Pelted by a wave of home mortgage foreclosures and $9.1 billion in losses during the past two years, Bloomington-based Residential Capital may be on the brink of closing its doors, according to parent company GMAC, the financial arm of General Motors Corp.
After GMAC poured billions into keeping ResCap in business in the past two years, the home loan lender reported a $1.9 billion loss in the third quarter -- swelling GMAC's losses to $2.52 billion in July, August and September. In the same period a year earlier, GMAC lost $1.6 billion.
Unless GMAC produces more subsidies for the Minnesota-based lending unit, "substantial doubt exists regarding ResCap's ability to continue as a going concern," GMAC said in a statement Wednesday.
ResCap's third-quarter financial performance also included a sharp downturn in new loans. The $11.9 billion in new loans made by ResCap in July, August and September reflected a 59 percent slide in loan production compared with a year earlier.
In September, ResCap announced the latest cuts to its Minnesota workforce. About 250 workers were to be laid off, leaving the company's workforce at 555 -- 70 percent below its 2006 peak of 1,900.
ResCap had been a leader in the home loan industry, operating under familiar brands such as Ditech, GMAC Mortgage and Homecomings Financial. By the end of September, though, ResCap was not receiving interest payments on 22 percent of its outstanding loans -- four times the percentage of troubled loans a year earlier.
This past summer, a unit of ResCap filed more than a dozen lawsuits against mortgage originators, alleging they had failed to adequately screen customers or that they had provided inadequate or inaccurate information about applicants' finances.
Cerberus Capital Management, which owns 51 percent of GMAC and all of Chrysler, has been in talks about a merger of GM and Chrysler.
