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Bailout Watchdog Investigating Alleged Foreclosure Fraud

by AP on October 13, 2010

WASHINGTON — A government watchdog is investigating government-owned GMAC Mortgage after a company employee admitted to approving thousands of foreclosures without reading the paperwork. The special inspector general for the $700 billion financial bailout is looking into the improper foreclosures, which led GMAC Mortgage to halt foreclosures in 23 states, a spokeswoman for the watchdog said. Special inspector general Neil Barofsky can investigate GMAC because its parent company received three bailouts from the Treasury Department totaling $16.3 billion – more than all but a handful of companies. The investigation highlights the Treasury Department’s competing priorities for GMAC. As majority-owner of GMAC parent Ally Financial, Treasury wants the company to regain its financial footing so it can repay its bailouts and return to private hands. That has led Treasury to avoid meddling in GMAC’s day-to-day business. Yet Treasury has another responsibility under the bailout law: helping homeowners facing foreclosure. Its main effort relies on GMAC and other mortgage companies’ lowering borrowers’ monthly payments. Often, the companies can make more money by foreclosing. GMAC Mortgage halted some foreclosures last month after an employee admitted to approving 10,000 foreclosures per month. The employee signed court papers swearing that the foreclosure documents were accurate. But he did not read the documents. GMAC’s move last month sparked similar admissions and foreclosure halts by big banks including Bank of America Corp. and JPMorgan Chase & Co. GMAC said Tuesday that it has hired legal and accounting firms to review foreclosures in all 50 states. Consumer advocates and lawyers have complained for years about corner-cutting in the foreclosure process by GMAC and other mortgage companies. Treasury owns 56 percent of GMAC’s common shares, plus $14 billion of other GMAC investments. GMAC parent Ally Financial is the only bank that is majority-owned by the Treasury. Treasury officials said they have not looked into GMAC’s treatment of mortgage borrowers. “Treasury, as a matter of long-standing policy, is not involved in the day-to-day management of any private company,” spokesman Mark Paustenbach said in a statement. He said Treasury has “made clear that these firms must follow the law,” and supports efforts by enforcement agencies and regulators to hold the companies accountable for any illegal actions. Barofsky’s office is one of three independent bodies overseeing the bailout, which was approved by Congress in 2008 at the peak of the global financial crisis. He has criticized the government for failing to drive a hard bargain with banks. For example, he said Treasury Secretary Timothy Geithner may have wasted billions of taxpayer dollars by failing to negotiate with banks that were owed money by insurance giant American International Group Inc. Banks such as Goldman Sachs Group Inc. got billions from the AIG bailout, which Geithner ran as president of the Federal Reserve Bank of New York. Treasury’s authority to create new bailout programs expired last week.

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Bailout Watchdog Investigating Alleged Foreclosure Fraud

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Zach Carter: Obama Must Reject The Foreclosure Fraud Bailout

