Archive for the 'Ditech' Category
August 5th, 2009, 12:00 pm by Mathew Padilla
GMAC Inc., the auto lender, may cut its losses and need for capital by sending its mortgage unit Residential Capital, which controls Costa Mesa-based Ditech.com, into bankruptcy, according to Bloomberg, which quotes a report from CreditSights Inc.
ResCap, which has lost at least $1 billion per quarter since the third period of 2007, may breach capital covenants in the current quarter, says CreditSights, a debt-rating firm. Here’s more from Bloomberg:
Detroit-based GMAC could keep ResCap’s “remaining good assets” and leave behind $11.4 billion of debt in a bankruptcy, said the report, which asked whether it was “time to put ResCap out of its misery.”
…
“The future value may have fallen below the cost of keeping ResCap alive,” said the report, whose New York-based authors included Adam Steer and David Hendler. “We see no real pragmatic reason for GMAC to absorb another $2 billion-plus quarterly hit.”
GMAC, during a conference call yesterday to discuss its $3.9 billion second-quarter loss, was asked about putting ResCap into BK. Here’s the exchange (from Bloomberg transcript):
Eric Selle of JP Morgan: And just a question on ResCap. I mean, it seems like we keep forgiving debt and extending these maturities. I mean, what is your current view on ResCap and why not cut it off? It seems like it’s the biggest driver of the hole in the stress test. What is your current view on ResCap and why not cut it off and force it into filing; it seems like your capital would benefit greatly?
Robert Hull, Chief Financial Officer: Good questions, Eric, and clearly we get these every quarter. I mean – the first response is always the same which is we’ll continue to support ResCap so long as it protects the interest of our stakeholders. And so, that means that we’re looking at this business, there are no options that are off the table for ResCap. But recognize my second point would be we have a core competency in origination and servicing. On the servicing side, we are the fifth largest in the U.S. and origination we’re sort of roughly around number seven. We think these are strengths for us. The legacy portfolio, clearly is giving us challenges; I mentioned that in the speech. And so, we do wrestle with that. We do believe we pulled a lot of losses forward and you heard that in the speech today. I’d never be so aggressive as to say they’re over but I think we’ve handled a lot of the clean-up here. And as long as we see the functionality and assets in this business as benefiting the stakeholder, we’ll stay in it.
Selle: And just specifically, I mean, what is the plan here? I mean, what interest are you guys protecting? I mean, this thing is still bleeding around 2 billion a quarter. I guess two questions, when is that supposed to abate to maybe a gain and then what’s the ultimate plan? I mean, is this to – I mean, it seems like it’s a lot of funding on government and it’s not a lot of opportunity for profit. When do you guys think you can get this to turn around to a profit? Is that dependent on borrowing costs or are, I just guess – I’m just looking for the six to 12-month plan on that thing.
Hull: Sure. Well, you can imagine we’re probably not going to give you a six to 12-month plan, but what I can tell you is that when we ran the traps with the Federal Reserve on all the loss content of all of our assets, we pounded on ResCap the hardest. None of these losses you see in this quarter were a – were in excess of what we planned with them. Some of them happened sooner and we pulled them ahead to try and get this behind us. So that was really the thesis on that. Clearly, the ResCap story is not finished and we continue to work with that business. But as I said, part of that six to 12-month story would have to be, we think origination and servicing are core strengths for us and we are not ready to give up on those yet.
Selle: And then just finally, what are the plans to fill the 5.6 billion of capital required for the stress test and I’ll jump off? Thank you.
Hull: The balance of the stress test capital, the 13.1 you allude, to is still the subject of discussion between GMAC and the Fed, and until November when those discussions are finished — and it’s dynamic and I’m sure there’s a lot that will happen between now and then — we really don’t have a clear answer nor the one we could disclose. Next question, Susan.
Ditech was not mentioned on the call or in the earnings release.
