GMAC LLC’s Residential Capital home-lending unit will let go of roughly 700 workers — or five percent of its U.S.-based employees — as a continued subprime credit crunch has nearly every lender in the space wondering what will come next. About 600 to 700 workers will lose their jobs in cuts expected to take effect during the next few months, GMAC spokeswoman Gina Proia said in an interview with Bloomberg earlier yesterday. “The decision was influenced by current market conditions and the deterioration of the U.S. mortgage market,” said Proia. The newly-announced layoffs come on top of the elimination of 1,000 other jobs at the mortgage financing giant; the company had announced those cuts previously in January amid a rough financial patch for the former financing arm of General Motors Corp. ResCap reported a $651 million fourth-quarter loss in January as the subprime downturn just began to gather steam.
Since the start of 2006, at least 60 mortgage lenders have halted their operations, sought buyers or gone bankrupt, according to a well-known blog known as the Mortgage Lender Implode-o-Meter. Most of the job cuts will come from ResCap’s mortgage services divisions, though some corporate services jobs will be affected, Proia told Bloomberg. General Motors Corp. sold a majority stake in GMAC, including ResCap, to a consortium of investors led by Cerberus Capital Management last April in a deal worth an estimated $14 billion. In spite of difficulties at ResCap, the private equity investor is not running away from the subprime market, as HW reported this morning that the company will purchase Option One Mortgage from tax services provider H&R Block for approximately $970 million.