Questions Arise as GMAC Looks to Expand Lending

GMAC Financial Services announced last week it will step up its correspondent and warehouse lending volume. The announcement comes, however, at a time when outsider observers are questioning the viability of GMAC’s Residential Capital division and other warehouse lenders are facing increased stress and government scrutiny. CreditSights, a debt ratings agency, said GMAC may reallocate ResCap’s desirable assets to other parts of GMAC and leave behind $11.4bn in debt to spin off the company and “put ResCap out of its misery,” in a report it issued last week. “While GMAC continued to toe the company line, indicating that it intends to provide support to ResCap as long as it benefits its owners to do so, we believe ResCap’s days could be numbered,” the report said. A spokesperson for GMAC said the report was “purely speculative” and that CreditSights had no affiliation or special access to GMAC when producing the report. For the first half of 2009, GMAC’s correspondent business originated more than $28bn in loans, which is on track to eclipse the $34bn it originated during all of 2008. GMAC also maintains $2.2bn in warehouse line commitments. With the decrease in the number of national correspondent and warehouse lenders — and the recent suspension of a major FHA originator after a federal probe into its warehouse lender — GMAC said it can expand in both the correspondent and warehouse arenas. “New efficiencies in our operations, our accelerated purchase facility and current market conditions have resulted in a tremendous opportunity for us and our clients,” Adam Glassner, ResCap’s new executive vice president and senior managing director said in a statement. Glassner joined GMAC in March to lead the effort of combining its correspondent and warehouse lending efforts. The executive vice president and senior managing director responsibilities were added to Glassner’s job when Thomas Neary, who previously held the position, voluntarily resigned for personal reasons at the end of July. But ResCap lost at least $1bn every quarter since Q307, and while GMAC keeps it functioning, “it systematically plundered the company for the more attractive assets via asset sales and exchanges,” the CreditSights report said, citing GMAC’s divestment of ResCap’s ownership in GMAC Bank (now Ally Bank) and the placement senior liens on other ResCap’s other “attractive” assets, like its mortgage servicing rights. GMAC said ResCap continues to operate based upon a strategy that it announced in September 2008 — to shed its non-core businesses and focus on core mortgage lending and servicing in the United States and Canada. Write to Austin Kilgore.