More from this blog…
Posted in: Company Watch • Ditech • GMAC • Meltdown • industry | 10 Comments »
May 21st, 2009, 8:17 am by Mathew Padilla
The Wall Street Journal reports GMAC LLC, owner of Costa Mesa-based Ditech.com, is poised to get $7 billion more from the Treasury Department, the first installment of an aid deal that could reach $14 billion.
According to the Journal, the government could end up owning a majority stake in both GMAC and General Motors.
The Obama administration wants GMAC to keep making loans to customers of General Motors and Chrysler. Treasury gave GMAC $5 billion in December. Here’s more:
The GMAC funding is an illustration of how rapidly the government effort to rescue the U.S. auto industry is escalating in cost and scope. What began as an emergency batch of loans to GM, Chrysler and GMAC in December — totaling just over $20 billion — now looks likely to balloon well beyond $50 billion and could approach $100 billion by the end of the year.
If the government did not get involved, allowing the auto industry to collapse, it would be a giant anti-stimulus at the worst possible moment. On the other hand, tossing billions of dollars at these companies will not resurrect buyer demand. And we have yet to see a blueprint for how the auto makers will operate after restructuring.These moves are not confidence builders.
In other news…
Posted in: Bailout Buzz • Company Watch • Ditech • GMAC • Meltdown | 1 Comment »
May 5th, 2009, 11:58 am by Mathew Padilla
GMAC, the owner of Costa Mesa-based Ditech.com, reported today a loss of $675 million in the first quarter, 15% greater than $589 million a year ago. Here’s the company’s explanation:
Results in the quarter were primarily attributable to continued pressure in mortgage operations related to valuation adjustments on mortgage servicing assets, weaker credit performance on both auto and mortgage assets, mark-to-market adjustments on derivatives, and an original issue discount related to the fourth quarter debt exchange. The losses were partially offset by profitable performance in the insurance business and $631 million in after-tax gains on debt extinguishment transactions.
GMAC previously received $6 billion of government bailout money, and federal officials are counting on it to lend money to customers of bankrupt auto maker Chrysler LLC.
The lender is affiliated with General Motors, making loans to its customers, and was a big player in the home-loan market until investors abandoned mortgage securities not tied to Fannie Mae or Freddie Mac.
In other news…
Posted in: Company Watch • Ditech • GMAC • Meltdown • industry | 2 Comments »
December 30th, 2008, 8:39 am by Mathew Padilla
GMAC, the owner of Ditech.com in Costa Mesa and a lender to buyers of General Motors’ cars, is getting $5 billion from the U.S. government, the Treasury Department said today.
The Associated Press reports the move will help GMAC avoid bankruptcy but also limit General Motors control over the company. GM previously sold a 51% stake in GMAC to private investor Cerberus Capital Management.
GMAC said it would resume lending to consumers whom it previously said were too great a risk for auto loans. Such a move will boost auto sales but could expose the company to more loan defaults. Here’s more from AP:
In exchange for the slice of the $700 billion bank rescue package, the government will receive preferred shares that pay an 8 percent dividend and warrants to purchase additional shares in return for the money, the department said.
Treasury also said it will lend up to $1 billion to General Motors so that the company can purchase additional equity that GMAC is planning to offer as part of its effort to raise more capital.
Read the full AP story HERE. The article focuses on the car lending side of GMAC, so no details on Ditech.
And in other news…
Posted in: Bailout Buzz • Company Watch • Ditech • GMAC • Meltdown • Costa Mesa | 5 Comments »
November 5th, 2008, 8:47 am by Mathew Padilla
(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…
Posted in: Company Watch • Ditech • Meltdown | 6 Comments »
September 3rd, 2008, 11:52 am by Mathew Padilla
(Update: Costa Mesa layoffs.)
Residential Capital LLC, the parent of Costa Mesa-based Ditech.com, is cutting 5,000 jobs, a 60 percent staff reduction, as the mortgage meltdown continues.
