GMAC ResCap, Inc., earlier Residential Funding Company LLC and Residential Capital Corporation, was a residential mortgage loan originator and servicer based in Minneapolis, Minnesota. It was a subsidiary of GMAC (now Ally Financial). As a result of its exposure to subprime lending during the subprime mortgage crisis, the company filed for bankruptcy protection in 2012 and underwent liquidation in December 2013.
 | |
| Company type | Subsidiary |
|---|---|
| Industry | Financial services |
| Founded | 1982 |
| Defunct | December 17, 2013 |
| Fate | Chapter 11 bankruptcy and liquidation |
| Headquarters | Minneapolis, Minnesota |
| Products | Mortgage loans |
| Parent | Ally Financial |
History
editIn 1982, Residential Funding Company LLC was formed as a subsidiary of Northwest Bank. It began operations in 1986.[1]
In 1990, the company was acquired by GMAC Mortgage Corporation.[2]
In 2005, GMAC (now Ally Financial), a subsidiary of General Motors, transferred ownership of GMAC Mortgage Corporation and Residential Funding Corporation (GMAC-RFC) to Residential Capital Corporation (ResCap) and contributed $2 billion of equity.[3]
As of the end of 2006, the company had $48 billion, or 76% of its mortgage portfolio invested in subprime loans.[4]
In January 2007, the company eliminated 1,000 jobs.[5]
In October 2007, the company eliminated 3,000 jobs.[6] At the beginning of 2007, the company had 14,000 employees.[7]
In May 2008, the company reported that it may run out of money.[8]
In June 2008, the company completed a $60 billion refinancing.[9]
On April 17, 2012, the company missed an interest payment.[10]
On May 14, 2012, the company filed for a pre-packaged bankruptcy that included the separation of the company from its parent, Ally Financial.[11]
On December 11, 2013, the company's Plan of Reorganization was approved by the bankruptcy court.[12]
Litigation
editIn September 2008, after suffering heavy losses during the subprime crisis, New Jersey Carpenters Health Fund sued the company and the underwriters of residential mortgage-backed securities issued by affiliates of the company, claiming that the prospectuses and registration statements of the RMBS did not adequately disclose the risks, were misleading to investors, and violated securities law. The company settled for $100 million and the 3 underwriters, Citigroup, Goldman Sachs Group and UBS AG, settled for $235 million, which was approved by the court in 2015.[13]
References
edit- ^ "Supplement dated February 25, 2008". U.S. Securities and Exchange Commission. February 25, 2008.
- ^ "GMAC completes acquisition of RFC". United Press International. February 12, 1990.
- ^ "GMAC Capitalizes New Residential Mortgage Subsidiary; Elects Jacob And Melzer To Board Of Directors" (Press release). The Auto Channel. May 4, 2005.
- ^ Chakravorty, Jui (August 10, 2007). "GMAC to get $1 bln from GM, cites subprime pressure". Reuters.
- ^ "ResCap says to cut 1,000 jobs, sees $10 mln charge". Reuters. January 21, 2007.
- ^ Stempel, Jonathan (October 17, 2007). "GMAC's ResCap mortgage unit to cut 3,000 jobs". Reuters.
- ^ "Mortgage lender to cut staff 25%". CNN. October 17, 2007.
- ^ DiStefano, Joseph N. (May 5, 2008). "GMAC's ResCap scrambles for cash". Philadelphia Media Network.
- ^ "$60 Billion Refinance Package for GMAC's Mortgage Lender". The New York Times. Associated Press. June 5, 2008.
- ^ "Ally Financial mortgage unit misses bond payment". Reuters. April 17, 2012.
- ^ "Chapter 11 move divorces ResCap from Ally". Pittsburgh Tribune-Review. Associated Press. April 17, 2012.
- ^ "ResCap Plan of Reorganization Approved by U.S. Bankruptcy Court" (Press release). PR Newswire. December 11, 2013.
- ^ Kass, Dani (August 3, 2015). "$235M Citi, Goldman, UBS Settlement Approved In MBS Case". Law360.