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.

(c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

Next in News ►