GMAC Reports Loss, Cites Pressure from Mortgage Market
General Motors' former finance arm GMAC swung to a first-quarter loss, as pressure on the U.S. mortgage market forced the company to take charges at its housing finance unit.
GMAC, in which GM retains a 49% stake, posted a net loss of $305 million, compared with a profit of $495 million a year earlier.
GMAC's mortgage unit ResCap posted a quarterly net loss of $910 million, more than offsetting gains from its insurance and auto finance divisions, which earned $605 million.
GMAC said it had taken steps to mitigate risk at ResCap, such as reducing nonprime mortgage assets and curtailing new loans to borrowers with weaker credit.
GMAC said ResCap had cut its nonprime loan production to $3.3 billion in the first quarter from $9.1 billion a year earlier, and increased reserves due to higher delinquencies.
The finance company also said it injected $500 million into ResCap in the first quarter and another $500 million this month to shore up the equity base of the loss-making unit.
That $1 billion infusion was funded by a transfer of the same amount by former parent GM in order to finalize the sale of GMAC to an investment group led by Cerberus Capital Management.
Looking ahead, GMAC said it expected a "considerable improvement" in ResCap's results in the second quarter with "much-reduced" losses at its U.S. mortgage operations.