by on October 7, 2010

Unbelievably, the U.S. Senate has approved legislation making it easier for banks to get away with foreclosure fraud. The bill would make it much harder for consumer advocates to show that banks are engaging in fraud, bailing out megabanks who cut corners in order to boost bonuses and slap borrowers with massive, illegal fees. The political fight between big banks and troubled homeowners is on, and President Barack Obama must take a side . If President Obama signs this legislation into law, he’s sending a clear signal that his administration stands ready to bailout the banks again, whatever the consequences for American homeowners. The new legislation is a clear attempt to provide legal cover to GMAC’s robo-signing scandal, and should be firmly opposed by Obama. Banks are running into big trouble in foreclosure courts right now because they have kept shoddy mortgage records for years in order to cut costs and boost bonuses. Those records are so bad that banks routinely cannot prove that they have the legal right to foreclose on the homes they attempt to foreclose on. That’s a major problem, because banks have repeatedly demonstrated that they cannot be trusted to figure out their own foreclosures for themselves. They’ve foreclosed on people who haven’t missed any mortgage payments, and even on borrowers who have fully paid off their loans. So banks and their lawyers have been fabricating documents, forging signatures, and lying to judges in order to go through with foreclosures. All of this is fraud– especially when committed systematically, en masse by large corporations and their clients. It gets even worse when banks try to use fraudulent documents to slap borrowers with thousands of dollars in illegal fees . The legislation currently awaiting President Obama’s signature tries to bailout banks on one aspect of this documentation problem. Banks push through a lot of bogus documents with the help of corrupt notaries. Notaries are people who witness some legal event, like the signing of a contract, and then testify in print that they saw the contract being signed. It’s one way for courts and lawyers to show that documents have not been forged. But the major foreclosure fraud scandal at bailout behemoth GMAC that ignited the current furor involved what appear to be totally bogus notaries. One GMAC employee, Jeffrey Stephan, signed thousands of affidavits and had them all notarized in Pennsylvania, even though they were being used in foreclosure cases in many different states. Since different states have different standards for notary approval, these documents should have been unacceptable in the vast majority of state courts. That made the GMAC scandal illegal in most states. But the GMAC scandal got much worse once Stephan acknowledged that he had never actually examined the affidavits before approving them. All of Pennsylvania’s notaries who signed off on the Stephans Documents were totally unreliable. They were approving fraudulent documents en masse. So for the Stephens Documents, there are two levels of impropriety–the notaries who didn’t do their homework, and Stephens, who illegally robo-signed hundreds of thousands of documents. The bill approved by the Senate on September 30 addresses the notary side of things. It says that all states must accept a notary from any other state, and even allows notaries to sign-off on electronic documents. That means notaries don’t have to be present at the signing of documents–somebody can forge a document, scan it into a computer, and ship it off to a notary for approval, replicating the GMAC scam online. The good news is that the GMAC documents were still illegal even without the false notarizations. The fact that Stephans robo-signed these without examining them was itself an act of fraud (barring other extenuating circumstances). So even if this bill is signed by Obama, wronged homeowners have some hope for redress. But the legislation would still create a major new hurdle for borrowers seeking relief. If a bogus notarization is deemed legal, it’s much harder to prove that the document itself is just a big fat fraud. Most states only accept notarizations from their own state–this makes perfect sense for mortgages. Nobody from Pennsylvania needs to fly-in to witness my mortgage closing in Virginia–a Virginian notary will do just fine. By requiring any state’s notarizations to be acceptable nationwide, the bill establishes a new race-to-the-bottom in standards: Whichever state has the weakest notary rules gets all the business. It means all of the crap Pennsylvania notaries on the GMAC robo-signings would be deemed acceptable in any state. Borrowers could still challenge the GMAC robo-signings, but it would be much harder to win the challenge, since an official, authorized notary had stated that the fraudulent robo-signings were in fact legitimate. The bill is an obvious attempt to bailout banks from the consequences of their own bonus-fueled shortcuts–shortcuts which are being used to slap individual American families with tens of thousands of dollars in illegal fees . President Obama has no business bailing out our biggest banks again–especially on the backs of troubled borrowers those banks are attempting to defraud. And the future political ramifications are dire. If this bill proves insufficient to bailout GMAC, JPMorgan, Bank of America, and the other major banks implicated in the foreclosure fraud scandal, there will be future legislative efforts to help them. If this bill becomes law, then politicians will have created political cover for the next round of bailouts, which will be characterized as a mere “technical fix” to this attempt. President Obama must veto this bill. American homeowners deserve to be protected from fraud. The American government shouldn’t be bailing out fraud.

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Zach Carter: Obama Must Reject The Foreclosure Fraud Bailout

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GMAC Pulls Foreclosure Affidavits Signed By Kristine Wilson

September 26, 2010

Attorneys for homeowners in Florida say Ally Financial’s GMAC mortgage unit has begun to withdraw affidavits submitted in support of foreclosures that were signed by a second employee.

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GMAC Foreclosures Investigated By State Attorneys General

September 26, 2010

Attorneys general in three U.S. states are investigating foreclosures at Ally Financial Inc.’s GMAC Mortgage unit after the lender said it would halt some evictions following a discovery of faulty documentation.

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GM Is Said to Weigh Returning to Automotive Financing, May Buy Back GMAC

