GMAC Financial Services Reports Preliminary Third Quarter 2008 Financial Results

NEW YORK, Nov. 5 /PRNewswire/ -- GMAC Financial Services reported a 2008 third quarter net loss of $2.5 billion, compared to a net loss of $1.6 billion in the third quarter of 2007. Results were primarily attributable to a significant loss at Residential Capital, LLC (ResCap) as adverse market conditions domestically and internationally continued to affect the mortgage business. GMAC's automotive finance operation also experienced pressure from lower used vehicle prices and weaker consumer and dealer credit performance. Other items affecting results were realized losses and valuation adjustments on assets held for sale and certain other investment securities as a result of illiquidity in the credit and capital markets. These items were partially offset by profitable results in the insurance businesses.

"The economic and market conditions created an unrelenting environment for our business and the financial services sector overall," said GMAC Chief Executive Officer Alvaro G. de Molina. "Clearly this weighed heavily on financial results in the third quarter.

"In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity. In this regard, we've limited originations to match funding sources and are streamlining operations and evaluating opportunities to shed operations that are not essential to the core business," said de Molina. "In addition, we are pursuing strategies to increase flexibility and access to funding such as participating in the Federal Reserve's commercial paper purchase program via our asset-backed credit facility and engaging in discussions with regulatory authorities regarding bank holding company status."

     Third Quarter Net Income/(Loss)
     ($ in millions)
                                        Q308       Q307      Change

     Global Automotive Finance         ($294)      $554      ($848)
     Insurance                            97        117        (20)
     ResCap                           (1,912)    (2,261)       349
     Other(1)                           (414)        (6)      (408)
     Net Income/(Loss)               ($2,523)   ($1,596)     ($927)


    (1) Includes Commercial Finance operating segment, 21% ownership of former
        commercial mortgage unit and other corporate activities.

Liquidity and Capital

GMAC's consolidated cash and cash equivalents were $13.5 billion at Sept. 30, 2008, down modestly from the cash and cash equivalents balance of $14.3 billion at June 30, 2008. Of these total balances, ResCap's cash and cash equivalents balance was $6.9 billion at quarter-end, up from $6.6 billion at June 30, 2008. The change in consolidated cash is related to debt maturities at GMAC in the quarter, which were partially offset by reduced origination levels.

GMAC Bank assets and deposits continue to grow at a measured rate with total assets of $32.9 billion at quarter-end, which includes $8.5 billion of assets at the auto division and $24.4 billion of assets at the mortgage division. This compares to $31.9 billion at June 30, 2008. Deposits also increased in the third quarter to $17.7 billion at Sept. 30, 2008, compared to $16.9 billion at the end of the second quarter.

GMAC previously disclosed it is in discussions with federal regulatory authorities regarding, among other things, seeking bank holding company status under the Bank Holding Company Act of 1956, as amended. In conjunction with this initiative, GMAC intends to commence a private offer to exchange a significant amount of outstanding indebtedness for a reduced principal amount of new indebtedness. Timing and details should be disclosed in the near term.

Global Automotive Finance

GMAC's global automotive finance business reported a net loss of $294 million in the third quarter of 2008, compared to net income of $554 million in the year-ago period. The decline in performance was primarily driven by an increase in credit reserves as a result of the continued deterioration in used vehicle prices, which affected certain retail balloon contracts. Also affecting results was an impairment on operating leases related to the truck vehicle portfolio in Canada, weaker consumer and dealer credit performance, and valuation adjustments on securitization retained interests.

New vehicle financing originations for the third quarter of 2008 decreased to $11.3 billion of retail and lease contracts from $14.5 billion in the third quarter of 2007, due to tighter underwriting standards and lower industry sales.

Due to the current volatility in the global capital and credit markets, GMAC has recently taken steps to more closely align auto financing activities with available funding. Most recently in October, the company implemented pricing and underwriting adjustments in the U.S. and select international markets. In addition, in Asia-Pacific, GMAC announced it would cease retail and wholesale originations in Australia and New Zealand by the end of the year. The company also ceased retail originations in seven European markets as of Nov. 1, 2008.

