ResCap slashes jobs
GMAC Financial Services and its subsidiary Residential Capital (ResCap) announced the elimination of 5,000 jobs in the US as part of its survival plan as the downturn in the credit and mortgage markets persists. The move is part of ResCap’s plan to cut back its operation and adjust its lending to refocus its resources on strategic lending and servicing.
In September, ResCap approved a plan that included closing all 200 GMAC Mortgage retail offices, ceasing originations through the Homecomings wholesale broker channel and cutting functional staff support. In addition, the company is evaluating strategic alternatives for the GMAC Home Services business and the non-core servicing business. These collective actions will reduce the ResCap workforce by roughly 5,000 employees, or 60%. Approximately 3,000 employees will receive notification in September with the majority of the remaining 2,000 reductions expected by year-end.
"Conditions in the mortgage and credit markets have not abated and, we need to respond aggressively"
Tom Marano, ResCap
"While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment," says ResCap chairman and chief executive Tom Marano. "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 redundancies and related operational cutbacks. The charge will include costs related to severance and other employee-related costs of approximately $50 million to $60 million and facility closure costs of approximately $40 million to $60 million. The majority of the charge is expected to be reflected in the third quarter and result in future cash expenditures of approximately $55 million. Potential charges related to the remaining 2,000 workforce reductions have not yet been determined.
ResCap will continue to originate loans in the US and internationally where there is a secondary market. The company will originate products through its correspondent and direct lending channels. ResCap’s commitment to servicing loans is unchanged, and the company will continue to expand and enhance its servicing platform, including further development of special servicing operations to help preserve homeownership and support investors who own distressed and special situation loan portfolios.