GMAC ResCap
| Company type | Subsidiary |
|---|---|
| Industry | Residential mortgage loan origination and servicing |
| Predecessor | Residential Funding Company LLC, Residential Capital Corporation |
| Founded | 1982 |
| Fate | Filed for bankruptcy protection in 2012; dissolved by December 2013 |
| Headquarters | Minneapolis, Minnesota , United States |
| Parent | Ally Financial (formerly GMAC) |
GMAC ResCap, Inc., previously known as Residential Funding Company LLC and Residential Capital Corporation, operated as a residential mortgage loan originator and servicer headquartered in Minneapolis, Minnesota. As a subsidiary of GMAC (currently known as Ally Financial), the firm filed for bankruptcy protection in 2012 and was dissolved by December 2013, primarily due to its involvement in subprime lending during the subprime mortgage crisis.
History
Residential Funding Company LLC was established in 1982 under the ownership of Northwest Bank and started its business activities in 1986. In 1990, the company was acquired by GMAC Mortgage Corporation.
In 2005, GMAC, then part of General Motors, transferred control of GMAC Mortgage Corporation along with Residential Funding Corporation (GMAC-RFC) to Residential Capital Corporation (ResCap), providing an equity infusion of $2 billion.
By the close of 2006, subprime loans accounted for 76% of its $48 billion mortgage portfolio. Due to financial strain, the company significantly downsized its workforce, eliminating 1,000 positions in January 2007 and another 3,000 by October 2007, reducing staff from 14,000 at the beginning of that year.
Experiencing liquidity difficulties, ResCap disclosed potential cash flow issues in May 2008 and arranged a $60 billion refinancing package in June 2008.
On April 17, 2012, ResCap failed to make an interest payment. It proceeded to file for pre-packaged bankruptcy on May 14, 2012, thereby separating from its parent company Ally Financial. The bankruptcy court sanctioned its Plan of Reorganization on December 11, 2013.
Litigation
In September 2008, after incurring substantial losses amid the subprime mortgage crisis, New Jersey Carpenters Health Fund initiated legal action against the company and underwriters involved with residential mortgage-backed securities (RMBS) issued by its subsidiaries. The complaint claimed that the RMBS prospectuses and registration documents inadequately disclosed risks, misleading investors and breaching securities regulations. The company agreed to a $100 million settlement, while underwriters including Citigroup, Goldman Sachs Group, and UBS AG settled for $235 million collectively; these agreements received court approval in 2015.