Credit losses have increased in the third quarter of 2008 to 1.55 percent of managed retail assets, versus 1.01 percent in the third quarter of 2007. The sharp increase is related to higher loss severity in North America and increased losses in Latin America due to weaker economic conditions. Delinquencies remained almost flat with the year-ago period at 2.62 percent. Increased loan servicing efforts and tighter underwriting aided in keeping delinquencies from increasing during this weaker economic environment.

Insurance

GMAC's insurance business recorded net income of $97 million, down from net income of $117 million in the third quarter of 2007. Performance reflects slightly lower written premium and a decline in investment income due to realized losses and an impairment on Lehman Brothers securities as a result of recent market volatility.

The insurance investment portfolio was $6.6 billion at Sept. 30, 2008, compared to $7.5 billion at Sept. 30, 2007. The decrease in the portfolio is

related to a dividend payment to GMAC and changes in the market conditions that have caused the portfolio to have aggregate unrealized losses.

On Nov. 3, 2008, GMAC agreed to divest its reinsurance business, GMAC RE, to Maiden Holdings, Ltd. This transaction is part of GMAC's strategy to pursue opportunities to shed non-core operations in an effort to preserve capital.

Real Estate Finance

ResCap reported a net loss of $1.9 billion for the third quarter of 2008, compared to a net loss of $2.3 billion in the year-ago period. Results are primarily attributable to continued adverse market conditions, which drove high credit-related provisions and weak revenue.

During the third quarter, ResCap announced additional actions to significantly streamline operations, reduce cost and adjust its lending footprint. These actions included closing all GMAC Mortgage retail offices, ceasing originations through the Homecomings wholesale broker channel and further curtailing business lending and international business activities. In addition, ResCap entered into an agreement to sell the GMAC Home Services business to Brookfield Residential Property Services.

ResCap's U.S. residential finance business was negatively affected by lower mortgage production and a decrease in net servicing fees. While prime conforming loan production decreased year-over-year with $6.8 billion in the third quarter of 2008 versus $12.2 billion in the year-ago period, production of higher-margin government loans increased to $4.1 billion this quarter compared to $1.4 billion in the third quarter of 2007.

The international mortgage business experienced a net loss in the third quarter related to weakening consumer credit in key markets and increased cost of funds. ResCap has currently suspended all production outside of the U.S. with the exception of Canadian insured loans. ResCap's international business is now focused on management of assets in the U.K. and continental Europe. Results were also negatively affected by unfavorable foreign currency movements. The business lending operation experienced continued losses in the third quarter due to high levels of loss provisions and other impairments related to the current real estate market conditions.

In the third quarter, GMAC forgave $101.5 million of debt outstanding under the mortgage servicing rights credit facility with ResCap as a capital contribution to the mortgage subsidiary. In addition, GMAC also forgave $95.3 million of outstanding principal and accrued unpaid interest on ResCap notes held by GMAC. In October, GMAC forgave additional debt to ensure that ResCap remained compliant with the tangible net worth covenant.

Adverse market conditions have made it difficult for ResCap to maintain adequate capital and liquidity levels. As a result, absent economic support from GMAC, substantial doubt exists regarding ResCap's ability to continue as a going concern.

Outlook

The global capital and credit markets remain disrupted and general economic conditions have deteriorated. GMAC's business continues to be affected by these conditions and has led the company to take several actions to manage resources during this volatile environment. These steps include:

    -- Aligning auto originations with available committed funding sources in
       the U.S. and abroad
    -- Streamlining operations to suit the current business plans
    -- Growing GMAC Bank within the regulatory guidelines
    -- Reducing risk in the balance sheet
    -- Divesting select non-core operations such as GMAC Global Home Services
       and GMAC Reinsurance

GMAC is focused on pursuing strategies to increase flexibility and access to liquidity with the primary focus of continuing to support automotive dealers and customers.

