GMAC: ResCap in danger of failing

GMAC Financial Services said today that its Fort Washington subsidiary, Residential Capital L.L.C., was in danger of failing without additional support from its parent.

GMAC Financial said difficult market conditions had made it hard for ResCap, which employs 1,400 in the Philadelphia region, to maintain the liquidity needed to make loans.

ResCap lost $1.91 billion in the third quarter, three-quarters of GMAC Financial's $2.52 billion loss. In the comparable period a year earlier, ResCap lost $2.26 billion, driving GMAC Financial to a $1.6 billion overall loss.

"The economic and market conditions created an unrelenting environment for our business and the financial-services sector overall," GMAC chief executive officer Alvaro G. de Molina said in a news release.

ResCap's U.S. residential mortgage business originated $11.24 billion in mortgages in the third quarter, off sharply from $20.21 billion in the same period a year earlier.

Mortgages backed by the Federal Housing Administration and other federal agencies soared to $4.14 billion from $1.38 billion. Jumbo mortgages collapsed from nearly $5 billion to just $250 million, reflecting dramatic changes in the mortgage landscape.

In September, ResCap, which was the seventh-largest U.S. mortgage lender in the first half of the year, said it would slash 5,000 jobs in its mortgage operation, including 168 in the Philadelphia region.

That was on top of 5,000 jobs eliminated last year, including 270 in Cherry Hill, Fort Washington and Horsham. This year's cuts would reduce overall employment at ResCap to roughly 3,300, from 14,000 in early 2007.

GMAC is majority-owned by private-equity firm Cerberus Capital Management L.P., but Detroit-based General Motors Corp. still holds a minority stake. It came to the Philadelphia region in 1985 when it bought Colonial Mortgage Service Co.