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GMAC working to fix ResCap, get the red out
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GMAC Financial Services said it is focused on resolving matters at its ailing mortgage unit, Richfield-based Residential Capital.
Despite extraordinary help from the U.S. government -- including $12.5 billion of federal funds and access to cheap debt -- GMAC is struggling to return to the black as it takes hit after hit on its mortgage unit. ResCap, as it's commonly known, was one of the largest lenders to borrowers with shaky credit. The unit is still reeling from risky loans.
The lender's objective is to find a resolution by the end of the year, Robert Hull, GMAC's chief financial officer, said Wednesday during a conference call discussing the company's third-quarter results. This time frame is "not a promise but an objective," said Hull. He declined to discuss the options being considered.
Profitability continued to elude GMAC in the third quarter amid persistent losses at ResCap. GMAC posted a third-quarter loss of $767 million, compared with a year-earlier loss of $2.52 billion. ResCap alone lost $649 million in the third quarter.
GMAC drew criticism from analysts after saying it would no longer make ResCap's quarterly results public, a decision Hull said was made to save money.
"You are engaging in actions that limit the transparency of your existing business," Kevin Eng of Columbus Hill Capital Management said on the conference call. "This doesn't send a very warm and fuzzy signal to your creditors."
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