each portfolio based on common risk characteristics; (2) identification and estimation of portfolio indicators and other factors that management believes are key to estimating incurred credit losses; and (3) evaluation by management of borrower, collateral, and geographic information. Management monitors the adequacy of the allowance and makes adjustments as the assumptions in the underlying analyses change to reflect an estimate of incurred loan losses at the reporting date, based on the best information available at that time. In addition, the allowance related to the commercial portfolio segment is influenced by estimated recoveries from automotive manufacturers relative to guarantees or agreements with them to repurchase vehicles used as collateral to secure the loans. If an automotive manufacturer is unable to fully honor its obligations, our ultimate loan losses could be higher. To the extent that actual outcomes differ from our estimates, additional provision for credit losses may be required that would reduce earnings.                                        102 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Valuation of Automobile Lease Assets and Residuals We have significant investments in vehicles in our operating lease portfolio. In accounting for operating leases, management must make a determination at the beginning of the lease contract of the estimated realizable value (i.e., residual value) of the vehicle at the end of the lease. Residual value represents an estimate of the market value of the vehicle at the end of the lease term, which typically ranges from two to four years. We establish risk adjusted residual values based on independently published residuals. Risk adjustments are determined at lease inception and are based on current auction results adjusted for key variables that historically have shown an impact on auction values (as further described in the Lease Residual Risk discussion in the Risk Management section of this MD&A). The customer is obligated to make payments during the term of the lease for the difference between the purchase price and the contract residual value. However, since the customer is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent the value of the vehicle is below the residual value estimated at contract inception. Management periodically performs a detailed review of the estimated realizable value of leased vehicles to assess the appropriateness of the carrying value of lease assets. To account for residual risk, we depreciate automobile operating lease assets to estimated realizable value on a straight-line basis over the lease term. The estimated realizable value is initially based on the residual value established at contract inception. Over the life of the lease, management evaluates the adequacy of the estimate of the realizable value and may make adjustments to the extent the expected value of the vehicle at lease termination changes. Any adjustments would result in a change in the depreciation rate of the lease asset, thereby affecting the carrying value of the operating lease asset. In addition to estimating the residual value at lease termination, we must also evaluate the current value of the operating lease assets and test for impairment to the extent necessary in accordance with applicable accounting standards. Impairment is determined to exist if the undiscounted expected future cash flows (including the expected residual value) are lower than the carrying value of the asset. There were no such impairment charges in 2011 or 2010. Our depreciation methodology on operating lease assets considers management's expectation of the value of the vehicles upon lease termination, which is based on numerous assumptions and factors influencing used vehicle values. The critical assumptions underlying the estimated carrying value of automobile lease assets include: (1) estimated market value information obtained and used by management in estimating residual values, (2) proper identification and estimation of business conditions, (3) our remarketing abilities, and (4) automotive manufacturer vehicle and marketing programs. Changes in these assumptions could have a significant impact on the value of the lease residuals. Expected residual values include estimates of payments from automotive manufacturers related to residual support and risk-sharing agreements. To the extent an automotive manufacturer is not able to fully honor its obligation relative to these agreements, our depreciation expense would be negatively impacted. Valuation of Mortgage Servicing Rights Mortgage servicing rights represent the capitalized value of the right to receive future cash flows from the servicing of mortgage loans for others. Mortgage servicing rights are a significant source of value derived from the sale or securitization of mortgage loans. Because residential mortgage loans typically contain a prepayment option, borrowers may often elect to prepay their mortgage loans by refinancing at lower rates during declining interest rate environments. The borrower's ability to prepay is at times impacted by other factors in the current environment that may limit their eligibility to access a refinance (e.g. a high loan-to-value ratio). When this occurs, the stream of cash flows generated from servicing the original mortgage loan is terminated. As such, the market value of mortgage servicing rights has historically been very sensitive to changes in interest rates and tends to decline as market interest rates decline and increase as interest rates rise. We capitalize mortgage servicing rights on residential mortgage loans that we have originated and purchased based on the fair market value of the servicing rights associated with the underlying mortgage loans at the time the loans are sold or securitized. GAAP requires that the value of mortgage servicing rights be determined based on market transactions for comparable servicing assets, if available. In the absence of representative market trade information, valuations should be based on other available market evidence and modeled market expectations of the present value of future estimated net cash flows that market participants would expect from servicing. When observable prices are not available, management uses internally developed discounted cash flow models to estimate the fair value. These internal valuation models estimate net cash flows based on internal operating assumptions that we believe would be used by market participants, combined with market-based assumptions for loan prepayment rate, interest rates, default rates and discount rates that management believes approximate yields required by investors for these assets. Servicing cash flows primarily include servicing fees, escrow account income, ancillary income and late fees, less operating costs to service the loans. The estimated cash flows are discounted using an option-adjusted spread-derived discount rate. Management considers the best available information and exercises significant judgment in estimating and assuming values for key variables in the modeling and discounting process. All of our mortgage servicing rights are carried at estimated fair value. We use the following key assumptions in our valuation approach. •      Prepayment - The most significant drivers of mortgage servicing rights 

value are actual and forecasted portfolio prepayment behavior. Prepayment

speeds represent the rate at which borrowers repay their mortgage loans

prior to scheduled maturity. Prepayment speeds are influenced by a number

of factors such as the value of collateral, competitive market factors,

government programs or incentives, or levels of foreclosure activity.

