Finance company GMAC lost $2.52 billion in the third quarter, hurt by slumps in the housing and auto markets, and said its Residential Capital mortgage unit may fail.

CNBC.com

GMAC has been in the red for five straight quarters, losing $7.9 billion over that time. ResCap lost $1.91 billion in the third quarter and has lost $9.1 billion over the last two years.

Despite halting many risky loans and cutting 10,000 jobs over two years, ResCap is struggling to maintain sufficient capital and liquidity. GMAC excused $197 million of its obligations in the third quarter, and more in October.

"Absent economic support from GMAC, substantial doubt exists regarding ResCap's ability to continue as a going concern," GMAC said.

Private equity firm Cerberus Capital Management owns 51 percent of Detroit-based GMAC, and the automaker General Motors

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"If GMAC can't provide support that ResCap needs, then bankruptcy is an option for ResCap," said Christopher Wolfe, an analyst at Fitch Ratings. "GMAC is running out of options. There is a limit to how much support GMAC can provide, and we don't believe it can provide the support it has historically."

The fates of ResCap and GMAC also depend on a potential merger of GM with Chrysler LLC, also controlled by Cerberus.

GMAC has said it may convert to a bank holding company, letting it tap the U.S. Treasury Department's $700 billion bailout fund, and may refinance much of its debt. It completed a $60 billion restructuring in June.

The company has been the primary lender to GM customers but has curbed loans to borrowers who don't have good credit. Its auto finance unit lost $294 million in the quarter, hurt by higher North American and Latin American credit losses, while insurance operations earned $97 million.

GMAC's third-quarter revenue fell 24 percent to $1.72 billion. It year-earlier loss was $1.6 billion.

ResCap was the seventh-largest U.S. mortgage lender from January to June, the newsletter Inside Mortgage Finance said. It has stopped making riskier U.S. loans and halted all non-U.S. mortgage lending apart from Canadian insured loans. GMAC has also closed 200 retail mortgage offices.

GMAC spokeswoman Gina Proia declined to comment. GM and Cerberus did not immediately return calls seeking comment.

Most Difficult Environment Ever

If ResCap fails, it will join the ranks of major mortgage lenders that have fallen victim to the worst U.S. housing crisis in decades. Countrywide Financial and Wachovia agreed to be acquired, and IndyMac Bancorp and Washington Mutual failed.

"This is the most difficult environment we have ever faced," forcing "painful choices" to restrict lending, GMAC Chief Financial Officer Robert Hull said on a webcast. He took no questions from analysts, a change from prior practice.

Cutbacks in GMAC's lending were responsible for about half of GM's 45 percent plunge in October vehicle sales, the automaker said. "It was like someone turned off the lights," GM North American sales chief Mark LaNeve said on Monday.

Wolfe, the Fitch analyst, said, "GM needs GMAC to exist, but it doesn't need ResCap to exist." GM shares rose 24 cents to $5.96 in morning trading on the New York Stock Exchange.

ResCap debt prices indicate investors believe default is likely. Debt maturing between 2011 and 2015 was quoted Tuesday at 13.5 cents to 20 cents on the dollar, yielding at least 55.7 percent, bond pricing service Trace said.

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