ResCap is cutting 75 jobs in Costa Mesa, though none are tied to Ditech.com, said spokesperson Jeannine Bruin.
“Ditech is a brand we are still very much behind,” Bruin said.
GMAC Financial Services, the parent of Residential Capital (ResCap), said today 3,000 employees will “receive notification” this month and most of the rest by year-end.
The company is also closing all its 200 GMAC Mortgage retail offices, ceasing originations through its Homecomings wholesale unit, and curtailing business lending.
The job cuts in Costa Mesa are tied to GMAC Mortgage closings and mostly appraisal staff, spokesperson Bruin said.
Tom Marano, CEO of ResCap, said in a release, “While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment. Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk.”To read the full release, CLICK HERE.
Hmm…GMAC said in July its U.S. operations were beginning to stabilize.
Still, GMAC has previously tried to rescue the parent of Ditech.com and ResCap previously cut 3,000 jobs.
And in other O.C. business news….
Posted in: Company Watch • Ditech • Ditech • GMAC | 23 Comments »
July 31st, 2008, 5:00 pm by Mary Ann Milbourn
Residential Capital LLC, the mortgage unit of GMAC that controls Ditech.com in Costa Mesa, posted a miserable second quarter loss — $1.9 billion — but GMAC says in an SEC filing today that things may be looking up at least in ResCap’s U.S. operations.
This year’s second quarter loss was a huge jump from the $254 million in red ink ResCap reported in the same period last year. GMAC blamed the increase on “significant losses” on sales of pools of mortgages and additional set-asides for loan losses due to deteriorating markets in parts of Europe.
Because of the market conditions in Europe, GMAC said ResCap was halting mortgage loan production everywhere except the U.S. and Canada.
But things may be looking up domestically for ResCap. GMAC said its U.S. operations are beginning to stabilize after it slashed its balance sheet to reduce risk.
“While prime conforming loan production decreased modestly year-over-year with $12.2 billion in the second quarter of 2008 versus $12.7 billion in the year-ago period, production of higher-margin government loans increased to $3.8 billion this quarter compared to $800 million in the second quarter of 2007.”
For related news:
Posted in: Company Watch • Ditech • Ditech • mortgages | 5 Comments »
June 3rd, 2008, 11:30 am by Mathew Padilla
Residential Capital LLC, the unit of GMAC that controls Ditech.com in Costa Mesa, said in a filing today that it may need $1.4 billion in cash on top of a previously disclosed need for $600 million by June 30. The sudden requirement for more than triple the cash it previously needed is mostly due to its failure to sell $1.3 billion in assets due to “adverse conditions,” the company said.
ResCap, as the company is known, needs money to fund operations and to maintain cash reserves demanded by its lenders. It outlined a series of steps to stay solvent, including selling certain assets to investor Cerberus Capital Management, a majority shareholder in GMAC. I saw no mention of Ditech in the filing.
Yet it also warned: “If liquidity needs are greater, ResCap may be unable to independently satisfy its near-term liquidity requirements.”
Related Links:
Posted in: Company Watch • Ditech | 11 Comments »
May 5th, 2008, 6:24 pm by Mathew Padilla
Residential Capital LLC, the unit of GMAC that includes Costa Mesa-based Ditech.com, said in a filing that it is highly leveraged relative to its cash flow and could be upside down financially by June.
“There is a significant risk that we will not be able to meet our debt service obligations,” the company said Monday.
It’s seeking to restructure debt and raise $600 million by June. If not it might have to sell assets, possibly including “businesses and platforms that are unrelated to our core mortgage finance business.” Ditech.com is not mentioned in the filing.
Bloomberg reports the company is offering as little as 80 cents on the dollar to exchange or buy back $14 billion of bonds to extend maturities and stave off bankruptcy.