       However, the most significant factor influencing prepayment speeds is        generally the interest rate environment. As interest rates rise,        prepayment speeds generally slow, and as interest rates decline,        prepayment speeds generally accelerate. When mortgage loans are paid or

expected to be paid earlier than originally estimated, the expected future

cash flows associated with servicing such loans are reduced. We primarily

       use third-party models to project residential mortgage loan payoffs. In        other cases, we estimate prepayment speeds based on historical and        expected future                                          103

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  prepayment rates. We measure model performance by comparing prepayment predictions against actual results at both the portfolio and product level. •      Discount rate - The cash flows of our mortgage servicing rights are        discounted at prevailing market rates, which include an appropriate        risk-adjusted spread, which management believes approximates yields        required by investors for these assets.  

• Base mortgage rate - The base mortgage rate represents the current market

       interest rate for newly originated mortgage loans. This rate is a key        component in estimating prepayment speeds of our portfolio because the

difference between the current base mortgage rate and the interest rates

on existing loans in our portfolio is an indication of the borrower's

       likelihood to refinance.   •      Cost to service - In general, servicing cost assumptions are based on        internally projected actual expenses directly related to servicing. These        servicing cost assumptions are compared to market-servicing costs when

market information is available. Our servicing cost assumptions include

expenses associated with our activities related to loans in default.

• Volatility - Volatility represents the expected rate of change of interest

rates. The volatility assumption used in our valuation methodology is

intended to estimate the range of expected outcomes of future interest

rates. We use implied volatility assumptions in connection with the

valuation of our mortgage servicing rights. Implied volatility is defined

as the expected rate of change in interest rates derived from the prices

at which options on interest rate swaps, or swaptions, are trading. We

update our volatility assumptions for the change in implied swaptions

volatility during the period, adjusted by the ratio of historical mortgage

to swaption volatility.

We also periodically perform a series of reasonableness tests as we deem appropriate, including the following. • Review and compare data provided by an independent third-party broker. We

evaluate and compare our fair value price, multiples, and underlying

assumptions to data provided by independent third-party broker, including

       prepayment speeds, discount rates, cost to service, and fair value        multiples.  

• Review and compare pricing of publicly traded interest-only securities. We

       evaluate and compare our fair value to publicly traded interest-only        stripped MBS by age and coupon for reasonableness.  

• Review and compare fair value price and multiples. We evaluate and compare

       our fair value price and multiples to market fair value price and        multiples in external surveys produced by third parties.  

• Compare actual monthly cash flows to projections. We reconcile actual

monthly cash flows to those projected in the mortgage servicing rights

valuation. Based on the results of this reconciliation, we assess the need

to modify the individual assumptions used in the valuation. This process

ensures the model is calibrated to actual servicing cash flow results.

• Review and compare recent bulk mortgage servicing right acquisition

activity. We evaluate market trades for reliability and relevancy and then

consider, as appropriate, our estimate of fair value of each significant

transaction to the traded price. Currently, there is a lack of comparable

transactions between willing buyers and sellers in the bulk acquisition

market, which are the best indicators of fair value. However, we continue

to monitor and track market activity on an ongoing basis.

