UPDATE 1-GMAC pulls sale of $2.7 bln loan portfolio

(Adds detail, background, comment from GMAC)

DETROIT, Oct 2 (Reuters) GMAC on Thursday scrapped the sale of a $2.7 billion portfolio of corporate loan commitments due to a weak market, the latest sign that the credit market crisis is making conditions harder for the auto industry and its affiliated finance firms.

GMAC said it had terminated the sale of the portfolio held by its corporate finance unit. The sale of the assets, which included mostly revolving credit lines, had been planned as part of a broader restructuring by GMAC.

"As a result of where the market conditions are, we terminated the sale," GMAC spokeswoman Gina Proia said. "We will continue to evaluate the markets opportunistically."

The termination of the asset sale was first reported by Reuters Loan Pricing Corp. and comes at a time of extraordinary pressure on credit markets.

In one sign of the market stress, the U.S. commercial paper market contracted for the third straight week, suffering its sharpest weekly decline since the recession of 2001, as business lending effectively shut down.

GMAC had been quietly showing the portfolio to a small group of market participants before deciding to show it to the wider loan market, Reuters LPC reported.

GMAC is 51-percent owned by Cerberus Capital Management, with the remaining 49 percent owned by General Motors Corp. GM.N

Detroit-based GMAC lost $2.48 billion in the April-June period, hurt by losses at its mortgage lending unit ResCap and write-downs on the value of leases for sport-utility vehicles.

In June, GMAC arranged a $60 billion refinancing package for ResCap, which has lost over $7 billion in seven-straight unprofitable quarters. Last month, GMAC said it would cut about 5,000 jobs and take other steps to cut costs at ResCap.

GM and Cerberus, which also owns Chrysler LLC and its captive finance firm, have both been hit hard by the slump in U.S. auto sales and tighter credit markets.

U.S. auto sales for September slumped to a 15-year low with automakers reporting that the financial crisis had made consumers less willing to make big purchases and left many remaining car shoppers unable to secure financing. (Reporting by Tom Ryan, Kevin Krolicki and David Bailey; Editing by Bernard Orr)