May 11, 2010

By David Welch and Katie Merx May 11 (Bloomberg) — General Motors Co. may return to the auto-lending business more than three years after selling control of GMAC LLC, according to three people familiar with the company’s plan. GM may buy back the GMAC business, start a new finance company or form a partnership with banks and other lenders, said the people, who asked not to be identified because the plans are private. Having its own finance arm could increase the automaker’s profit and give its dealers competitive leasing and loan offers. Chief Executive Officer Ed Whitacre wants to establish an in-house lender before taking the Detroit-based automaker public again as soon as the fourth quarter of this year, said one of the people. GM repaid government loans last month, and having an initial public offering will allow the U.S. to reduce its 61 percent stake in the automaker. “The IPO is going to be more of a success if they can sell more vehicles than they have been selling,” said Rebecca Lindland , an analyst at IHS Global Insight in Lexington, Massachusetts. “They should be able to do that if they can be more aggressive in their financing. Having their own finance company would certainly help.” Whitacre has his management team exploring all options, the people said. Acquiring Detroit-based GMAC, now known as Ally Financial Inc., would give GM a ready-made lending operation. To acquire those operations, the automaker would have to execute a deal with the U.S. Treasury, which owns 56 percent of GMAC. Tom Wilkinson, a GM spokesman, declined to comment. Automotive Lending GM would probably want to acquire only the automotive business, said Mark Wakefield, a director at Southfield, Michigan-based turnaround firm Alix Partners, which is winding down the bankrupt old GM, now called Motors Liquidation Co. GM probably wouldn’t want GMAC’s mortgage business, which was called ResCap until the company changed names, he said. It made $175 million in the first quarter after losing $17.3 billion from 2007 through 2009. “The cleanest way to do this is to buy only the auto finance business and leave ResCap, Ally Bank and the commercial warehouse-lending business alone,” said Wakefield, who isn’t directly involved in the matter. An Ally spokeswoman, Gina Proia , called the potential acquisition of its auto-finance business by GM “speculation.” “Our position is that if we are supporting our manufacturers and customers, then the relationship works,” Proia said. GM sold 51 percent of GMAC to private equity firm Cerberus Capital Management LP in 2006 when the automaker ran low on cash and since has had to rely on outside lenders. One complicating factor: If GM owns more than 10 percent, the lender would have to relinquish its bank holding company status and wouldn’t have access to the Federal Reserve’s discount window for cheap funds. All parties would also have to work out a solution with Chrysler Group LLC, which has a contract with Ally for its dealers, Wakefield said. Borrowing Rates A GM-owned finance arm would have to borrow on the open market to lend to car buyers and dealers. The funds could come at higher interest rates until GM proves that it is a sound investment, Wakefield said. “It would take a while to convince the market that GMAC is safe and sound,” Wakefield said. “It will take a while to claw their way to a borrower rate that is competitive.” Russ Shelton , owner of Shelton Pontiac Buick GMC Inc. in Rochester Hills, Michigan, said dealers would welcome an in- house finance arm at GM. “Probably the biggest missing piece for GM is financing,” Shelton. “Getting a customer financed today is the hardest thing, even if they have good numbers. I think we could probably overcome some of that with a captive finance arm.” To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net .

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GMAC Registers 267B In TruPS

March 27, 2010

GMAC has registered 267 billion of trust preferred securities TruPS owned by the Treasury department

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GMAC Said to Sell $200 Million Unit to Wells Fargo to Focus on Auto Loans

March 23, 2010

By Dakin Campbell March 23 (Bloomberg) — GMAC Inc. , the home and auto lender shedding assets to repay federal bailout funds, agreed to sell its U.S.-based factoring business to Wells Fargo & Co. , according to two people with direct knowledge of the matter. The sale may be announced by Detroit-based GMAC and San Francisco-based Wells Fargo tomorrow, said one of the people, who declined to be identified because the agreement isn’t public. The business will be folded into Wells Fargo Trade Capital, run by Stuart Brister , according to one of the people. GMAC Chief Executive Officer Michael Carpenter is selling units to focus on auto financing after losses tied to home lending forced the firm to accept three U.S. bailouts. He’s seeking buyers for commercial finance assets worth about $200 million at the end of last year, according to the company’s year-end filing. Gina Proia , GMAC’s spokeswoman, declined to comment. Gabe Boehmer, a spokesman for Wells Fargo, couldn’t be reached for comment. Factoring allows companies to gain liquidity by selling their receivables for cash. GMAC said in its fourth-quarter filing it would sell the factoring unit. GMAC’s filing listed $233 million of loans and finance receivables for sale within the unit that includes the factoring operations . Brister joined the bank from GMAC, where he was a president of the commercial services unit of GMAC Commercial Finance, according to a 2007 company statement. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

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GMAC Said to Sell $200 Million Unit to Wells Fargo to Focus on Auto Loans

March 23, 2010

By Dakin Campbell March 23 (Bloomberg) — GMAC Inc. , the home and auto lender shedding assets to repay federal bailout funds, agreed to sell its U.S.-based factoring business to Wells Fargo & Co. , according to two people with direct knowledge of the matter. The sale may be announced by Detroit-based GMAC and San Francisco-based Wells Fargo tomorrow, said one of the people, who declined to be identified because the agreement isn’t public. The business will be folded into Wells Fargo Trade Capital, run by Stuart Brister , according to one of the people. GMAC Chief Executive Officer Michael Carpenter is selling units to focus on auto financing after losses tied to home lending forced the firm to accept three U.S. bailouts. He’s seeking buyers for commercial finance assets worth about $200 million at the end of last year, according to the company’s year-end filing. Gina Proia , GMAC’s spokeswoman, declined to comment. Gabe Boehmer, a spokesman for Wells Fargo, couldn’t be reached for comment. Factoring allows companies to gain liquidity by selling their receivables for cash. GMAC said in its fourth-quarter filing it would sell the factoring unit. GMAC’s filing listed $233 million of loans and finance receivables for sale within the unit that includes the factoring operations . Brister joined the bank from GMAC, where he was a president of the commercial services unit of GMAC Commercial Finance, according to a 2007 company statement. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

