GMAC Loses $2bn on Mortgage Operations in Q209
GMAC Financial Services' mortgage operations contributed $1.8bn net loss to the company's Q209 after-tax net loss of $3.9bn. Mortgage originations grew 40% from the previous quarter, but losses remained heavy. GMAC's mortgage operations including Residential Capital lost a pre-tax $2bn in Q209, compared with $1.8bn in the year-ago quarter. The company said in the earnings statement that these losses were consistent with findings of the government's Supervisory Capital Assessment Program. "GMAC's results in the quarter were dramatically affected by a series of strategic actions that produced a short-term negative impact to financial performance but are expected to lead to longer-term benefits," said GMAC CEO Alvaro de Molina in the earnings statement. The company noted that ResCap recently sold off its mortgage operations in Australia and Spain in an effort to focus on its US business. GMAC also increased the loan loss provision on its mortgage operations in anticipation of continued credit deterioration. "This is about gaining funding and operational flexibility, expanding on our strengths, and shedding legacy and non-strategic assets," de Molina added, "allowing us to focus on the core automotive and mortgage origination and servicing businesses." GMAC noted an improving origination segment, which it said came from higher government production and increased refinancing activity. The US mortgage origination volume rebounded to $18.5bn in Q209, compared with $13.2bn last quarter and $17bn in the year-ago quarter. The company boosted total credit-related loss reserves to $916m at quarter-end, compared with $463m in the year-ago quarter. GMAC held $8.2bn in non-performing assets in Q209, compared with $7.3bn in Q208. Write to Diana Golobay. Disclaimer: The author held no relevant investments at the time this story was published.