ResCap hires Vella in boost to "special" servicing
By Al Yoon
NEW YORK, Aug 11 (Reuters) - Residential Capital, the struggling mortgage arm of GMAC LLC, on Monday said it will boost its business of servicing risky loans for hedge funds and other institutional investors looking to reduce losses.
ResCap hired John Vella, former chief executive of EMC Mortgage, a unit of ill-fated investment bank Bear Stearns Cos. before its purchase by JPMorgan Chase & Co. (JPM.N)
Vella will be a senior vice president and managing director in the "special operations" business, ResCap said in a statement.
The push on servicing of distressed assets comes as rising delinquencies and foreclosures have increased losses for investors worldwide. Those seeking to profit on risky mortgages have been turning to companies that spend more time contacting and negotiating with borrowers to avoid foreclosure and make the loan current, improving the market value.
Increased service comes at a cost to mortgage companies that are obligated to collect and advance payments to investors at a previously agreed price. But the new business may be more profitable, analysts said.
ResCap, which has been selling some servicing rights, on Friday said it has enough liquidity for the next 12 months but there is a risk pressures may persist into early 2009.
In June, GMAC arranged a $60 billion refinancing package to help avoid possible failure of ResCap, which accounted for the bulk of its second quarter losses. GMAC is the financial services arm of U.S. auto maker General Motors GM.N.
A spokeswoman for Minneapolis-based ResCap did not return a call seeking comment.
Special mortgage servicers including Clayton Holdings' Quantum Servicing Corp. have reported a rapid rise in inquiries from investors who want to supplement efforts by others or move portfolios from weaker servicers entirely.
ResCap, the seventh-largest U.S. lender in the first half of 2008, in May also appointed Thomas Marano, the long-time head of mortgages at Bear Stearns, as its non-executive chairman. In June it hired Thomas Neary from Wells Fargo & Co. (WFC.N) as a senior managing director of capital markets. (Editing by Daniel Trotta)