   We generally expect our valuation to be within a reasonable range of that implied by these tests. Changes in these assumptions could have a significant impact on the determination of fair market value. In order to develop our best estimate of fair value, management reviews and analyzes the output from the models and may adjust the reserves to take into consideration other factors that may not be captured. If we determine our valuation has exceeded the reasonable range, we may adjust it accordingly. At December 31, 2011, based on the market information obtained, we determined that our mortgage servicing rights valuations and assumptions used to value those servicing rights were reasonable and consistent with what an independent market participant would use to value the asset. The assumptions used in modeling expected future cash flows of mortgage servicing rights have a significant impact on the fair value of mortgage servicing rights and potentially a corresponding impact to earnings. Refer to Note 12 to the Consolidated Financial Statements for sensitivity analysis. Goodwill The accounting for goodwill is discussed in Note 14 to the Consolidated Financial Statements. Goodwill is reviewed for potential impairment at the reporting unit level on an annual basis, as of August 31, or in interim periods if events or circumstances indicate a potential impairment. Goodwill is allocated to the reporting units at the date the goodwill is initially recorded. Once goodwill has been allocated to the reporting units, it generally no longer retains its identification with a particular acquisition, but instead becomes identified with the reporting unit as a whole. As a result, all of the fair value of each reporting unit is available to support the value of goodwill allocated to the unit. Goodwill impairment testing is performed at the reporting unit level, one level below the business segment. For more information on our segments, refer to Note 28 to the Consolidated Financial Statements. Goodwill impairment testing involves managements' judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by the fair value of the individual reporting unit using widely accepted valuation techniques, such as the market approach (earnings, transaction, and/or pricing multiples) and discounted cash flow methods. In applying these methodologies we utilize a number of factors, including actual operating results, future business plans, economic projections, and market data. A combination of                                        104 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  methodologies is used and weighted appropriately for each reporting unit. If actual results differ from these estimates, it may have an adverse impact on the valuation of goodwill that could result in a reduction of the excess over carrying value and possible impairment of goodwill. At December 31, 2011, we did not have material goodwill at our reporting units that is at risk of failing Step 1 of the goodwill impairment test. Determination of Reserves for Insurance Losses and Loss Adjustment Expenses Our Insurance operations include an array of insurance underwriting, including vehicle service contracts and consumer products that create a liability for unpaid losses and loss adjustment expenses incurred (further described in the Insurance section of this MD&A). The reserve for insurance losses and loss adjustment expenses represents an estimate of our liability for the unpaid cost of insured events that have occurred as of a point in time but have not yet been paid. More specifically, it represents the accumulation of estimates for reported losses and an estimate for losses incurred, but not reported, including claims adjustment expenses at the end of any given accounting period. Our Insurance operations' claim personnel estimate reported losses based on individual case information or average payments for categories of claims. An estimate for current incurred, but not reported, claims is also recorded based on the actuarially determined expected loss ratio for a particular product, which also considers significant events that might change the expected loss ratio, such as severe weather events and the estimates for reported claims. These estimates of the reserves are reviewed regularly by product line management, by actuarial and accounting staffs, and ultimately, by senior management. Our Insurance operations' actuaries assess reserves for each business at the lowest meaningful level of homogeneous data in each type of insurance, such as general or product liability and automobile physical damage. The purpose of these assessments is to confirm the reasonableness of the reserves carried by each of the individual subsidiaries and product lines and, thereby, the Insurance operations' overall carried reserves. The selection of an actuarial methodology is judgmental and depends on variables such as the type of insurance, its expected payout pattern, and the manner in which claims are processed. Special characteristics such as deductibles, reinsurance recoverable, or special policy provisions are also considered in the reserve estimation process. Estimates for salvage and subrogation recoverable are recognized at the time losses are incurred and netted against the provision for losses. Our reserves include a liability for the related costs that are expected to be incurred in connection with settling and paying the claim. These loss adjustment expenses are generally established as a percentage of loss reserves. Our reserve process considers the actuarially calculated reserves based on prior patterns of claim incurrence and payment and the degree of incremental volatility associated with the underlying risks for the types of insurance; it represents management's best estimate of the ultimate liability. Since the reserves are based on estimates, the ultimate liability may be more or less than our reserves. Any necessary adjustments, which may be significant, are included in earnings in the period in which they are deemed necessary. These changes may be material to our results of operations and financial condition and could occur in a future period. Our determination of the appropriate reserves for insurance losses and loss adjustment expenses for significant business components is based on numerous assumptions that vary based on the underlying business and related exposure. •      Vehicle service contracts - Vehicle service contract losses are generally        reported and settled quickly through dealership service departments        resulting in a relatively small balance of outstanding claims at any point        in time relative to the volume of claims processed annually. Vehicle        service contract claims are primarily composed of parts and labor for        repair or replacement of the affected components or systems. Changes in        the cost of replacement parts and labor rates will affect the cost of        settling claims. Considering the short time frame between a claim being        incurred and paid, changes in key assumptions (e.g., part prices, labor        rates) would have a minimal impact on the loss reserve as of a point in        time. The loss reserve amount is influenced by the estimate of the lag        between vehicles being repaired at dealerships and the claim being        reported by the dealership.   •      Personal automobile - Automobile insurance losses are principally a

function of the number of occurrences (e.g., accidents or thefts) and the

severity (e.g., the ultimate cost of settling the claim) for each

occurrence. The number of incidents is generally driven by the

demographics and other indicators or predictors of loss experience of the

insured customer base including geographic location, number of miles

driven, age, sex, type and cost of vehicle, and types of coverage

selected. The severity of each claim, within the limits of the insurance

purchased, is generally random and settles to an average over a book of

business, assuming a broad distribution of risks. Changes in the severity

of claims have an impact on the reserves established at a point in time.