About GMAC Financial Services

GMAC Financial Services is a global finance company operating in and servicing North America, South America, Europe and Asia-Pacific. GMAC specializes in automotive finance, real estate finance, insurance, commercial finance and online banking. As of Dec. 31, 2007, the organization had $249 billion in assets and serviced 15 million customers. Visit the GMAC media site at www.media.gmacfs.com for more information.

Forward-Looking Statements In this earnings release and related comments by GMAC LLC ("GMAC") management, the use of the words "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "seek," "may," "would," "could," "should," "believe," "potential," "continue," or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements herein and in related charts and management comments, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties.

While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results, and GMAC's and Residential Capital LLC's ("ResCap") actual results may differ materially due to numerous important factors that are described in the most recent reports on SEC Forms 10-K and 10-Q for GMAC and ResCap, each of which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: securing low cost funding for GMAC and ResCap and maintaining the mutually beneficial relationship between GMAC and General Motors Corporation ("GM"); our ability to maintain an appropriate level of debt and liquidity; the profitability and financial condition of GM; restrictions on ResCap's ability to pay dividends to us; recent developments in the residential mortgage and capital markets; continued deterioration in the residual value of off-lease vehicles; the impact on ResCap of the continuing decline in the U.S. housing market; changes in U.S. government- sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate; disruptions in the markets in which we fund GMAC's and ResCap's operations, with resulting negative impact on our liquidity; uncertainty concerning our ability to access federal liquidity programs; changes in our contractual servicing rights; costs and risks associated with litigation; changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; changes in the credit ratings of ResCap, GMAC or GM; changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in the existing or the adoption of new laws, regulations, policies or other activities of governments, agencies and similar organizations.

Investors are cautioned not to place undue reliance on forward-looking statements. GMAC undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

     GMAC Financial Services Preliminary Unaudited Third Quarter 2008
     Financial Highlights

     ($ in millions)

                                                                        Memo:
                                                         3Q       3Q       2Q
     Summary Statement of Income        Note           2008     2007     2008
     Revenue
     Total financing revenue                         $4,641   $5,381   $4,822
     Interest expense                                 2,906    3,715    2,869
     Depreciation expense on operating
      lease assets                                    1,412    1,276    1,401
     Impairment of investment in
      operating leases                                   93        -      716
       Net financing revenue (loss)                     230      390     (164)

     Other revenue
     Servicing fees                                     441      548      465
     Servicing asset valuation and hedge
      activities, net                                  (261)    (123)    (185)
     Insurance premiums and service
      revenue earned                                  1,123    1,143    1,123
     Gain (loss) on mortgage and
      automotive loans, net                              25     (320)  (1,099)
     Investment (loss) income                          (216)      13      185
     Other income                                       373      602      990
       Total other revenue                            1,485    1,863    1,479
     Total net revenue                                1,715    2,253    1,315
     Provision for credit losses                      1,099      964      771
     Noninterest expense
     Compensation and benefits expense                  612      628      591
     Insurance losses and loss adjustment
      expenses                                          642      659      714
     Other operating expenses                         1,967    1,211    1,548
     Impairment of goodwill and other
      intangible assets                                  16      455        -
       Total noninterest expense                      3,237    2,953    2,853
     Loss before income tax (benefit)
      expense                                        (2,621)  (1,664)  (2,309)
     Income tax (benefit) expense                       (98)     (68)     173
     Net loss                                       ($2,523) ($1,596) ($2,482)



                                                    Sep 30,   Dec 31,  Sep 30,
     Select Balance Sheet Data                        2008      2007     2007

     Cash and cash equivalents                      $13,534  $17,677  $23,923
     Loans held for sale                             11,979   20,559   23,992
     Finance receivables and loans, net   1
     Consumer                                        72,925   87,769  106,542
     Commercial                                      39,497   39,745   40,558
     Investments in operating leases, net 2          30,628   32,348   31,300
     Total debt                           3         160,631  193,148  221,100