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GMAC Said to Sell $200 Million Unit to Wells Fargo to Focus on Auto Loans

March 23, 2010

By Dakin Campbell March 23 (Bloomberg) — GMAC Inc. , the home and auto lender shedding assets to repay federal bailout funds, agreed to sell its U.S.-based factoring business to Wells Fargo & Co. , according to two people with direct knowledge of the matter. The sale may be announced by Detroit-based GMAC and San Francisco-based Wells Fargo tomorrow, said one of the people, who declined to be identified because the agreement isn’t public. The business will be folded into Wells Fargo Trade Capital, run by Stuart Brister , according to one of the people. GMAC Chief Executive Officer Michael Carpenter is selling units to focus on auto financing after losses tied to home lending forced the firm to accept three U.S. bailouts. He’s seeking buyers for commercial finance assets worth about $200 million at the end of last year, according to the company’s year-end filing. Gina Proia , GMAC’s spokeswoman, declined to comment. Gabe Boehmer, a spokesman for Wells Fargo, couldn’t be reached for comment. Factoring allows companies to gain liquidity by selling their receivables for cash. GMAC said in its fourth-quarter filing it would sell the factoring unit. GMAC’s filing listed $233 million of loans and finance receivables for sale within the unit that includes the factoring operations . Brister joined the bank from GMAC, where he was a president of the commercial services unit of GMAC Commercial Finance, according to a 2007 company statement. To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

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GMAC Bailout Could Cost Taxpayers $6.3 Billion, Says Watchdog

March 11, 2010

WASHINGTON — The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable – a decision that could cost taxpayers $6.3 billion, a new watchdog report says. The government said the $17.2 billion bailout was a necessary step to save troubled automakers General Motors and Chrysler. GMAC provides critical financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers. Yet GMAC faced far fewer conditions than the bailed-out automakers, the report says. When the automakers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable. GMAC was treated more like banks that received bailouts without having to explain what they were doing with the money, the report says. The report was released Thursday by the Congressional Oversight Panel overseeing the $700 billion financial bailout that Congress passed in October 2008. “Treasury missed many opportunities to improve accountability and protect taxpayer money,” panel chair Elizabeth Warren said in a conference call with reporters. She said Treasury didn’t make GMAC show how it would return the taxpayer money, or how the investment would increase credit to consumers. “These decisions mean that Treasury is now struggling to deal with a GMAC that is not financially rehabilitated, Treasury has no exit strategy and taxpayers are not fully protected,” Warren said. The Treasury Department responded by reiterating that backing GMAC was necessary to preserve dealer financing for GM. It disputed the report’s core finding, that alternative approaches might have saved taxpayer money and provided better transparency. “Treasury viewed the course taken as the least costly and least disruptive of all the options available,” Treasury spokeswoman Meg Reilly said in a statement. The watchdog report, however, calls GMAC’s three-part bailout “one of the more baffling decisions made” to stabilize the financial sector. It says there was no evidence that GMAC’s failure would upend the financial system, or that it was “too big to fail.” GMAC started as the finance arm of General Motors, providing crucial funding for consumers buying cars and dealers financing wholesale purchases. In recent years, it became a key player in subprime mortgage lending and other risky finance that fueled the financial crisis. The company began to see major losses in 2007 as the housing market turned south and subprime mortgage investments lost much of their value. GMAC CEO Michael Carpenter referred to the company’s money-losing mortgage unit as the “millstone around the company’s neck.” The new report says the bailout effectively saved GMAC’s mortgage arm and other unprofitable businesses. It questions whether the government should have wound down GMAC’s operations that are not related to auto financing, perhaps by orchestrating the same sort of bankruptcy it arranged for GM and Chrysler. The auto finance arm might have been merged back into GM, said Warren, who also is a bankruptcy expert and a professor at Harvard Law School. She said Treasury did not fully consider that course. That left Treasury owning 56.3 percent of a company that continues to lose money. Treasury spokeswoman Reilly described the government as a “reluctant shareholder” in GMAC and said it is managing its investment in the company in “a hands-off commercial manner consistent with the administration’s established principles that guide Treasury’s management of financial interests in private firms.” The estimate that taxpayers could lose $6.3 billion was released earlier by the White House’s Office of Management and Budget, but it was not publicized before Thursday’s report. The Congressional Oversight Panel is one of three mechanisms Congress built into the $700 billion bailout bill. The fund also is subject to audits by the Government Accountability Office and investigation by a special inspector general. Besides Warren, the panel includes New York state banking superintendent Richard Neiman, former Securities and Exchange Commissioner Paul Atkins and attorney J. Mark McWatters. Damon Silvers, a senior official with the labor federation AFL-CIO, is on the panel but recused himself from all consideration of the auto bailouts.

