GMAC Cuts More Than 500 Jobs in Mortgage, Auto Finance Units

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February 03, 2010, 01:53 PM EST More From Businessweek
By Dakin Campbell and David Mildenberg
http://www.businessweek.com/news/2010-02-03/gmac-cuts-more-than-500-jobs-in-mortgage-auto-finance-units.html

Feb. 3 (Bloomberg) -- GMAC Inc., the auto and home lender controlled by the U.S. government, plans to cut about 554 jobs and close three offices as the firm tries to stanch loan losses.

Employees are being told today about plans to cut 313 positions at Residential Capital LLC’s offices in Costa Mesa, California and Charlotte, North Carolina, according to GMAC spokeswoman Gina Proia. The Charlotte mortgage office will be shut, while Costa Mesa will retain about 30 people, she said. The Semperian auto-loan servicing offices in Charlotte and Knoxville, Tennessee will close, cutting 241 jobs, she said.

GMAC may report an annual loss tomorrow of more than $10 billion for 2009 after mortgage defaults piled up at ResCap. Investors have pressed GMAC to stop supporting the home lending unit, whose Costa Mesa office houses Ditech, GMAC’s online mortgage lender. Proia declined to comment on ResCap’s future before the release of quarterly results.

“It’s really disappointing to see this happen,” said Paul Reddam, who founded Ditech in 1995 and sold it to GMAC in 1999. “We had 800 employees when I left the company and I know the staff grew significantly over the following couple of years.” Reddam now owns CashCall, a privately held lender based in Anaheim, California.

Ditech became known for television ads that pitched low rates and showed a rival lender exclaiming, “Lost another loan to Ditech.” The Ditech brand remains intact, with work being absorbed at other GMAC offices, Proia said.

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During 2006, ResCap ranked among the nation’s biggest suppliers of subprime mortgages, according to trade journal Inside Mortgage Finance. Such loans have been blamed for contributing to the global financial crisis because they were made to people who were more prone to default. ResCap has lost more than $10 billion since 2007, and GMAC has shifted originations to its Ally Bank unit.

GMAC disclosed last month that its fourth-quarter loss was about $5 billion. Combined with losses from three previous quarters, that could boost the firm’s full-year deficit above $10 billion.