GMAC mortgage unit still risks "negative liquidity"

NEW YORK (Reuters) - GMAC LLC's money-losing mortgage unit said on Friday it should have enough cash to operate for the next 12 months after cutting costs and reducing lending risk, but there was still a chance it won't meet its obligations in 2008.

The mortgage unit, Residential Capital LLC, had $1.5 billion of cash readily available to cover operations and maturing debt as of June 30, according to its quarterly report filed with the U.S. Securities and Exchange Commission.

Despite cutting thousands of jobs and shifting its focus toward high-quality loans to cope with the U.S. housing slump, ResCap said "there continues to be a risk that the company will not be able to meet its debt service obligations and be in a negative liquidity position in 2008."

"... Management believes its plans are sufficient to meet its liquidity requirements for the next twelve months," it said.

In June, GMAC arranged a $60 billion refinancing package to stave off a possible collapse for ResCap.

ResCap was the seventh-largest U.S. mortgage lender in the first half of 2008, despite a 39 percent decline in loan volume, according to the newsletter Inside Mortgage Finance.

A group led by private equity firm Cerberus Capital Management LLC CBS.UL bought 51 percent of GMAC from General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) in 2006. GM owns the other 49 percent. GMAC also has auto finance and insurance operations.

ResCap expects liquidity to be pressured at least into early 2009, as lower housing prices in many U.S. and international markets contribute to higher delinquencies and defaults on loans it owns and services.

On July 31, GMAC posted a $2.48 billion second-quarter loss, including a loss of $1.86 billion at ResCap. The mortgage lender has lost money for seven straight quarters, losing $7.2 billion over that period.  Continued...