Changes in bodily injury claim severity are driven primarily by inflation

in the medical sector of the economy. Changes in automobile physical

damage claim severity are caused primarily by inflation in automobile

repair costs, automobile parts prices, and used car prices. However,

changes in the level of the severity of claims paid may not necessarily

match or track changes in the rate of inflation in these various sectors

of the economy.

   At December 31, 2011, we concluded that our insurance loss reserves were reasonable and appropriate based on the assumptions and data used in determining the estimate. However, because insurance liabilities are based on estimates, the actual claims ultimately paid may vary from the estimates. Legal and Regulatory Reserves Our legal and regulatory reserves reflect management's best estimate of probable losses on legal and regulatory matters. As a legal or regulatory matter develops, management, in conjunction with internal and external counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is both probable and estimable. If, at the time of evaluation, the loss contingency related to a legal or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When the loss contingency related to a legal or regulatory matter is deemed to be both probable and estimable, we will establish a liability with respect to such loss contingency and record a corresponding amount to                                        105 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  other operating expenses. To estimate the probable loss, we evaluate the individual facts and circumstances of the case including information learned through the discovery process, rulings on dispositive motions, settlement discussions, our prior history with similar matters and other rulings by courts, arbitrators or others. The reserves are continuously monitored and updated to reflect the most recent information related to each matter. Additionally, in matters for which a loss event is not deemed probable, but rather reasonably possible to occur, we would attempt to estimate a loss or range of loss related to that event, if possible. For these matters, we do not record a liability. However, if we are able to estimate a loss or range of loss, we would disclose this loss, if it is material to our financial statements. To estimate a range of probable or reasonably possible loss, we evaluate each individual case in the manner described above. We do not accrue for matters for which a loss event is deemed remote. For details regarding the nature of all material contingencies, refer to Note 31 to the Consolidated Financial Statements. Loan Repurchase and Obligations Related to Loan Sales The liability for representation and warranty obligations reflects management's best estimate of probable lifetime loss. We consider historic and recent demand trends in establishing the reserve. The methodology used to estimate the reserve considers a variety of assumptions including borrower performance (both actual and estimated future defaults), repurchase demand behavior, historic loan defect experience, historic and estimated future loss experience, which includes projections of future home price changes as well as other qualitative factors including investor behavior. In cases where we do not have or have limited current or historical demand experience with an investor, because of the inherent difficulty in predicting the level and timing of future demands, if any, losses cannot currently be reasonably estimated, and a liability is not recognized. Management monitors the adequacy of the overall reserve and makes adjustments to the level of reserve, as necessary, after consideration of other qualitative factors including ongoing dialogue with counterparties. Determination of Provision for Income Taxes As of June 30, 2009, we converted from an LLC to a Delaware corporation, thereby ceasing to be a pass-through entity for income tax purposes. As a result, we adjusted our deferred tax assets and liabilities to reflect the estimated future corporate effective tax rate. Our banking, insurance, and foreign subsidiaries were generally always corporations and continued to be subject to tax and provide for U.S. federal, state, and foreign income taxes. Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise we consider all available positive and negative evidence including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). For the years ended December 31, 2011 and 2010, we have concluded that the negative evidence is more objective and therefore outweighs the positive evidence, and therefore we have recorded total valuation allowances on net deferred tax assets of $2.2 billion and $2.0 billion, respectively. A sustained period of profitability in our U.S. operations is required before we would change our judgment regarding the need for a full valuation allowance against our net U.S. deferred tax assets. Our cumulative pretax losses in the three-year period ending with the current quarter are significant objectively verifiable negative evidence regarding future profitability. However, weight of this negative evidence decreased during 2011 as losses incurred during 2008 became more distant. We continue to believe, however, that losses experienced in the previous three-year period serve as negative evidence outweighing subjectively determined positive evidence, and accordingly, we have not changed our judgment regarding the need for a valuation allowance against our U.S. net deferred tax assets at December 31, 2011. Looking forward, continued decreases in negative objective evidence could potentially lead to a reversal of a portion of our U.S. valuation allowance in 2012. Until such time, utilization of tax attributes to offset U.S.-based taxable income will continue to reduce the overall level of our U.S. deferred tax assets and related valuation allowance. For additional information regarding our provision for income taxes, refer to Note 25 to the Consolidated Financial Statements. Recently Issued Accounting Standards Refer to Note 1 to the Consolidated Financial Statements for further information related to recently adopted and recently issued accounting standards.                                        106 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Statistical Tables The accompanying supplemental information should be read in conjunction with the more detailed information, including our Consolidated Financial Statements and the notes thereto, which appear elsewhere in this Annual Report. Net Interest Margin Tables The following tables present an analysis of net interest margin excluding discontinued operations for the periods shown.                                                        2011                                           2010                                      2009                                                           Interest                                      Interest                                  Interest                                                            income/                                      income/                                   income/ Year ended December 31,              Average              interest         Yield/       Average         interest     Yield/       Average         interest     Yield/ ($ in millions)                    balance (a)             expense          rate      balance (a)       expense       rate      balance (a)       expense       rate Assets Interest-bearing cash and cash equivalents                     $       12,376       $              54      0.44 %   $     13,964     $       69      0.49 %   $     14,065     $       98      0.70 % Trading assets                             366                      19      5.19              252             15      5.95              985            132     13.40 Investment securities (b)               14,551                     373      2.56           11,312            339      3.00            9,446            211      2.23 Loans held-for-sale, net                 9,365                     332      3.55           13,506            601      4.45           12,542            416      3.32 Finance receivables and loans, net (c) (d)                            110,650                   6,635      6.00           92,224          6,546      7.10           92,567          6,471      6.99 Investment in operating leases, net (e)                                  9,031                   1,260     13.95           12,064          1,693     14.03           21,441          1,916      8.94 Total interest-earning assets          156,339                   8,673      5.55          143,322          9,263      6.46          151,046          9,244      6.12 Noninterest-bearing cash and cash equivalents                         1,305                                                686                                     1,144 Other assets                            24,948                                             35,040                                    28,910 Allowance for loan losses               (1,756 )                                           (2,363 )                                  (3,208 ) Total assets                    $      180,836                                       $    176,685                              $    177,892 