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Bank Watch: GMAC Looks To Exit Real Estate Finance Business (CoStar Group)

January 7, 2010

GMAC Financial Services took a series of actions intended to cut its losses from its real estate lending activities and get out of that business; the actions include exploring strategic alternatives for its Residential Capital LLC (ResCap). GMAC also…

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Bank Watch: GMAC Looks To Exit Real Estate Finance Business

January 6, 2010

GMAC Financial Services took a series of actions intended to cut its losses from its real estate lending activities and get out of that business; the actions include exploring strategic alternatives for its Residential Capital LLC (ResCap). GMAC also…

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GMAC to Post $5 Billion Loss for Fourth Quarter on Souring Mortgage Loans

January 5, 2010

By Matt Townsend Jan. 5 (Bloomberg) — GMAC Inc., the auto and home lender bailed out by the U.S. government three times, said its combined fourth-quarter loss was $5 billion as mortgage loans soured. GMAC cited a $3.8 billion pre-tax charge, which was previously disclosed, tied to revaluing “higher-risk mortgage loans” that it intends to sell, according to an investor presentation today. GMAC received a $3.79 billion infusion from the Treasury Department last month that allowed the firm to bolster car financing and its loss-plagued Residential Capital mortgage unit. The U.S. previously earmarked about $13.5 billion for the GMAC and now has a majority stake. The Detroit-based firm is the primary lender for General Motors Co. and Chrysler Group LLC dealers. ResCap’s losses prompted GMAC to consider “strategic alternatives” — Wall Street parlance for a unit’s sale or shutdown — and analysts at CreditSights Inc. to speculate about bankruptcy. Chief Executive Officer Michael Carpenter said Dec. 30 that ResCap is stable and that GMAC didn’t have any urgency about making a decision. To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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GMAC Chief Carpenter Says Car Lender Won’t Do `Anything Crazy’ With ResCap

