GMAC Financial Services released its 2008 second quarter financial results yesterday, and it reported significant losses within its real estate finance business, Residential Capital, LLC (ResCap).
ResCap recorded a net loss of $1.9 billion for the second quarter of 2008, compared to a net loss of $254 million a year ago. The company said these results are primarily due to substantial losses from asset sales as it reduced the size and risk of its balance sheet, as well as higher loan loss provisions due to continued deterioration in certain overseas markets. Partially offsetting the business’ losses was a $647 million gain recognized from ResCap’s tender offer and the retirement of debt.

“A soft economic environment and continued volatility in the mortgage and credit markets have significantly affected results for the second quarter,” said Alvaro G. de Molina, GMAC’s CEO. De Molina added that despite such obstacles, he and his team are encouraged by key advancements, particularly the continued realignment and streamlining of its mortgage business.
ResCap’s recent operational actions have included reducing the size and risk of its balance sheet, originating only mortgages with market liquidity, tapering off its business lending portfolio, leveraging the company’s servicing platform, and continuing to rationalize its cost base.
GMAC reported a total net loss of $2.5 billion, compared to net income of $293 million in the second quarter of 2007. According to the company’s announcement, its overall loss was largely due to the substandard results recorded for its ResCap business.
To view GMAC’s financial statement for the second quarter of 2008, click here.