Strategic origination channels remain open; commitment to servicing
customers unchanged
FORT WASHINGTON, Pa., Sept. 3 /PRNewswire/ -- GMAC Financial Services
and its subsidiary Residential Capital, LLC (ResCap) today announced
additional initiatives to further optimize the mortgage business as the
downturn in the credit and mortgage markets persists. In response to these
conditions, ResCap has enacted a plan to significantly streamline its
operation, reduce cost, adjust its lending footprint and refocus its
resources on strategic lending and servicing.
On Sept. 2, 2008, a plan was approved that included closing all 200
GMAC Mortgage retail offices, ceasing originations through the Homecomings
wholesale broker channel, further curtailing business lending and
international business activities, and right-sizing functional staff
support. In addition, the company is evaluating strategic alternatives for
the GMAC Home Services business and the non-core servicing business. These
collective actions will reduce the ResCap workforce by approximately 5,000
employees, or 60 percent. Approximately 3,000 employees will receive
notification this month with the majority of the remaining 2,000 reductions
expected to occur by year-end.
"While these actions are extremely difficult, they are necessary to
position ResCap to withstand this challenging environment," said ResCap
Chairman and Chief Executive Officer Tom Marano. "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."
ResCap will incur a charge expected to range from $90 to $120 million
that reflects the 3,000 workforce reductions and related operational
streamlining initiatives. The charge will include costs related to
severance and other employee-related costs of approximately $50 to $60
million and facility closure costs of approximately $40 to $60 million. The
majority of the charge is expected to be reflected in the third quarter and
result in future cash expenditures of approximately $55 million. Potential
charges related to the remaining 2,000 workforce reductions have not yet
been determined.
The workforce reductions will include a range of administrative and
managerial positions. All eligible employees affected by the workforce
reduction will be provided severance packages and outplacement assistance.
ResCap will continue to originate loans in the U.S. and internationally
where there is a secondary market to sell the loans. The company will
originate products through its correspondent and direct lending channels.
ResCap's commitment to servicing loans is unchanged by the actions
announced today, and the company will continue to expand and enhance its
industry-leading servicing platform, including further development of
high-touch special servicing operations to help preserve homeownership and
support investors that own distressed and special situation loan
portfolios.
About GMAC Financial Services
GMAC Financial Services is a global, diversified financial services
company that operates in approximately 40 countries in automotive finance,
real estate finance, insurance and commercial finance businesses. For more
information, go to http://www.gmacfs.com .
About Residential Capital, LLC
Residential Capital, LLC, an indirect wholly owned subsidiary of GMAC
Financial Services, is a leading real estate finance company. ResCap's
businesses cover the U.S. residential finance industry, from origination
and servicing of mortgage loans through their sale or securitization in the
secondary market. ResCap operates in selected international markets and
also provides capital to other originators of mortgage loans and
residential real estate developers.
Forward-Looking Statements
In this announcement and comments by GMAC LLC ("GMAC") and Residential
Capital, LLC("ResCap") management, the use of the words "expect,"
"anticipate," estimate," "forecast," "initiative," "objective," "plan,"
"goal," "project," "outlook," "priorities," "target," "intend," "evaluate,"
"pursue," "seek," "may," "would," "could," "should," "believe,"
"potential," "continue," or the negative of any of those words or similar
expressions is intended to identify forward-looking statements. All
statements herein and management comments, other than statements of
historical fact, including without limitation, statements about future
events and financial performance, are forward-looking statements that
involve certain risks and uncertainties. While these statements represent
our current judgment on what the future may hold, and we believe these
judgments are reasonable, these statements are not guarantees of any events
or financial results, and ResCap's actual results may differ materially due
to numerous important factors that are described in the most recent reports
on SEC Form 10-K for ResCap, each of which may be revised or supplemented
in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include,
among others, the following: securing low cost funding for ResCap; our
ability to maintain an appropriate level of debt; recent developments in
the residential mortgage market, especially in the nonprime sector;
disruptions in the markets in which we fund ResCap's operations, with
resulting negative impact on our liquidity; the impact on ResCap of the
continuing decline in the U.S. housing market; changes in U.S. government-
sponsored mortgage programs or disruptions in the markets in which our
mortgage subsidiaries operate; changes in our contractual servicing rights;
costs and risks associated with litigation; changes in our accounting
assumptions that may require or that result from changes in the accounting
rules or their application, which could result in an impact on earnings;
changes in the credit ratings of ResCap; changes in economic conditions,
currency exchange rates or political stability in the markets in which we
operate; and changes in the existing or the adoption of new laws,
regulations, policies or other activities of governments, agencies and
similar organizations.
Investors are cautioned not to place undue reliance on forward-looking
statements. ResCap undertakes no obligation to update publicly or otherwise
revise any forward-looking statements, whether as a result of new
information, future events or other such factors that affect the subject of
these statements, except where expressly required by law.
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