January 1, 2010

By Dakin Campbell and David Mildenberg Jan. 1 (Bloomberg) — GMAC Inc. has more time to decide what will happen to its loss-plagued Residential Capital mortgage unit after receiving a third U.S. bailout, according to new Chief Executive Officer Michael Carpenter . “We think ResCap and the mortgage business is stable and that we don’t have to do anything crazy,” Carpenter said in a Dec. 30 interview, the day his Detroit-based auto and home lender received a $3.79 billion infusion from the Treasury Department. “We have no urgency.” ResCap’s losses prompted GMAC to consider “strategic alternatives” — Wall Street parlance for a unit’s sale or shutdown — and analysts at CreditSights Inc. to speculate about bankruptcy. Still, ResCap helped its parent company rank fifth among U.S. home lenders in the year through Sept. 30, according to data compiled by Inside Mortgage Finance, and the bailout allowed GMAC to pump $2.7 billion into the mortgage unit. GMAC is being approached “every day with interesting ideas” for ResCap, said Carpenter, 62. Shoring up ResCap allows the government to keep a stake in a company making home loans, said Mirko Mikelic , senior portfolio manager at Fifth Third Asset Management, which owns GMAC bonds . ResCap’s 6.375 percent notes maturing in 2010 rose the most in eight months Dec. 30 to 75.25 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Government Control The latest bailout gave the U.S. a majority stake in GMAC and helped the firm absorb $3.8 billion in new pretax charges. The aid comes on top of about $13.5 billion previously earmarked for GMAC, whose survival is regarded by regulators as crucial to the U.S. auto industry. GMAC is the primary lender to General Motors Co. and Chrysler Group LLC, the automakers that went into bankruptcy during the recession. “It’s very clear that supporting GMAC was absolutely critical to the auto bailout and that’s why the government put the money into the company,” said Carpenter, who replaced Alvaro de Molina as CEO in November. “ResCap and the mortgage business has been a drain on that ambition and so we are emphasizing the auto-finance business because that is our mission in life.” The U.S. stake will rise to 56.3 percent from 35.4 percent. The U.S. also controls General Motors, GMAC’s former parent, whose stake shrinks to 6.7 percent. The stake held by Cerberus Capital Management LP, the New York-based investment firm, falls to 14.9 percent from 22 percent. An independent trust for the benefit of GM holds about 9.9 percent, GMAC said. GMAC doesn’t have publicly traded shares. ‘Keep GM Alive’ The U.S. also gets to name two more directors, giving the government four seats on the nine-person board . GMAC affirmed that it’s looking at strategic options for ResCap, once one of the largest marketers of subprime mortgages , which contributed to the unit’s losses. ResCap made $25.6 billion in mortgage loans through the first six months of 2009, according to a company filing. One of the options could be selling part of the business to a large investor, said David Lykken , managing director of Mortgage Banking Solutions, an Austin, Texas-based consulting firm. The New York Post reported last month that Berkshire Hathaway Inc.’s Warren Buffett may be interested in the unit. “This is a perfect situation for the government and Buffett,” Lykken said. “To get more lending done you need to turn to the independents and ResCap is one of the last biggest and strongest platforms still in existence.” Ready for Rebound The mortgage market has “better upside” than many other industries and when it rebounds, much of the new business may be captured by lenders not covered by stringent regulations that apply to larger banks, Lykken said. GMAC wrote down $2 billion in ResCap mortgage assets in preparation for selling them and set up a $500 million reserve tied to the servicing unit that does billing and record-keeping for home loans. “There will be individual asset sales in the near future, but whether some larger concept evolves is a matter of time,” Carpenter said. GMAC contributed $2.7 billion of capital to ResCap in the form of mortgage loans acquired from the Ally Bank unit, debt forgiveness and cash, according to the company statement. GMAC “does not expect to incur additional substantial losses from ResCap,” the company said. Access to Capital The latest capital infusion and restructuring weren’t enough to stabilize ResCap and assure a return to profitability, according to Moody’s Investors Service. While the changes were positive, ResCap’s “liquidity position is tenuous, capital insufficient and franchise impaired,” Moody’s said in a statement. GMAC didn’t guarantee continued support for ResCap, and without such help, “we believe ResCap would eventually default,” Moody’s said. The bailout included conversion of U.S.-held preferred stock into common, which “somewhat deleveraged” the company, Carpenter said. When coupled with improved conditions at the mortgage operations, it “will improve access to the capital markets in the near term” and lead to a quicker repayment of government funds, he said. GMAC was the only company of 19 that underwent Federal Reserve stress tests that wasn’t able to raise capital in the private sector, according to the Treasury. The latest aid was less than originally planned because restructurings at GM and Chrysler caused less disruption at GMAC than regulators expected, the Treasury said. Tim Price , a partner at Cerberus, didn’t return a call for comment. “The Fed has a lot to say about how much capital the company needs,” Carpenter said. “They have a strong voice in all of this.” GMAC received $12.5 billion in two previous government bailouts and almost $1 billion more was given to GM, which used it to invest in GMAC. “In May, the Treasury Department made a commitment to all institutions that engaged in the stress tests that we would ensure their capital needs are met,” said Treasury spokesman Andrew Williams . “We are making good on that promise.” To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net ; David Mildenberg in Charlotte at dmildenberg@bloomberg.net .

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Video: GMAC Gets $3.8 Billion in Third U.S. Bailout Package: Video

December 31, 2009

Dec. 31 (Bloomberg) — GMAC Inc., the auto and home lender bailed out twice by the U.S. government, received a third rescue package valued at $3.79 billion that gives taxpayers a majority stake in the Detroit-based company. Bloomberg’s Lindsey Arent reports. (Source: Bloomberg)

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GMAC to receive $3.8b from US government

December 31, 2009

GMAC to receive $3.8b from US government

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GMAC Receives $3.8 Billion From Treasury in Lender’s Third Bailout Package

