Treasury to Invest $5B in GMACFS

The Treasury Department said it will invest $5 billion in Troubled Asset Relief Program funds in GMAC Financial Services to keep the auto and mortgage lender running as part of its effort to assist the domestic automobile industry. Treasury also is lending $1 billion to General Motors so the car maker can participate in a rights offering and support GMAC's reorganization as a bank holding company. The Federal Reserve Board approved GMAC's application to become a BHC on Dec. 24. GMAC said it would immediately expand its financing for car buyers thanks to its new access to low-cost funding. During the fourth quarter, the company's mortgage lending and servicing arm, Residential Capital, "dialed back" its lending, a spokeswoman said, because it had to pay servicing advances to investors on an increasing number of delinquent loans. ResCap services nearly $400 billion in mortgages. "We are hopeful that GMAC's bank holding company structure and the infusion of capital through the TARP program will improve ResCap's access to cost competitive capital, which will increase the amount of credit that we can extend to mortgage consumers," GMAC spokeswoman Jeannine Bruin said. GMAC originated $8.5 billion in single-family loans in the fourth quarter, down from $10.8 billion in the third quarter.