AFSCME 3357-HOF'S BLOG

Subprime Mortgage Crash Could Cost GM Amost $1 Billion

Last fall, GM sold off 51% of GMAC to Cerebus Capital, a private equity firm. Good thing, too, because since then, the sub-prime mortgage market has gone Kablooey. The largest portion of GMAC's assets rest in the hands of its Rescap mortgage banking subsidiary. It was recently disclosed that 77% of Rescap's loans are subprime, or high-risk. A significant portion of the remainder are either "nonconforming" first mortgage loans or riskier second mortgage loans. All told, some analysts expect that when GM finally posts its 2006 annual statement (by March 15), the statement will include a new reserve for bad mortgage loans in the amount of $900 million or $950 million. IF GM would have retained all of GMAC, the loss would have been double that.