Servicing Crimps ResCap's Results
ResCap, the mortgage lending division of GMAC Financial services, suffered a $2.3 billion loss in the third quarter mostly related to asset writedowns and loss on the sale of loans.
But servicing was also a factor in the company's weak results, as the company doubled its loss reserve compared with the year-earlier period. GMAC serviced $465 billion of home loans at the end of the third quarter, valuing its MSR asset $5.5 billion. Domestic mortgages accounted for $427.4 billion of the company's total home loan servicing volume.
As of Sept. 30, GMAC allowance for loan losses as a percentage of lending receivables was 3%, up from 1.45% a year earlier.
Non-accrual loans accounted for 13.1% of lending receivables at the end of the third quarter, up from 7.7% a year earlier.
The company expects weakness in housing and mortgage markets "to prevail well beyond the end of 2007."
The company's third-quarter results included a $455 million goodwill impairment charge, GMAC said.
GMAC said that it had cut 3,000 positions from ResCap during the third quarter, accounting for 25% of its staff. That was in addition to 2,000 job cuts earlier in the year.
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