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Subprime Crunch Hurts GMAC in 2007

""GMAC Financial Services"":http://www.gmacfs.com, a financial services company, said it experienced a net loss of $724 million in the fourth quarter of 2007 and an annual net loss of $2.3 billion for the entire year.
The financial services giant blames troubles experienced at its lending subsidiary Residential Capital, LLC, (or ResCap) for the company's many losses last year.
""The effect on Residential Capital, LLC (ResCap) from the continued disruption in the mortgage, housing and capital markets was the primary driver of adverse performance,"" GMAC said. ""Affecting results in the quarter were higher credit provision as a percent of assets, market-driven valuation adjustments and increased funding costs at the company.""
GMAC's Chief Executive Officer Eric Feldstein also elaborated on the perfect storm of factors that contributed to the company's losses in 2007.
""Losses in the fourth quarter decreased compared to the prior quarter,"" Feldstein said. ""However, GMAC's performance throughout 2007 was severely affected by the ongoing challenges in the mortgage, credit and capital markets. As a result, 2007 was a year of significant transformation for the organization - driving aggressive actions designed to reduce risk, streamline operations and rationalize our cost structure.""
Feldstein says GMAC is responding to its net losses by reducing the balance sheet, increasing liquidity, restructuring the company, and tightening its underwriting standards.

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