Liabilities

 Interest-bearing deposit liabilities                     $       41,136       $             700      

1.70 % $ 33,355 $ 641 1.92 % $ 24,159 $ 677 2.80 % Short-term borrowings

                    7,209                     314      4.36            7,601            324      4.26            9,356            465      4.97 Long-term debt (f) (g) (h)              90,410                   5,209      5.76           87,270          5,701      6.53           97,939          5,949      6.07 Total interest-bearing liabilities (f) (g) (i)                138,755                   6,223      4.48          128,226          6,666      5.20          131,454          7,091      5.39 Noninterest-bearing deposit liabilities                              2,239                                              2,082                                     1,955 Total funding sources (g) (j)          140,994                   6,223      4.41          130,308          6,666      5.12          133,409          7,091      5.32 Other liabilities                       19,682                                             25,666                                    20,231 Total liabilities                      160,676                                            155,974                                   153,640 Total equity                            20,160                                             20,711                                    24,252 Total liabilities and equity    $      180,836                                       $    176,685                              $    177,892 Net financing revenue                                $           2,450                                $    2,597                                $    2,153 Net interest spread (k)                                                     1.07 %                                    1.26 %                                    0.73 % Net interest spread excluding original issue discount (k)                   1.79 %                                    2.32 %                            

1.75 % Net interest spread excluding original issue discount and including noninterest-bearing deposit liabilities (k)

                                 1.85 %                                    2.38 %                                    1.82 % Net yield on interest earning assets (l)                                    1.57 %                                    1.81 %                                    1.43 % Net yield on interest earning assets excluding original issue discount (l)                                                                2.15 %                                    2.65 %                                    2.18 %  

(a) Average balances are calculated using a combination of monthly and daily

average methodologies.

(b) Excludes income on equity investments of $25 million, $17 million and $9

million at December 31, 2011, 2010 and 2009, respectively. Yields on

available-for-sale debt securities are based on fair value as opposed to

historical cost.

(c) Nonperforming finance receivables and loans are included in the average

balances. For information on our accounting policies regarding nonperforming

status refer to Note 1 to the Consolidated Financial Statements.

(d) Includes other interest income of $20 million, $9 million and $92 million at

December 31, 2011, 2010 and 2009, respectively.

(e) Includes gains on sale of $395 million, $723 million and $530 million during

the year ended December 31, 2011, 2010 and 2009, respectively. Excluding

these gains on sale, the yield would be 9.58%, 8.04% and 9.64% at

December 31, 2011, 2010 and 2009, respectively.

(f) Includes the effects of derivative financial instruments designated as

hedges.

(g) Average balance includes $2,522 million, $3,710 million and $4,804 million

related to original issue discount at December 31, 2011, 2010 and 2009,

respectively. Interest expense includes original issue discount amortization

of $912 million, $1,204 million and $1,143 million during the year ended

December 31, 2011, 2010 and 2009, respectively.

(h) Excluding original issue discount the rate on long-term debt was 4.62%, 4.94%

and 4.68% at December 31, 2011, 2010 and 2009, respectively.

(i) Excluding original issue discount the rate on total interest-bearing

liabilities was 3.76%, 4.14% and 4.37% at December 31, 2011, 2010 and 2009,

respectively.

(j) Excluding original issue discount the rate on total funding sources is 3.70%,

4.08% and 4.30% at December 31, 2011, 2010, and 2009, respectively.

