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Massive ResCap Cutbacks

5,000 layoffs, Homecomings originations halted, GMAC Mortgage offices closed

September 3, 2008

By staff

Residential Capital LLC will stop originating through its wholesale lending subsidiary, shut down 200 retail offices and lay off 5,000 employees in the process.

The restructuring was approved Tuesday, parent GMAC Financial Services announced today.

The statement indicated that all 200 GMAC Mortgage retail offices will be closed.

In addition, Homecomings Financial LLC wholesale broker channel originations will be halted.

The initiatives also include the evaluation of strategic alternatives for the GMAC Home Services business and the non-core servicing business.

The moves were made "to further optimize the mortgage business as the downturn in the credit and mortgage markets persists," the announcement said.

As a result of the moves, approximately 5,000 jobs will be eliminated. The layoffs work out to around 60 percent of ResCap's total workforce and impact a range of administrative and managerial positions.

Around 3,000 employees will be given notice this month, while the remaining 2,000 cuts will occur by yearend.

Impacted employees will receive severance packages and outplacement assistance.

ResCap, which was the sixth largest originator during the second quarter among mortgage lenders tracked by, expects to take up to $120 million in charges tied to the first 3,000 layoffs, though costs have not been estimated yet for the remaining 2,000 layoffs.

ResCap said it will continue to originate mortgages through its correspondent and direct lending channels "where there is a secondary market to sell the loans." Servicing is not impacted by the moves, though the lender said it will continue to improve its servicing platform and special servicing operations.

"While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment," ResCap Chairman and Chief Executive Officer Tom Marano said in the press release. "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."

The latest workforce reduction follows more than 6,000 the number of layoffs since last year.

ResCap Layoffs
Date Reported
August 15, 2008
GMAC Mortgage LLC
August 13, 2008 multiple
August 5, 2008 GMAC Mortgage LLC
June 20, 2008 ResCap
May 4, 2007
The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.

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