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Mortgage Unit Continues to Haunt GMAC

Haunted by losses from its mortgage operation, GMAC Financial Services posted a $5 billion loss for the last three months of 2009. The news, however, was much brighter for the finance company’s auto operations.

by Staff
February 9, 2010
2 min to read


Haunted by losses from its mortgage operation, GMAC Financial Services posted a $5 billion loss for the last three months of 2009. The news, however, was much brighter for the finance company’s auto operations.

GMAC’s mortgage operations, ResCap, lost more than $4 billion during the quarter, as the company incurred a $3.3 billion charge related to its efforts to sell its trouble home lending business.

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In contrast, GMAC’s automotive operations earned $369 million during the fourth quarter, compared to a $405 million loss in the year-ago period. Company official said the company’s auto unit will continue to be the main focus going forward.

Another bright spot for the company was its Ally Bank Unit, which reported that deposits rose from $15.9 billion in the third quarter to $16.9 billion.

“GMAC has undergone a significant transformation in 2009, and, as a result, is better positioned to pursue business and market opportunities going forward,” Said Michael Carpenter, CEO of the company. “Key steps during the year included: diversifying the profitable automotive finance business with the addition of Chrysler; launching the Ally Bank brand, which is a key part of our funding profile; strengthening our capital and liquidity positions; and implementing major restructuring actions to minimize risk related to the legacy mortgage business.

“We are encouraged with the progress, and the recent upgrades of our credit ratings demonstrate that the steps we are taking are appropriate and making an impact,” Carpenter added.

Officials said the positive results of its auto financing unit were driven by stronger net financing revenue, which it attributed to improve remarketing gains offsetting losses related to its Nuvell subprime legacy portfolio.

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Originations for its North American auto segment came in at $6.6 billion for the quarter, with its U.S. lending segment making up $5.9 billion of that total. For the same period in 2008, originations stood at $1.4 billion, which included $800 million from the U.S. segment.

The company, which received $3.8 billion in a third-round of Federal aid in December, also continued to make progress in expanding its financing footprint to Chrysler dealers and customers. At year end, GMAC completed formal underwriting for 1,474 U.S. Chrysler dealers that applied for standard wholesale credit lines, and approved 94 percent of those dealers for financing.

Additionally, GMAC originated $894 million new-vehicle retail loans for Chrysler, compared to $721 million in the prior quarter.

For all of 2009, the company originated $18.2 billion in retail automotive credit in the United States, with outstanding wholesale credit to dealers totaling $19.1 billion.

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