ResCap Repositions With Layoffs, New Focus

FORT WASHINGTON, PA-Residential Capital, GMAC Financial Services beleaguered residential finance subsidiary, is radically realigning its operations as the downturn in the credit and mortgage markets continues unabated. The company has revealed plans that will affect some 5,000 of its employees–although not necessarily resulting in layoffs of that magnitude, a source with the company tells GlobeSt.com.

As part of these plans Rescap is closing all 200 GMAC Mortgage retail offices and will cease originations through the Homecomings wholesale broker channel. It is also evaluating strategic alternatives for the GMAC Home Services business and the non-core servicing business.

ResCap is also taking steps to narrow its focus on the lending channel it deems to be still competitive in this market environment: Ditek and its call center operations will continue to provide loans backed by GMAC bank deposits, the source says. It also wants to capitalize on the FHA loan opportunities that will be made available under the housing bill passed this Summer.

ResCap will also focus on increasing the capabilities of its servicing division–specifically its special operations servicing group, the source says. ResCap has traditionally provided servicing to third party lenders. What it will now focus on growing is servicing for investors with “complex portfolios,” such as hedge funds, mortgage bankers and institutional investors, and other investors that are capitalizing on the distressed asset opportunities, the source says. The source declined to discuss expected volumes or other changes made as part of the transition.

ResCap is unlikely to hire more people to staff this growth, although no solid plans have been made one way or another. More than likely, the source says, employees and other resources will be redeployed from either the servicing operations or mortgage originations.

All of these actions will impact, collectively, some 5,000 of its employees. Some 3,000 people will be notified this month whether their position has been eliminated or right-sized. Another 2,000 employees will be notified of changes to their positions at the end of the year, however the source emphasizes that these ‘changes’ will not necessarily be layoffs.

“We are hoping to have a resolution to the question of our two business units by the end of the year. That resolution may include a sale or some other alternative that is currently on the table.” The source declined to specify any further.

Other moves GMAC has made to salvage ResCap include a $60 billion portfolio recapitalization this summer as well as a realignment in the upper management.

In June GMAC recapped its subsidiary’s portfolio in a series of complex transactions designed to enhance the liquidity position, increase its key bank facilities and extend some unsecured debt maturities. GMAC obtained a new, globally syndicated $11.4-billion secured revolving credit facility with a three-year maturity. It also renewed the one-year, $10-billion syndicated commercial paper back-up facility, New Center Asset Trust. GMAC also provided a $3.5 billion two-year credit facility to ResCap and an additional $2.4-billion support of the subsidiary’s near term liquidity.

For its part, ResCap extended, for one year, the maturity on all of its bilateral bank facilities totaling approximately $11.6 billion and it obtained a new $2.5-billion syndicated whole loan repurchase facility. ResCap also executed private exchange and cash tender offers to retire the US dollar equivalent of $14 billion of outstanding debt.

The following month, Thomas Marano, then the non-executive chairman of ResCap, was named ResCap chairman and CEO, succeeding Jim Jones. Also, Joshua Weintraub, a Cerberus employee and executive committee member of the ResCap board, became ResCap vice chairman. Tony Renzi, COO of ResCap’s US Residential Funding Group, was named to the newly created position of ResCap COO. Jerry Lombardo, a Cerberus Operations employee, joined the company as treasury executive, succeeding Treasurer Bill Casey.