December 30, 2009

By Dakin Campbell, David Mildenberg and Robert Schmidt Dec. 30 (Bloomberg) — GMAC Inc. , the home and auto lender that counts the U.S. taxpayer as its largest stakeholder, received $3.8 billion from the Treasury Department in a third government bailout. The infusion, less than the $5.6 billion originally projected by the agency, includes $2.54 billion of trust preferred securities and $1.25 billion of mandatory convertible preferred stock, Treasury said today in a statement. The government received warrants to buy more securities and plans to convert $3 billion of its existing preferred stock into common, boosting its stake to 56 percent from 35 percent. The U.S. will also name two more board members , according to the statement. GMAC Chief Executive Officer Michael Carpenter is struggling to return the lender to profitability amid losses at home-mortgage operations including Residential Capital LLC, known as ResCap. Detroit-based GMAC, the primary lender to General Motors Co. and and Chrysler Group LLC, previously benefited from two rounds of U.S. aid totaling $13.5 billion. “The government really doesn’t want to be involved, but they figure they are too important for the company to just go under,” said Mirko Mikelic , senior portfolio manager at Fifth Third Asset Management, which owns GMAC bonds. “The government also wants to have another option in the housing market, even if ResCap is on life support.” Share Exchange The government will exchange $5.25 billion of preferred stock into mandatory convertible preferred stock, giving the Treasury $11.4 billion of those shares in GMAC, the Treasury said. “These actions fulfill Treasury’s commitments made in May to GMAC in a manner which protects taxpayers to the greatest extent possible,” said the Treasury statement. The infusion is the final dose of capital needed to close a shortfall found by Federal Reserve stress tests in May. GMAC asked the Treasury Department to delay providing the cash when Carpenter was named CEO, replacing Alvaro de Molina on Nov. 16. The deadline for meeting the requirements had been Nov. 9. The federal government was already the biggest owner of GMAC, with a 35.4 percent stake as of Sept. 30. The U.S. also controls General Motors, the former owner of GMAC, which had a 9.9 percent stake. Cerberus Capital Management LP, the New York- based investment firm, held 22 percent. GMAC doesn’t have publicly traded shares. To contact the reporters on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net ; David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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GMAC’s Latest Bailout: $3.5 Billion More In Aid, According To Report

December 30, 2009

WASHINGTON — The government on Wednesday was moving ahead with a fresh multibillion dollar cash infusion to stabilize auto finance company GMAC Financial Services as it continues to struggle with big losses in its home mortgage unit, according to a person with knowledge of the matter. The person, who spoke on condition of anonymity because discussions weren’t complete, says the government aid would range around $3 billion. That would be less than the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company. Shoring up GMAC has been a major component of the Obama administration’s massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles. GMAC has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government. But GMAC also operates a large residential mortgage business, ResCap, which was battered by the recent housing collapse. GMAC was obligated by the Treasury Department to raise $11.5 billion in additional capital earlier this year after failing the government’s stress test for banks, largely because of ResCap’s big losses. However, GMAC had difficulty raising money because of its financial woes, making an extra government infusion necessary. An announcement of the latest injection of aid could come late Wednesday or on Thursday. Treasury spokesman Andrew Williams declined to offer details, but said: “Treasury is in discussions with GMAC to ensure its capital needs as determined … by the stress tests are met.” GMAC spokeswoman Gina Proia said Wednesday that GMAC is weighing options for reviving ResCap. It is also reviewing its broader business as it tries to improve its financial health and eventually repay the taxpayer money it has already received. Michael Carpenter, who succeeded Alvaro De Molina as the company’s CEO in November, has said the company would need no more than $5.6 billion in aid. Lawmakers estimated the company would receive between $2 billion and $5 billion in additional aid. Despite the government support, GMAC still remains on shaky financial ground. Last month, it reported a quarterly loss of $767 million, though the results were an improvement over a giant loss a year ago. ResCap lost $747 million during the third quarter as homeowners continued to default on their mortgages in large numbers. GMAC has also been hurt by the rapid decline of the U.S. auto industry after sales crumbled due to the recession and financial woes of the big automakers. Sales of cars and trucks were down 24 percent through November compared with the same part of last year. Despite the drop in auto sales, GMAC’s auto lending business has shown some signs of revival. The auto financing division earned a profit of $395 million during the third quarter. The company’s online consumer banking unit, Ally Bank, has also been a bright spot by bringing in billions of dollars in new deposits by offering relatively high interest rates. __ AP Business Writers Candice Choi and Dan Strumpf in New York contributed to this report.

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GMAC Reports Third-Quarter Loss Tied to Loan Defaults (Update4) (Bloomberg)

November 4, 2009

Nov. 4 (Bloomberg) — GMAC Inc. , the auto and mortgage lender negotiating a third round of government aid, reported a third-quarter loss tied to mortgage defaults.

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GMAC Reports Third-Quarter Loss Tied to Loan Defaults (Correct) (Bloomberg)

November 4, 2009

(Corrects mortgage unit results in the sixth paragraph.) Nov. 4 (Bloomberg) — GMAC Inc. , the auto and mortgage lender negotiating a third round of government aid, reported a third-quarter loss tied to mortgage defaults.

