GMAC Takes Writedown, Eyes Options - Including ResCap Sale

GMAC Financial Services has used a $3.8 billion capital infusion from the Treasury Department to take a $2 billion writedown on its mortgage assets and pursue options that could include the sale of Residential Capital. GMAC also made a $2.7 billion capital contribution to ResCap in the form of mortgage loans, debt forgiveness and cash. "These decisive balance sheet actions and resulting capital infusions are intended to minimize the impact on GMAC and Ally Bank of any future losses related to ResCap's legacy mortgage business," GMAC chief executive Michael Carpenter said. (ResCap was known as a subprime and Alt-A mortgage lender before that market died.) The CEO also noted these actions will allow GMAC to "pursue strategic alternatives" with respect to ResCap and the mortgage business. "We expect to consider various possible options," company spokeswoman Gina Proia said when asked about a possible sale. "There are no special plans at this time," she added. Losses due to ResCap's mortgage operations totaled $3.9 billion for the first three quarters of 2009, including a $747 million loss in the third quarter. In propping up ResCap, GMAC also took a $500 million "repurchase reserve expense" for mortgage buyback demands from investors who claim the loans they purchased from ResCap violate representations and warranties. GMAC took a similar $515 million expense in the third quarter. ResCap and its mortgage affiliates originated $15.4 billion in residential loans in the third quarter - predominantly Fannie Mae, Freddie Mac and Federal Housing Administration product. It is a top-10 mortgage servicer with a $380 billion servicing portfolio.