ResCap to Cut 25% of Workforce Today

The Wall Street Journal Online is reporting that Residential Capital, GMAC’s mortgage origination unit will lay off 25% of its workforce today. The unit, better known as ResCap, cost parent company GM nearly $1 billion in charges related to subprime loan quality issues when GMAC unloaded a 51% equity stake to Cerberus Capital Management (the same company that also purchased Option One from H&R Block).

From the Journal:

Residential Capital LLC, the home-lending arm of GMAC Financial Services, will announce a reduction of about 25% in its work force today, according to people familiar with the matter, joining a parade of lenders paring operations as loan demand slows and financing for mortgages tightens.

…

In recent quarters, weakness at ResCap has been a drag on GM’s bottom line. GM’s reported net income of $62 million in the first quarter fell well below the $602 million it posted in the first quarter of 2006, with GM recognizing a net loss of $115 million related to its GMAC investment. ResCap lost $910 million in the quarter, a staggering downturn.

Update: A bit more from the company itself:

The reduction in ResCap’s workforce was influenced by sharp downturns in the U.S. residential real estate markets and the global dislocation of the mortgage finance and credit markets. The mortgage industry continues to experience lower overall origination volumes; illiquidity in the secondary market; and adverse trends in home price appreciation.

As a result of the actions announced today, ResCap will incur restructuring charges, which are expected to range from $90 to $110 million, which will include costs related to severance and other employee-related costs of approximately $55 to $65 million and the closure of facilities of approximately $35 to $45 million. The majority of these charges will be incurred in the fourth quarter of 2007. Consolidated charges are expected to result in future cash expenditures of approximately $85 to $95 million.

The workforce reductions will include a range of administrative and managerial positions. Business units most affected by lower mortgage market origination volumes will incur the most reductions.

Ho-hum, another day, another layoff…

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