GM's Woes May Force Possible Sale of GMAC.(General Motors Corp., General Motors Acceptance Corp.)

New York -- Cash-strapped General Motors is exploring a partial sale of General Motors Acceptance Corp., which controls the nation's seventh-largest mortgage banking franchise.

As Mortgage Servicing News went to press this month, GM announced a third-quarter loss of $1.6 billion, revealing for the first time that it is toying with the idea of shedding a considerable stake in GMAC.

In a statement, GM said it is "exploring the possible sale of a controlling interest" in its financial services division "to a strategic partner."

GM, as yet, does not have a particular strategic partner in mind and has just started the sale process, said a GMAC spokesperson.

GMAC Residential of Horsham, Pa., and its affiliate, Homecomings Financial, Minneapolis, have a combined residential servicing portfolio of $345 billion. Both units are housed in a holding company, Residential Capital Corp., which is 100% owned by GMAC.

GM said the impetus for the sale is restoring GMAC and ResCap's investment grade ratings and renewing its access to low-cost financing in the capital markets.

Rating agencies, taking note of the GM's financial woes, are keeping a close watch on ResCap's debt. Fitch has a "BBB-" rating on ResCap's senior debt and has placed the company on its watch list. The worse the credit rating, the higher the yield ResCap will be forced to pay investors in its bonds. With profit margins in mortgage banking coming under pressure, GMAC cannot afford to see its cost of funds increase dramatically. In a research note Fitch said the sale of GMAC presents "unique challenges" because of its size.