GMAC Cuts More Than 500 Jobs in Mortgage, Auto Finance Units

GMAC Inc., the auto and home lender controlled by the U.S. government, plans to cut about 554 jobs and close three offices as the firm tries to stanch loan losses.
Employees are being told today about plans to cut 313 positions at Residential Capital LLC’s offices in Costa Mesa, California and Charlotte, North Carolina, according to GMAC spokeswoman Gina Proia. The Charlotte mortgage office will be shut, while Costa Mesa will retain about 30 people, she said. The Semperian auto-loan servicing offices in Charlotte and Knoxville, Tennessee will close, cutting 241 jobs, she said.
GMAC may report an annual loss tomorrow of more than $10 billion for 2009 after mortgage defaults piled up at ResCap. Investors have pressed GMAC to stop supporting the home lending unit, whose Costa Mesa office houses Ditech, GMAC’s online mortgage lender. Proia declined to comment on ResCap’s future before the release of quarterly results.
“It’s really disappointing to see this happen,” said Paul Reddam, who founded Ditech in 1995 and sold it to GMAC in 1999. “We had 800 employees when I left the company and I know the staff grew significantly over the following couple of years.” Reddam now owns CashCall, a privately held lender based in Anaheim, California.
Ditech became known for television ads that pitched low rates and showed a rival lender exclaiming, “Lost another loan to Ditech.” The Ditech brand remains intact, with work being absorbed at other GMAC offices, Proia said.
Semperian’s “anchor sites” are in Jacksonville, Florida and Lewisville, Texas, she said.
Data on ResCap’s current workforce weren’t available. The company employed about 6,100 people at the end of 2008, according to data compiled by Bloomberg. GMAC listed about 22,700 employees at the end of 2008, including about 1,500 jobs at ResCap that were slated for elimination in the first quarter of 2009, according to a company filing.
Making Loans
The reductions “are part of getting our structural costs in line with business activities,” Proia said. ResCap continues to make home loans through its own staff and correspondent lenders, while operating a servicing unit that ranked fifth nationally in 2009, she said.
The government rescued GMAC three times to help prop up U.S. automakers by financing car purchases. The firm has said it wants to expand that role and resolve the fate of Minneapolis- based ResCap, which GMAC Chief Executive Officer Michael Carpenter has called “a millstone around the company’s neck.” Carpenter has said GMAC considered and rejected bankruptcy as an option for ResCap, and the company on Dec. 30 said it “does not expect to incur additional substantial losses” from the business.
Bailouts
Taxpayers gave GMAC a $3.79 billion infusion from the Treasury Department on Dec. 30, on top of about $13.5 billion previously earmarked for the firm in two previous bailouts. The government controls a 56 percent stake and could wind up with more than 70 percent, the lender has said.
During 2006, ResCap ranked among the nation’s biggest suppliers of subprime mortgages, according to trade journal Inside Mortgage Finance. Such loans have been blamed for contributing to the global financial crisis because they were made to people who were more prone to default. ResCap has lost more than $10 billion since 2007, and GMAC has shifted originations to its Ally Bank unit.
GMAC disclosed last month that its fourth-quarter loss was about $5 billion. Combined with losses from three previous quarters, that could boost the firm’s full-year deficit above $10 billion.
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