Dedicated to Deposits: Deals, Data, and Discussion

Problems Grow at GMAC's Mortgage Unit, ResCap

POSTED ON BY

According to this Bloomberg article, ResCap is fighting to avoid bankruptcy. ResCap (short for Residential Capital LLC) is a mortgage subsidiary of GMAC Financial Services, and it has been hit hard by the credit crunch.

In 2007, GMAC posted a net loss of $2.3 billion after a $4.3 billion loss at ResCap. There are some more bumpy roads ahead for ResCap according to this Bloomberg article:
ResCap has said it may not be able to meet debt obligations unless it comes up with an additional $600 million by the end of June. Cerberus is unlikely to step in because it won't be able to recoup an additional investment given tight credit markets.

In 2006, Cerberus bought 51% controlling interest in GMAC Financial Services.

GMAC Bank is another unit of GMAC Financial Services. As I reported on last month, GMAC Bank is facing a regulatory issue which must be resolved by November 30. This dates back to an agreement reached in 2006 with the FDIC when Cerberus' GMAC-deal went through. Cerberus and GMAC now have requested that the FDIC grant a waiver to allow GMAC to keep GMAC Bank.

I don't know how much impact ResCap will be on GMAC Bank, and I'm not sure how this FDIC regulatory issue will be resolved. I feel it's likely that GMAC Bank will pull through this okay.

I have a money market account at GMAC Bank, and it has been one of my favorite online banks. The rates have been very competitive (although they have lagged lately) and its ACH transfer service is one of the best.

The latest bank ratings by both Bankrate and BauerFinancial still show a strong bank: 4 out of 5 star rating (sound) at Bankrate.com based on 12/31/07 data and a 4 out of 5 star rating (excellent) at BauerFinancial based on 12/31/07 data. More financial details on GMAC Bank can be viewed at this FDIC page.

Thanks to the reader who mentioned this Bloomberg news story in the comments.


Related Posts

Comments