GMAC ResCap

GMAC ResCap, Inc. was a residential mortgage loan originator and servicer based in Minneapolis, United States. As a result of its exposure to subprime lending during the subprime mortgage crisis, the company filed for bankruptcy protection in 2012 and underwent liquidation in December 2013.

GMAC ResCap, Inc.
TypeSubsidiary
IndustryFinancial services
Founded1982 (1982)
DefunctDecember 17, 2013 (2013-12-17)
FateChapter 11 bankruptcy and liquidation
HeadquartersMinneapolis, Minnesota
ProductsMortgage loans
ParentAlly Financial

History

In 1982, Residential Funding Company LLC was formed as a subsidiary of Northwest Bank.[1]

In 1990, the company was acquired by GMAC Mortgage Corp.[2]

In 2005, GMAC (now Ally Financial), a subsidiary of General Motors, transferred ownership of GMAC Mortgage Corporation and Residential Funding Corporation (GMAC-RFC) to Residential Capital Corporation (ResCap) and contributed $2 billion of equity.[3]

In January 2007, the company eliminated 1,000 jobs.[4]

In October 2007, the company eliminated 3,000 jobs.[5] At the beginning of 2007, the company had 14,000 employees.[6]

In May 2008, the company reported that it may run out of money.[7]

In June 2008, the company completed a $60 billion (~$75.2 billion in 2021) refinancing.[8]

In 2009, it was reported that Warren Buffett was evaluating buying the company.[9]

On April 17, 2012, the company missed an interest payment.[10]

On May 14, 2012, the company filed for a pre-packaged bankruptcy that included the separation of the company from its parent, Ally Financial.[11]

On December 11, 2013, the company's Plan of Reorganization was approved by the bankruptcy court.[12]

Litigation

In September 2008, after suffering heavy losses during the subprime crisis, New Jersey Carpenters Health Fund sued the company and the underwriters of residential mortgage-backed securities issued by affiliates of the company, claiming that the prospectuses and registration statements of the RMBS did not adequately disclose the risks, were misleading to investors, and violated securities law. The company settled for $100 million and the 3 underwriters, Citigroup, Goldman Sachs Group and UBS AG, settled for $235 million, which was approved by the court in 2015.[13]

References
  1. IN RE: COMMUNITY BANK OF NORTHERN VIRGINIA SECOND MORTGAGE LENDING PRACTICES LITIGATION
  2. "GMAC completes acquisition of RFC". United Press International. February 12, 1990.
  3. "GMAC Capitalizes New Residential Mortgage Subsidiary; Elects Jacob And Melzer To Board Of Directors" (Press release). Ally Financial. May 4, 2005.
  4. "ResCap says to cut 1,000 jobs, sees $10 mln charge". Reuters. January 21, 2007.
  5. Stempel, Jonathan (October 17, 2007). "GMAC's ResCap mortgage unit to cut 3,000 jobs". Reuters.
  6. "Mortgage lender to cut staff 25%". CNN Money. October 17, 2007.
  7. DiStefano, Joseph N. (May 5, 2008). "GMAC's ResCap scrambles for cash". Philadelphia Media Network.
  8. "$60 Billion Refinance Package for GMAC's Mortgage Lender". The New York Times. Associated Press. June 5, 2008.
  9. "Buffett Said to Look at GMAC's ResCap". The New York Times. December 24, 2009.
  10. "Ally mortgage unit misses interest payment". Chicago Tribune. Reuters. April 17, 2012.
  11. "Chapter 11 move divorces ResCap from Ally". Pittsburgh Tribune-Review. Associated Press. April 17, 2012.
  12. "ResCap Plan of Reorganization Approved by U.S. Bankruptcy Court" (Press release). PR Newswire. December 11, 2013.
  13. Kass, Dani (August 3, 2015). "$235M Citi, Goldman, UBS Settlement Approved In MBS Case". Law360.
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