GMAC’s Bluster?

By: PAUL JACKSON
September 4, 2008

HW reported yesterday that GMAC/ResCap had decided to shutdown its wholesale and retail mortgage origination channels, a move that will cost 5,000 employees their jobs; but GMAC officials told National Mortgage News Thursday that the move wouldn’t likely impact production. Much.

Which either means the company was carrying dead weight to the tune of 60 percent of its existing staff base, evidence of surprisingly inept management — or it means that the company is planning on growing its other origination channels. Via NMN:

A company spokeswoman said Residential Capital will aggressively market its Ditech direct-to-consumer brand and maintain a presence as a correspondent buyer of mortgages. Asked about origination volume, she cautioned, “I don’t want to make any predictions, but volumes may not drop much.”

The company is maintaining “direct” originations via its DiTech brand, and a correspondent operation that accounted for half of production to start 2008, according to the company’s Q1 earnings summary.

But a further look at the numbers suggests how cutting retail and wholesale will bite ResCap. Inside Mortgage Finance ranked ResCap as the 8th largest lender during 2007; the company’s retail operations ranked 11th, and generated $22.92 billion — nearly 25 percent of total production for the year. The remaining 75 percent of volume came via broker and correspondent channels (the company does not provide a detailed breakout of its loan pipeline).

Which means the company is losing at best about 50 percent of its origination pipeline, historically speaking. While overall volume is waaaaay down, it seems that GMAC/ResCap would need to make up some serious ground using DiTech if it plans to keep things on the level.