                                               Third Quarter     Nine Months
      Operating Statistics                      2008   2007     2008    2007
      GMAC's Worldwide Cost
       of Borrowing                       4   6.15%    6.51%   6.17%    6.30%


    (1) Finance receivables and loans are net of unearned income
    (2) Net of accumulated depreciation
    (3) Represents both secured and unsecured on-balance sheet debt such as
        commercial paper, medium-term notes and long-term debt
    (4) Calculated by dividing total interest expense (excluding
        marked-to-market adjustments and intercompany interest) by total
        borrowings



     GMAC Financial Services Preliminary Unaudited Third
     Quarter 2008 Financial Highlights (Continued)

     ($ in millions)

                                   Note     Third Quarter       Nine Months
     GMAC Automotive Finance                2008     2007      2008      2007
      Operations
       Net Income
         North American Operations
          (NAO)                            ($250)    $438     ($950)   $1,058
         International Operations (IO)       (44)     116       197       289
           Net Income                      ($294)    $554     ($753)   $1,347

     Consumer Portfolio Statistics
     NAO Number of contracts
          originated (# thousands)           393      510     1,270     1,448
         Dollar amount of contracts
          originated                     $10,601  $13,856   $34,268   $38,633
         Dollar amount of contracts
          outstanding at end of
          period                     5   $59,175  $65,237
         Share of new GM retail sales        42%      45%       45%       45%

         Mix of retail & lease
          contract originations
          (% based on # of units):
            New                              75%      79%       75%       80%
            Used                             25%      21%       25%       20%

         GM subvented (% based on #
          of units)                         82%      84%       80%       85%

         Average original term in
          months (US retail only)            65       59        63        57

         Off-lease remarketing (US
          only)
           Sales proceeds on scheduled
            lease terminations (36-
            month) per vehicle -
            Serviced                6,7  $12,765  $15,250   $13,413   $15,539
          Off-lease vehicles
           terminated - Serviced (#
           units)                     7  108,063   80,449   328,438   237,812
          Sales proceeds on scheduled
           lease terminations (36-
           month) per vehicle - On-
           balance sheet              6  $12,987  $15,750   $13,481   $15,769
          Off-lease vehicles
           terminated - On-balance
           sheet (# units)            8   58,418   30,150   161,176    87,371

     IO Number of contracts
         originated (# thousands)            160      179       540       537
        Dollar amount of contracts
         originated                       $2,733   $2,968    $9,280    $8,686
        Dollar amount of contracts
         outstanding at end of
         period                       9  $17,694  $17,911

        Mix of retail & lease
         contract originations
         (%based on # of units):
          New                                85%      84%       85%       83%
          Used                               15%      16%       15%       17%

        GM subvented (% based on #
         of units)                           39%      42%       40%       42%

     Asset Quality Statistics
     NAO Annualized net retail
          charge-offs as a % of
          managed assets             10    1.90%    1.19%     1.71%     1.17%
         Managed retail contracts
          over 30 days delinquent  10,11   2.69%    2.69%     2.44%     2.52%
         Serviced retail contracts
          over 30 days delinquent  11,12   2.66%    2.54%     2.43%     2.33%

     IO  Annualized net charge-offs
          as a % of managed assets   10    0.70%    0.49%     0.72%     0.56%
         Managed retail contracts
          over 30 days delinquent  10,11   2.51%    2.50%     2.47%     2.56%

     Operating Statistics
     NAO  Allowance as a % of related
           on-balance sheet consumer
           receivables at end of
           period                          4.37%    3.72%
          Repossessions as a % of
           average number of managed
           retail contracts
           outstanding               10    2.65%    2.43%     2.57%     2.25%
          Severity of loss per unit
           serviced - Retail         12
              New                        $11,720   $9,077   $10,919    $8,829
              Used                        $9,269   $7,295    $8,710    $7,044

     IO  Allowance as a % of related
          on-balance sheet consumer
          receivables at end of
          period                           1.61%    1.46%
         Repossessions as a % of
          average number of contracts
          outstanding                      0.69%    0.73%     0.69%     0.76%


