GMAC profit falls 63 pct as home loans weigh
NEW YORK (Reuters) - GMAC, the finance company in which General Motors Corp GM.N sold a majority stake, posted a 63 percent decline in second-quarter profit on Monday, hurt by losses in its home lending unit.
Net income fell to $293 million from $787 million a year earlier.
The company's Residential Capital LLC unit posted a net loss of $254 million, compared with a profit of $548 million a year earlier, hurt by what GMAC called "severe illiquidity" in the market for subprime mortgages.
The loss, however, was 72 percent smaller than the first quarter's $910 million. Excluding ResCap, profit at GMAC more than doubled.
ResCap losses "continue to constrain GMAC's bottom-line profitability," GMAC Chief Executive Eric Felstein said in a statement. But he said steps to trim risk "have reduced ResCap's losses, quickly and significantly, despite increasing challenges in the U.S. mortgage market."
Like many lenders, ResCap has struggled as falling home prices and rising interest rates made it tougher for many homeowners to keep up with their mortgage payments.
GM injected $1 billion into ResCap earlier this year to shore up its finances. As of June 30, ResCap had $7.5 billion of equity, up from $7.2 billion in the prior quarter.
GM sold a 51 percent stake in GMAC for $14 billion to a group led by private equity firm Cerberus Capital Management in November. GMAC's results may be reflected in the automaker's quarterly results, slated for release on Tuesday.
(Reporting by Jonathan Stempel)
