GMAC to cut 5,000 jobs at ResCap mortgage unit

NEW YORK (Reuters) - GMAC LLC plans to eliminate about 5,000 jobs at its Residential Capital LLC mortgage unit and close all 200 GMAC Mortgage retail offices to combat weak housing and credit markets, the company said on Wednesday.

The job cuts will affect about 57 percent of ResCap's work force, leaving the unit with 3,800 employees, GMAC spokeswoman Gina Proia said. Most of the cuts will take place this year.

GMAC said it will stop offering home loans through its Homecomings Financial broker channel. It will also evaluate strategic options for GMAC Home Services, which helps companies relocate employees, and "non-core" mortgage servicing businesses. GMAC plans to keep offering mortgages directly "where there is a secondary market to sell the loans."

The cutbacks suggest deepening problems for GMAC's owners, private equity firm Cerberus Capital Management LP [CBS.UL] and the automaker General Motors Corp (GM.N). Cerberus in 2006 bought 51 percent of GMAC from GM, which owns the rest.

GMAC arranged a $60 billion refinancing package in June to stave off a collapse of ResCap, which has lost $7.2 billion in seven straight unprofitable quarters. More than 100 mortgage lenders have quit the industry since the start of 2007. GMAC has lost money in four consecutive quarters.

"We've been keeping a list of who is next to go under in the mortgage area, and ResCap has been at the top," said David Olson, president of Wholesale Access, a Columbia, Maryland firm that tracks the mortgage industry.

"General Motors and Cerberus have been losing money from this business, and with delinquencies rising in auto finance, that's another part of their problem," he continued. "They have to cut back somewhere."

GMAC is based in Detroit, and ResCap in Minneapolis.

ResCap was the seventh-largest U.S. mortgage lender from January to June, making $35.7 billion of loans, according to the newsletter Inside Mortgage Finance. ResCap had about 14,000 employees at the start of 2007.

"While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment," ResCap Chief Executive Tom Marano said.

LOSSES MOUNT

In the April-June period, ResCap lost $1.86 billion, while GMAC overall lost $2.48 billion, hurt by write-downs of sport utility vehicle leases.

Spokeswoman Proia said GMAC planned to expand its servicing operations, and focus on strategic lending. She declined to say whether GMAC had hired outside advisers to conduct asset sales.

Cerberus was not immediately available for comment. The firm also owns Chrysler LLC.

GMAC expected 3,000 of the job cuts to take place this month, and most of the rest by year end. It anticipated a $90 million to $120 million charge tied to the first round of job cuts, and another charge for the rest.

Olson said it was unclear how well a smaller ResCap might operate, or whether GMAC might successfully sell assets.

"There are no buyers, that's the problem," Olson said. "And with securitization markets still closed, there is no liquidity."

GM shares were up 21 cents at $10.86 in afternoon trading on the New York Stock Exchange.

ResCap debt trades at deeply "distressed" levels. Its 8.5 percent notes maturing in 2013 traded Wednesday morning at 25.5 cents on the dollar, yielding 53.11 percent, the Financial Industry Regulatory Authority bond pricing service Trace said.

(Additional reporting by Megan Davies; Editing by Brian Moss,Jeffrey Benkoe, Leslie Gevirtz)