(k) Net interest spread represents the difference between the rate on total

interest earning assets and the rate on total interest-bearing liabilities.

(l) Net yield on interest earning assets represents net financing revenue as a

    percentage of total interest earning assets.                                          107

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  The following table presents an analysis of the changes in net interest income, volume and rate.                                                      2011 vs 2010                        2010 vs 2009                                                   Increase (decrease)                Increase (decrease)                                                       due to (a)                          due to (a)                                                          Yield/                              Yield/

Year ended December 31, ($ in millions) Volume rate Total

      Volume       rate       Total Assets Interest-bearing cash and cash equivalents $    (8 )   $     (7 )   $  (15 )   $     (1 )   $   (28 )   $ (29 ) Trading assets                                   6           (2 )        4          (67 )       (50 )    (117 ) Investment securities                           88          (54 )       34           47          81       128 Loans held-for-sale, net                      (162 )       (107 )     (269 )         34         151       185 Finance receivables and loans, net           1,193       (1,104 )       89          (24 )        99        75 Investment in operating leases, net           (423 )        (10 )     (433 )     (1,045 )       822      (223 ) Total interest-earning assets              $   694     $ (1,284 )   $ (590 )   $ (1,056 )   $ 1,075     $  19 Liabilities Interest-bearing deposit liabilities       $   138     $    (79 )   $   59     $    213     $  (249 )   $ (36 ) Short-term borrowings                          (17 )          7        (10 )        (80 )       (61 )    (141 ) Long-term debt                                 199         (691 )     (492 )       (677 )       429      (248 ) Total interest-bearing liabilities             320         (763 )     (443 )       (544 )       119      (425 ) Net financing revenue                      $   374     $   (521 )   $ (147 )   $   (512 )   $   956     $ 444  

(a) Changes in interest not solely due to volume or yield/rate are allocated in

proportion to the absolute dollar amount of change in volume and yield/rate.

                                          108 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Outstanding Finance Receivables and Loans The following table presents the composition of our on-balance sheet finance receivables and loans. December 31, ($ in millions)               2011          2010          2009         2008          2007 Consumer Domestic Consumer automobile                     $  46,576     $  34,604     $ 12,514     $  16,281     $  20,030 Consumer mortgage 1st Mortgage                                6,997         7,057        7,960        13,542        24,941 Home equity                                 3,575         3,964        4,238         7,777         9,898 Total domestic                             57,148        45,625       24,712        37,600        54,869 Foreign Consumer automobile                        16,883        16,650       17,731        21,705        25,576 Consumer mortgage 1st Mortgage                                  256           742          405         4,604         7,320 Home equity                                     -             -            1            54             4 Total foreign                              17,139        17,392       18,137        26,363        32,900 Total consumer loans                       74,287        63,017       42,849        63,963        87,769 Commercial Domestic Commercial and industrial Automobile (a)                             26,552        24,944       19,604        16,913        17,463 Mortgage                                    1,887         1,540        1,572         1,627         3,001 Other                                       1,178         1,795        2,688         3,257         3,430 Commercial real estate Automobile                                  2,331         2,071        2,008         1,941             - Mortgage                                        -             1          121         1,696         2,943 Total domestic                             31,948        30,351       25,993        25,434        26,837 Foreign Commercial and industrial Automobile (b)                              8,265         8,398        7,943        10,749        11,922 Mortgage                                       24            41           96           195           614 Other                                          63           312          437           960         1,704 Commercial real estate Automobile                                    154           216          221           167             - Mortgage                                       14            78          162           260           536 Total foreign                               8,520         9,045        8,859        12,331        14,776 Total commercial loans                     40,468        39,396       34,852        37,765        41,613 Total finance receivables and loans (c) $ 114,755     $ 102,413     $ 77,701     $ 101,728     $ 129,382 Loans held-for-sale                     $   8,557     $  11,411     $ 20,625     $   7,919     $  20,559  

(a) Amount includes Notes Receivable from General Motors of $3 million at

December 31, 2009.

(b) Amounts include Notes Receivable from General Motors of $529 million,

$484 million, $908 million, $1.7 billion, and $1.9 billion at

December 31, 2011, 2010, 2009, 2008, and 2007, respectively.

(c) Includes historical cost, fair value, and repurchased loans.

