(Update: auto loans restricted.)
ResCap, the financial company that controls Costa Mesa-based Ditech.com and is itself a unit of GMAC Financial Services, may not be able to survive amid tough market conditions, GMAC said today.
GMAC said in a release that even after taking steps to cut costs at ResCap and forgive about $200 million of its debt: “Adverse market conditions have made it difficult for ResCap to maintain adequate capital and liquidity levels. As a result, absent economic support from GMAC, substantial doubt exists regarding ResCap’s ability to continue as a going concern.”
As for GMAC, it reported a third-quarter loss of $2.5 billion, compared to a loss of $1.6 billion a year earlier.
And in addition to the housing industry woes, auto sales are down.
Bloomberg reports that GMAC “has cut off auto loans to customers who don’t have the highest credit ratings and curtailed operations.”
Alvaro G. de Molina, CEO of GMAC, said, “The economic and market conditions created an unrelenting environment for our business and the financial services sector overall.”
He added:
“In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity. In this regard, we’ve limited originations to match funding sources and are streamlining operations and evaluating opportunities to shed operations that are not essential to the core business. In addition, we are pursuing strategies to increase flexibility and access to funding such as participating in the Federal Reserve’s commercial paper purchase program via our asset-backed credit facility and engaging in discussions with regulatory authorities regarding bank holding company status.”
To read the full release CLICK HERE.
And here are some highlights from the struggles of GMAC and Ditech…
- Ditech parent to cut 5,000 jobs
- Ditech parent sees its U.S. mortgage biz stabilizing
- General Motors may rescue parent of Ditech.com
- Ditech owner in cash crunch
- Ditech owner posts $724 million loss, considers sale of units
- Update: ResCap cutting 3,000 jobs
- Schwarzenegger, servicers agree to ‘fast-track’ subprime workouts
- GMAC ‘tests’ scare tactic
- Ditech.com to move loan processing to Phoenix
We now resume our regularly scheduled financial catastrophe.
Poor GM. They can’t even get GMAC to give loans to people with less than a 700 FICO score. That’s how GM kept selling as many crummy Chevy’s and Pontiac’s and Buick’s as they did, by offering cheap credit to risky borrowers who got laughed at by the Honda dealer down the street.
Now that the cheap money has been turned off by GMAC, both car sales and mortgages have crashed on them. This will all be over for them in 60 days at most.
At least those annoying Ditech commercials will no longer bug me on TV.
I recently was involed in consulting for a bank who was interested in buying Ditech within the last few weeks and now the price will go way down to almost nothing. The price that was being thrown around was in th 8-10 million dollar range. I think it would be still worth something as the brand and existing platform could still produce a decent income.
Lou Pacific
Real Estate and Mortgage Company Consultant
Serving OC and the Industry for 30 years.
…..ok!, thanks for the resume update Lou.
Any idea what impact this would have on people who hold ditech.com mortgages?
Colleen,
People don’t “hold” ditech mortgages - what ditech does is service the mortgage for the secondary market after they originate it sell it to the secondary market.
Dont’ confuse the company that holds your mortgage with the company that services your mortgage, two different companies. For example, Downey Savings services mortgages for 3rd party investors who can NOT modify the loans because the investor is an investment platform that needs the consent of its numerous bondholders/beneficiaries before modifying - the problem is these investors can not be tracked down or will not unanimously approve of the modification.