In an effort to reduce its exposure to legacy mortgage business, GMAC Financial Services of GMAC Inc. (GJM) yesterday announced a deal to sell its European mortgage business. The company said that its mortgage subsidiary, Residential Capital LLC, has agreed to sell its European mortgage assets and businesses to affiliates of certain funds managed by affiliates of Fortress Investment Group LLC (FIG).
The deal represents about 10% of Residential Capital’s total assets as of Dec. 31, 2009. However, under the new accounting norms that became effective on Jan. 1, 2010, the transaction represents around 40% of total assets on a pro forma basis. The assets in the deal are valued at about the levels established in the fourth quarter of 2009, and GMAC expects no material gain or loss.
The sale includes certain loan assets and servicing rights, and the shares of the related operating entities in the United Kingdom, Germany and The Netherlands. Though GMAC did not reveal the sale price, Fortress Investment said that the assets to be acquired include approximately 6,000 residential mortgage whole loans.
GMAC also announced the closure of a whole loan transaction in the United Kingdom for $177 million (GBP 116 million) on Mar 31, 2010. This whole loan transaction, the deal with the Fortress affiliates and some other whole loan sales that are in progress will mark the exit of GMAC from the European mortgage market.
However, according to the Fortress management, the deal would enable the company to attract investment opportunities throughout Europe by leveraging GMAC’s servicing platforms with other Fortress-owned servicers.
Late in March, Wells Fargo & Co. (WFC) announced its intention to buy the North American factoring business of a unit of GMAC for undisclosed value and terms. The deal is expected to be completed by April 30, 2010.
The huge losses incurred by its troubled residential mortgage unit, Residential Capital, impelled GMAC to obtain multiple loans totaling $17 billion under the Troubled Asset Relief Program (TARP) from the government in 2009. Currently, GMAC is focused on the disposing of several of its business operations in order to focus on its core automotive lending business and repay the TARP money.
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