ResCap Unit Reports 4Q Loss

Residential Capital Corp., which houses the GMAC-related mortgage units, posted a $651 million operating loss in the fourth quarter due to higher delinquencies and loss severities on subprime loans.For the full year, ResCap earned $182 million, an 81% decline from its profit level in 2005. However, General Motors Acceptance Corp., which includes ResCap, earned $2.1 billion last year, a modest 9% decline from that of 2005. (Approximately $791 million of the $2.1 billion represents a one-time tax benefit.) In a statement, GMAC chief executive Eric Feldstein said, "The sharp downturn in the U.S. mortgage market in the fourth quarter posed enormous challenges for the industry as a whole -- origination volume was down, margins narrowed, delinquencies rose, and pressure on home prices intensified." According to the Quarterly Data Report, GMAC ranks 10th among subprime funders. GMAC-RFC is a major warehouse lender to subprime firms. In November, hedge fund Cerberus Capital bought 51% of GMAC.