By Jessica Toonkel and Rick Rothacker
March 12 (Reuters) - The banking unit of Ally Financial, thebailed-out auto lender that is 74 percent-owned by the U.S.government, is selling the majority of its mortgage servicingrights portfolio to Ocwen Financial Corp for $585million, Ally said on Tuesday.
Ally Bank said the deal will help it reduce mortgage riskand refocus on its Internet banking and auto finance operations.The lender was previously known as GMAC, and was once thein-house lending arm of General Motors Co..
"Successfully achieving these goals will enable Ally to bein the best position to repay the taxpayer," Ally spokeswomanGina Proia said.
For Ocwen, the purchase will further fuel its explosivegrowth. The company's servicing portfolio has increased in sizeby more than six times since 2009, according to Compass PointResearch & Trading.
Under the deal, Ocwen will have the right to collectpayments on $90 billion of loans, the bank said. As part of theagreement, Ally has the right to sell its remaining mortgageservicing rights portfolio, which is in excess of $30 billion,to Ocwen.
Ally said it has received interest in the remainingportfolio from other financial institutions and is consideringits options. Proia declined to comment on potential bidders.
Reuters had previously reported that Ocwen was in the leadto buy Ally's MSR portfolio. Barclays advised Ally on the deal.
The MSR sale is the latest effort by Ally to restructure acompany that needed a series of bailouts during the financialcrisis due to ballooning mortgage losses. The lender'sResidential Capital mortgage unit filed for bankruptcy in May2012, and last year Ally reached agreements to sell off itsinternational operations.
Last week, the Federal Reserve's annual stress test of largebanks found Ally was the only one of 18 that would not havestayed above a minimum capital ratio in a hypothetical severeeconomic downturn. Ally has disputed the Fed's analysis.