     (5) Represents on-balance sheet assets, which includes $6.1 billion of
     loans held for sale in 2008

     (6) Prior period amounts based on current vehicle mix, in order to be
     comparable

     (7) Serviced assets represent operating leases where GMAC continues to
     service the underlying asset

     (8) GMAC-owned portfolio reflects lease assets on GMAC's books after
     distribution to GM of automotive leases in connection with the sale
     transaction which occurred in November 2006

     (9) Represents on-balance sheet assets including retail leases

     (10) Managed assets represent on and off-balance sheet finance
     receivables and loans where GMAC continues to be exposed to credit and/or
     interest rate risk

     (11) Represents percentage of average number of contracts outstanding.
     Excludes accounts in bankruptcy.

     (12) Serviced assets represent on and off-balance sheet finance
     receivables and loans where GMAC continues to service the underlying
     asset



     GMAC Financial Services Preliminary Unaudited Third
     Quarter 2008 Financial Highlights (Continued)

     ($ in millions)

                                 Note     Third Quarter        Nine Months
     ResCap Operations                   2008      2007      2008       2007

      Net Income (loss)                ($1,912)  ($2,261)  ($4,631)   ($3,425)

        Gain (loss) on sale of mortgage
         loans, net
          Domestic                         $32     ($107)    ($213)     ($351)
          International                   (171)     (463)   (1,735)      (280)
            Total Gain (loss) on sale of
             mortgage loans              ($138)    ($570)  ($1,948)     ($631)

      Portfolio Statistics
        Mortgage loan production
          Prime conforming              $6,766   $12,174   $34,390    $34,425
          Prime non-conforming             250     4,993     1,838     27,798
          Government                     4,137     1,378     9,873      5,458
          Nonprime                           -       221         3      4,246
          Prime second-lien                 86     1,440       872      6,472
            Total Domestic              11,239    20,206    46,976     78,399

            International                  627     9,068     3,867     23,258
            Total Mortgage production  $11,866   $29,274   $50,843   $101,657

      Mortgage loan servicing rights
       at end of period                 $4,725    $5,547

      Loan servicing at end of period
        Domestic                      $391,945  $427,440
        International                   34,079    38,200
          Total Loan servicing        $426,023  $465,640

      Asset Quality Statistics -
       ResCap Consolidated
        Provision for credit losses by
         product
          Mortgage loans held for
           investment                     $533      $788    $1,158     $1,436
          Lending receivables              118        93       256        313
            Total Provision for credit
             losses                       $652      $881    $1,414     $1,749

      Allowance by product at end of
       period
        Mortgage loans held for
         investment                       $975    $1,734
        Lending receivables                564       325
          Total Allowance by product    $1,539    $2,060

      Allowance as a % of related
       receivables at end of period
        Mortgage loans held for
         investment                      3.27%     2.85%
        Lending receivables             12.95%     4.12%
          Total Allowance as a % of
           related receivables           4.50%     3.00%

      Nonaccrual loans at end of
       period                           $7,477    $8,993
      Nonaccrual loans as a % of
       related receivables at end of
       period                           21.88%    13.10%

          Total nonperforming assets   $8,496   $10,655


     GMAC Insurance Operations

      Net Income                           $97      $117      $364       $391

      Premiums and service revenue
       written                          $1,042    $1,063    $3,241     $3,097
      Premiums and service revenue
       earned                           $1,114    $1,133    $3,322     $3,206
      Combined ratio               13    90.9%     95.3%     94.2%      92.3%

      Investment portfolio fair value
       at end of period                 $6,639    $7,518
      Memo: After-tax at end of
       period
        Unrealized gains                  $104      $156
        Unrealized losses                 (172)      (42)
         Net unrealized capital gains     ($68)     $114


     (13) Combined ratio represents the sum of all incurred losses and
      expenses (excluding interest and income tax expense) divided by the
      total of premiums and service revenues earned and other income

     Numbers may not foot due to rounding