Fitch Upgrades GMAC, Says Mortgage Business Less Risky

Fitch Ratings on Thursday upgraded the short- and long-term issuer default ratings on GMAC Inc., in the wake of the Treasury Department recently pumping $3.8 billion into the struggling company. GMAC is the parent of Residential Capital Corp., the nation's fourth largest servicer of home mortgages. Fitch upgraded both ratings to 'B,' noting that GMAC "has addressed the capital shortfall identified through the Supervisory Capital Assessment Program." Treasury is now a 56% shareholder in GMAC, which has been contemplating selling ResCap, or some of its assets. Fitch said the new capital from Treasury provides "further cushion and flexibility to address the mortgage business in an orderly manner." Fitch anticipates that GMAC will remain above the 15% total risk-based capital requirement, even factoring in the adoption of FAS 166 and 167, which require consolidation of off-balance sheet vehicles. Concurrent with the capital actions, GMAC took large write-downs on mortgage-related assets, classifying some as held-for-sale. Fitch believes future volatility emanating from GMAC's residential mortgage business will be significantly lower, particularly given the continued contraction of mortgage loans at the company — $28 billion at Sept. 30.