Related Links:
Posted in: Company Watch • Ditech • Ditech | 6 Comments »
February 5th, 2008, 8:39 am by Mathew Padilla
GMAC, owner of Costa Mesa-based Ditech.com and formerly a unit of General Motors, posted a $724 million loss in Q4 as home owners missed loan payments, reports Bloomberg. Here’s more…
The net loss compares with a profit of $1 billion a year earlier, the Detroit-based company said in a statement today. GMAC said it’s talking to buyers for parts of the Residential Capital mortgage unit, which recorded a $921 million quarterly loss.
GMAC vowed today to make money in 2008 after falling home prices and record U.S. foreclosures led to a $2.3 billion companywide loss for 2007. Provisions for bad mortgages probably will decrease this year, GMAC predicted. The auto finance unit remained profitable, overcoming a 6.1 percent decline in GM’s North American auto sales last year.
“While results were weak, we suspect investors will take some encouragement from GMAC’s expectation of profitability in 2008,” said Himanshu Patel, an analyst at JPMorgan Chase & Co.
ResCap’s future may include acquisitions, sales, alliances and joint ventures, GMAC said. Discussions are in various stages and GMAC said it’s unclear whether any transaction will result. The unit lost $4.3 billion for the full year.
ResCap is the unit of GMAC that controls Ditech. It’s units could be sold, form alliances or even buy other companies, reports Bloomberg, which writes that its loss was due to “a higher provision for bad loans, fewer new mortgages and markdowns on the value of securities and loans held for sale.”
For what I wrote on Ditech’s last job cuts, CLICK HERE.
To read the full Bloomberg story CLICK HERE.
Posted in: Company Watch • Ditech | 11 Comments »
October 17th, 2007, 9:29 am by Mathew Padilla
(Update: Ditech cuts added.)
Residential Capital LLC, the home-lending arm of GMAC Financial Services and parent of Ditech.com in Costa Mesa, confirmed today it’s cutting about 3,000 jobs, or roughly 25% of its workforce.
The cuts include 120 jobs at Ditech’s Costa Mesa headquarters. Ditech will have 300 workers left in O.C. after the cuts.
Here’s more from the Wall Street Journal, which reported on the cuts earlier today:
The unit, known as ResCap, is expected to cut about 3,000 of its 12,000 employees, in addition to the 1,000 who were to be cut by the end of this month, as announced in January.
“ResCap has taken aggressive actions to date and will continue to adjust its operations to be more in line with the dramatically changed real-estate finance environment,” spokesman Stephen DuPont wrote in a release. “We are focused on turning around the business and believe ResCap will continue to be a market leader in the mortgage space for the long term.” He declined to comment further.
Like other lenders, ResCap, a former crown jewel of GMAC, has been grappling with the nation’s worst housing downturn in more than a decade.
General Motors Corp. sold a 51% stake in GMAC to a consortium of investors led by Cerberus Capital Management in November. In the sale, GMAC received a common-equity injection of about $1 billion from GM and used the funding to shore up ResCap’s balance sheet.
Representatives of GM and Cerberus declined to comment.
Paid subscribers to the Journal can read the whole story by CLICKING HERE.
National Mortgage News also wrote on the future of ResCap:
Residential Capital Corp. may close its Residential Funding Corp. conduit as part of a plan to slash 2,500 full-time workers, industry sources have told MortgageWire. ResCap, which controls RFC and GMAC Mortgage of Horsham, Pa., plans to stay in the correspondent business — but through GMAC, sources said. A spokesman for ResCap would not comment on the layoffs but said the company will remain a correspondent lender. Created by Salomon Brothers back in the 1980s, RFC has a long history in the business. Its headquarters are in Minneapolis. “RFC is doing no volume right now,” said one banker familiar with the company. ResCap is 51% owned by hedge fund Cerberus Capital Corp., which recently threw its subprime unit, Aegis Mortgage, into bankruptcy. Earlier this year Cerberus agreed to buy Option One Mortgage of California but the sale is in trouble.
That’s all I know so far. Stay tuned.
Posted in: Company Watch • Ditech | 42 Comments »
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