                                      109 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Nonperforming Assets The following table summarizes the nonperforming assets in our on-balance sheet portfolio. December 31, ($ in millions)                        2011       2010       2009       2008 Consumer Domestic Consumer automobile                               $   139    $   129    $   267    $   294 Consumer mortgage 1st Mortgage                                          316        452        782      2,547 Home equity                                            91        108        114        540 Total domestic                                        546        689      1,163      3,381 Foreign Consumer automobile                                    89         78        119        125 Consumer mortgage 1st Mortgage                                          142        261         33      1,034 Home equity                                             -          -          -          - Total foreign                                         231        339        152      1,159 Total consumer (a)                                    777      1,028      1,315      4,540 Commercial Domestic Commercial and industrial Automobile                                            105        261        281      1,448 Mortgage                                                -          -         37        140 Other                                                  22         37        856         64 Commercial real estate Automobile                                             56        193        256        153 Mortgage                                                -          1         56      1,070 Total domestic                                        183        492      1,486      2,875 Foreign Commercial and industrial Automobile                                            118         35         66          7 Mortgage                                                -         40         35          - Other                                                  15         97        131         19 Commercial real estate Automobile                                             11          6         24          2 Mortgage                                               12         70        141        143 Total foreign                                         156        248        397        171 Total commercial (b)                                  339        740      1,883      3,046 Total nonperforming finance receivables and loans   1,116      1,768      3,198      7,586 Foreclosed properties                                  82        150        255        787 Repossessed assets (c)                                 56         47         58         95 Total nonperforming assets                        $ 1,254    $ 1,965    $ 3,511    $ 8,468 Loans held-for-sale                               $ 2,820    $ 3,273    $ 3,390    $   731  

(a) Interest revenue that would have been accrued on total consumer finance

receivables and loans at original contractual rates was $100 million during

the year ended December 31, 2011. Interest income recorded for these loans

was $48 million during the year ended December 31, 2011.

(b) Interest revenue that would have been accrued on total commercial finance

receivables and loans at original contractual rates was $41 million during

the year ended December 31, 2011. Interest income recorded for these loans

was $25 million during the year ended December 31, 2011.

(c) Repossessed assets exclude $3 million, $14 million, $23 million, and

$34 million of repossessed operating lease assets at December 31, 2011, 2010,

    2009, and 2008, respectively.                                          110

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Accruing Finance Receivables and Loans Past Due 90 Days or More The following table presents our on-balance sheet accruing loans past due 90 days or more as to principal and interest. December 31, ($ in millions)                           2011        2010        2009        2008 Consumer Domestic Consumer automobile                                  $     -     $     -     $     -     $    19 Consumer mortgage 1st Mortgage                                               1           1           1          33 Home equity                                                -           -           -           - Total domestic                                             1           1           1          52 Foreign Consumer automobile                                        3           5           5          40 Consumer mortgage 1st Mortgage                                               -           -           1           - Home equity                                                -           -           -           - Total foreign                                              3           5           6          40 Total consumer                                             4           6           7          92 Commercial Domestic Commercial and industrial Automobile                                                 -           -           -           - Mortgage                                                   -           -           -           - Other                                                      -           -           -           - Commercial real estate Automobile                                                 -           -           -           - Mortgage                                                   -           -           -           - Total domestic                                             -           -           -           - Foreign Commercial and industrial Automobile                                                 -           -           -           - Mortgage                                                   -           -           -           - Other                                                      -           -           3           - Commercial real estate Automobile                                                 -           -           -           - Mortgage                                                   -           -           -           - Total foreign                                              -           -           3           - Total commercial                                           -           -           3           - Total accruing finance receivables and loans past due 90 days or more                                  $     4     $     6     $    10     $    92 Loans held-for-sale                                  $    73     $    25     $    33     $     7                                          111

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Allowance for Loan Losses The following table presents an analysis of the activity in the allowance for loan losses on finance receivables and loans. ($ in millions)                         2011         2010         2009         2008         2007 Balance at January 1,                $  1,873     $  2,445     $  3,433     $  2,755     $  3,576 Cumulative effect of change in accounting principles (a)                   -          222            -         (616 )     (1,540 ) Charge-offs Domestic                                 (667 )     (1,297 )     (3,380 )     (2,192 )     (2,398 ) Foreign                                  (213 )       (349 )       (633 )       (347 )       (293 ) Write-downs related to transfers to held-for-sale                               -            -       (3,438 )          -            - Total charge-offs                        (880 )     (1,646 )     (7,451 )     (2,539 )     (2,691 ) Recoveries Domestic                                  227          363          276          219          224 Foreign                                   100           85           76           71           74 Total recoveries                          327          448          352          290          298 Net charge-offs                          (553 )     (1,198 )     (7,099 )     (2,249 )     (2,393 ) Provision for loan losses                 219          442        5,603        3,102        3,038 Discontinued operations                     -           (4 )        567          308           29 Other                                     (36 )        (34 )        (59 )        133           45 Balance at December 31,              $  1,503     $  1,873     $  2,445     $  3,433     $  2,755  

