GMAC became the latest in a long line of mortgage business downsizing and closings. GMAC announced on Wednesday that it will be laying off 5000 employees and closing over 200 of its retail mortgage branches throughout the US.

Cuts Target Retail Branches and Wholesale Lending

GMAC has specifically targeted immediate cuts to its retail lending branches and Homecomings wholesale broker channel and seeking strategic opportunities to sell its GMAC Home Services business and non-core servicing divisions.

Chairman and Chief Executive Officer Tom Marano explained that although difficult the cuts are unavoidable as "conditions in the mortgage and credit markets have not abated and, therefore we need to respond quickly and aggressively by further reducing cost and risk."

ResCap Subprime will Take Most of the Downsizing

The majority of the layoffs are expected to center around Residential Capital, LLC or ResCap a GMAC mortgage lending division based in Ft. Washington, PA. Some portion--estimated at 2000 employees--may be reduced as a part of selling these discrete business lines over the remainder of the year.

Ditech and GMAC Consumer Direct Continue Lending

According to GMAC spokesperson Jeannine Bruin, "We're not going to have a retail presence where customers can walk in the door," but assured that GMAC would continue to origiante mortgage loans and service existing clients.

GMAC will continue to operate their more popular consumer brands Ditech and GMAC Consumer Direct from centralized call centers and mortgage operation centers.

GMAC Continues Drag on Troubled GM

Tied to another troubled industry, US automakers, GMAC has been a non-core business distraction and earning drag for General Motors (GM) that resulted in selling a controlling interest in the financial arm in 2006. Cerberus Capital, a private equity firm now owns 51 percent and GM 49 percent of the mortgage business.

Published on September 4, 2008