The Treasury Department has agreed to invest $7.5 billion in GMAC Financial Services, the parent company of the nation's sixth largest residential servicer.
Announced late Thursday, the investment is coupled with Federal Deposit Insurance Corp. approval for GMAC to sell newly issued senior unsecured debt with government backing. GMAC has already received $5 billion in Troubled Asset Relief Program (TARP) funds.
Until the new investment was extended, GMAC was on the hook to raise $11.5 billion of capital within six months. Now it needs to raise $5.6 billion, it said. GMAC is a bank holding company. It recently changed the name of its depository to Ally Bank from GM Bank. Ally makes warehouse lines of credit to non-depository mortgage firms.
Over the past year, GMAC has closed the retail branch arm of its Residential Capital Corp. affiliate and exited the wholesale channel. In the same period, ResCap's owned servicing portfolio has fallen by 20% to $365 billion in housing receivables, according to the Quarterly Data Report.
In other TARP-related news, a new report from Morgan Stanley says many banks will repay their government bailout funds by the 4Q09.