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

Improvements to Financial Reporting by Enterprises Involved with Variable

    Interest Entities.                                          112

--------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Allowance for Loan Losses by Type The following table summarizes the allocation of the allowance for loan losses by product type.                                       2011               2010               2009                2008               2007                                            % of               % of               % of                % of               % of December 31, ($ in millions)     Amount   total     Amount   total     Amount    total     Amount   total     Amount   total Consumer Domestic Consumer automobile             $   600     39.9   $   769     41.0   $   772    31.6     $ 1,115     32.5   $ 1,033     37.5 Consumer mortgage 1st Mortgage                        275     18.3       322     17.2       387    15.8         525     15.3       540     19.6 Home equity                         237     15.8       256     13.7       251    10.3         177      5.2       243      8.8 Total domestic                    1,112     74.0     1,347     71.9     1,410    57.7       1,817     53.0     1,816     65.9 Foreign Consumer automobile                 166     11.1       201     10.7       252    10.2         279      8.1       276     10.0 Consumer mortgage 1st Mortgage                          4      0.2         2      0.1         2     0.1         409     11.9        49      1.8 Home equity                           -        -         -        -         -       -          31      0.9         -        - Total foreign                       170     11.3       203     10.8       254    10.3         719     20.9       325     11.8 Total consumer loans              1,282     85.3     1,550     82.7     1,664    68.0       2,536     73.9     2,141     77.7 Commercial Domestic Commercial and industrial Automobile                           62      4.0        73      3.9       157     6.4         178      5.2        36      1.3 Mortgage                              1      0.1         -        -        10     0.4          93      2.7       483     17.5 Other                                52      3.5        97      5.2       322    13.2          65      1.9        66      2.4 Commercial real estate Automobile                           39      2.6        54      2.9         -       -           -        -         -        - Mortgage                              -        -         -        -        54     2.2         458     13.3         -        - Total domestic                      154     10.2       224     12.0       543    22.2         794     23.1       585     21.2 Foreign Commercial and industrial Automobile                           48      3.2        33      1.7        54     2.2          45      1.3        26      1.0 Mortgage                             10      0.7        12      0.7        20     0.8           3      0.1         -        - Other                                 1      0.1        39      2.1       111     4.6           9      0.3         3      0.1 Commercial real estate Automobile                            3      0.2         2      0.1         -       -           -        -         -        - Mortgage                              5      0.3        13      0.7        53     2.2          46      1.3         -        - Total foreign                        67      4.5        99      5.3      

238 9.8 103 3.0 29 1.1 Total commercial loans

              221     14.7       323     17.3       

781 32.0 897 26.1 614 22.3 Total allowance for loan losses $ 1,503 100.0 $ 1,873 100.0 $ 2,445 100.0 $ 3,433 100.0 $ 2,755 100.0

                                          113 --------------------------------------------------------------------------------   Table of Contents Management's Discussion and Analysis Ally Financial Inc. • Form 10-K  Deposit Liabilities The following table presents the average balances and interest rates paid for types of domestic and foreign deposits.                                                  2011                               2010                               2009 

Year ended December 31, ($ in Average Average Average Average

           Average          Average millions)                            balance (a)      deposit rate      

balance (a) deposit rate balance (a) deposit rate Domestic deposits Noninterest-bearing deposits $ 2,237

              - %     $       2,071              - %     $       1,955              - % Interest-bearing deposits Savings and money market checking accounts                                   9,696           0.88               8,015           1.21               5,941           1.66 Certificates of deposit                   26,109           1.77              21,153           2.04              16,401           3.33 Dealer deposits                            1,685           3.87               1,288           4.00                 671           4.09 Total domestic deposit liabilities        39,727           1.55              32,527           1.78              24,968           2.70 Foreign deposits Noninterest-bearing deposits                   2              -                  11              -                   -              - Interest-bearing deposits Savings and money market checking accounts                                   1,158           2.03                 550           2.01                 117           6.57 Certificates of deposit                    2,166           2.23               2,107           2.83               1,029           2.25 Dealer deposits                              322           4.30                 242           4.47                   -              - Total foreign deposit liabilities          3,648           2.35               2,910           2.80               1,146           2.69 Total deposit liabilities          $      43,375           1.61 %     $      35,437           1.86 %     $      26,114           2.70 %  

(a) Average balances are calculated using a combination of monthly and daily

average methodologies.

The following table presents the amount of domestic certificates of deposit in denominations of $100 thousand or more segregated by time remaining until maturity.

                                                 Over three months       Over six months December 31, 2011 ($ in      Three months            through                through               Over millions)                       or less            six months            twelve months        twelve months       Total Domestic certificates of deposit ($100,000 or more)  $       1,531     $             1,750     $           2,748     $         3,956     $ 9,985                                          114

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Table of Contents Quantitative and Qualitative Disclosures about Market Risk Ally Financial Inc. • Form 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Refer to the Market Risk and the Operational Risk sections of Item 7, Management's Discussion and Analysis.

                                      115

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Table of Contents Management's Report on Internal Control over Financial Reporting Ally Financial Inc. • Form 10-K