Third-Quarter Loss Puts GMAC Deeper in the Red

(MoneyWatch)  GMAC Financial Services reported a deeper third-quarter net loss than a year ago, as losses at its mortgage subsidiary continue to dog the company, with the added factor of a sharp downturn in both the quality and quantity of its auto lending business.

GMAC reported a net loss of $2.5 billion in the third quarter, versus a net loss of $1.6 billion the year-ago quarter. As expected, most of the loss, $1.9 billion worth, belonged to GMAC's ResCap mortgage company, which has been suffering for several quarters, originally due to subprime mortgages gone bad, and then from the more general credit crisis.

But GMAC's Global Automotive Finance unit also lost $294 million, from a net profit of $554 million in the year-ago quarter.

Falling used-vehicle prices forced GMAC to increase its reserves for future losses. At the same time, the total value of originations ?€" that is, newly written retail finance contracts ?€" fell to $11.3 billion, from $14.5 billion in the year-ago quarter.

That was partly because U.S. auto sales have fallen, and partly because GMAC tightened its credit standards to accept only the most creditworthy customers, even at the cost of turning down business.

In turn, that's partly in reaction as credit losses grew in the third quarter to 1.55 percent of managed retail assets. That might not sound like much, but it's an increase of more than 50 percent from the year-ago quarter.

"The economic and market conditions created an unrelenting environment for our business and the financial services sector overall," said GMAC CEO Alvaro G. de Molina.

GMAC is hoping for some help from the financial-industries bailout, if the company can redefine itself as a bank holding company.

GMAC's net loss is also going to cost GM a ton of money when GM reports its third-qarter results on Nov. 7, since GM still owns 49 percent of GMAC. Privately held Cerberus owns the majority share.