GMAC Cuts Workforce, Closes Retail Offices

Posted by Orb Staff on September 04, 2008 No Comments
Categories : Residential Mortgage

GMAC Financial Services says it will shutter all 200 of its mortgage retail offices and reduce the workforce of subsidiary Residential Capital LLC's (ResCap) by 60% beginning this month in response to the downturn in the credit and mortgage markets.

Approximately 3,000 employees will receive notification this month, with the majority of the remaining 2,000 reductions expected to occur by year-end.

As part of the company's initiative, originations through the Homecomings wholesale broker channel will cease, and GMAC says it is evaluating strategic alternatives for its Home Services business and the non-core servicing business.

ResCap will continue to originate loans in the U.S. and internationally through its correspondent and direct lending channels. ResCap says its commitment to servicing loans is unchanged by the actions announced, and the company will continue to expand its 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.

‘While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment,’ Tom Marano, ResCap chairman and CEO, said in a statement. ‘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 million to $120 million that reflects the 3,000 workforce reductions and related operational streamlining initiatives. Potential charges related to the remaining 2,000 cuts have not yet been determined. The workforce reductions will include a range of administrative and managerial positions, and all eligible employees affected by the move will be provided severance packages and outplacement assistance.

SOURCE: GMAC, ResCap

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