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GMAC posts smaller net loss in 3rd quarter on improved results in …

November 4, 2009

May 9th, 2009 How could a government-run GMAC reshape car sales ?DETROIT — With the federal government almost certain to take control of GMAC Financial Services, analysts suggest it could become a loan machine that gives General Motors and Chrysler a … GMAC says 1st -qtr loss widens to $675M as credit markets weigh on auto, mortgage businesses. May 6th, 2009 GMAC won’t necessarily follow GM to Chapter 11NEW YORK — GMAC Financial Services said Tuesday that it will not be …

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UPDATE: TALF-Eligible $884.856 Million Ally Bank Deal Sold (Nasdaq)

November 3, 2009

NEW YORK -(Dow Jones)- An auto-sector deal eligible for a Federal Reserve program from GMAC’s Ally Bank has sold, according to a term sheet.

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GMAC Asks For $2.8 Billion More In Taxpayer Money

October 27, 2009

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government’s 35.4% stake in the company could increase if existing shares eventually are converted into common equity.

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Capmark exemplifies the commercial real estate market

October 26, 2009

The carnage in the commercial real estate sector continued over the weekend as private equity-backed Capmark Financial Group Inc., a former unit of GMAC LLC, filed for a $21 billion bankruptcy. The distressed company had been

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Capmark Financial files for bankruptcy

October 25, 2009

GMAC owns 21% of U.S. commercial real estate company Reuters New York — Commercial real estate company Capmark Financial filed for bankruptcy protection Sunday, undone by declines in the sector and a heavy debt load related to

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Banks and Commercial Lending Bust « LewRockwell.com Blog

October 24, 2009

On a related note, as the commercial real estate bust heats up, Capmark Financial Group, Inc. (formerly GMAC Commercial Holding Corp.) one of the largest commercial real estate lenders in the U.S., is heading into bankruptcy. …

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GMAC’s Ally to Buy Mortgages From Smaller Banks, Filling Taylor Bean Void

September 25, 2009

By David Mildenberg Sept. 25 (Bloomberg) — GMAC Inc., the auto and home loan company that received two U.S. bailouts, formed a team to buy residential mortgages from community lenders, filling a void left by the collapse of Taylor Bean & Whitaker Co. GMAC hired the head of Taylor Bean’s correspondent community banking unit, Doug Miller, to run the new team, according to a statement today from the Detroit-based lender. Ten former employees of Ocala, Florida-based Taylor Bean are also joining GMAC, said Matt Detwiler , a GMAC senior vice president, in an interview today. The operation will be part of Ally Bank, GMAC’s online bank. Taylor Bean’s collapse in August left hundreds of banks looking for a new place to sell their loans. Taylor Bean, the 12th-largest among U.S. mortgage firms, stopped lending in August and went bankrupt after regulators accused it of improper business practices. At least 2,000 people lost their jobs. The collapse of Taylor Bean “was a pretty big motivator for us,” Detwiler said. “Smaller organizations are generally under-served.” The program also will help local banks, savings banks and credit unions outsource some or all of their mortgage lending operations, the statement said. GMAC has “no reason to believe that any member of our new sales team was involved in any wrongdoing” at Taylor Bean, spokeswoman Jeannine Bruin said. “We are pleased to have them join our firm.” Taylor Bean’s Collapse GMAC originated $25.9 billion in mortgages through independent or “correspondent” lenders and mortgage brokerage firms during the first half of 2009, according to a regulatory report. The company is the industry’s fifth-largest correspondent lender, Detwiler said. Bruin declined to say how much money GMAC is committing; Taylor Bean handled $17 billion of loans, or 1.7 percent of the U.S. total, in the first half of this year, according to the industry newsletter Inside Mortgage Finance. Taylor Bean failed after it was expelled from the ranks of mortgage lenders approved to do business with government- sponsored mortgage companies; the government cited concerns about possible fraud. The firm’s implosion followed an attempt to lead an investor group that would pay $300 million for a controlling stake in Colonial BancGroup Inc., one of its lenders that also has since collapsed and been taken over by BB&T Corp. GMAC reported its seventh loss in eight quarters in August, and has been selling assets since last year after surging defaults on subprime loans almost forced the mortgage unit into bankruptcy. GMAC formed Ally Bank earlier this year as an Internet bank offering competitive rates to attract deposits. GMAC averted collapse last year when the government declared the firm crucial to the auto industry , and has received $13.5 billion in government funds since converting into a bank holding company in December. To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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