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Paul Kiesel
Paul Kiesel
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GMAC Home Loan Unit: The Past Year has been Horrible, No Improvements on the Horizon

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Reuters and Bloomberg both reported today that GMAC’s Home Loan Unit will fire 5,000 employees, or 60 percent of its staff, and close all 200 GMAC Mortgage retail offices because of “weak real estate markets.”

Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management, said, ” This gives you a full flavor of how terrible the mortgage market is [. . .] The past year has been horrible and it doesn’t look like there is any improvement on the horizon with continuing declines in home values and rising delinquencies.”

GMAC will also stop offering home loans through its GMAC Home Services and noncore mortgage servicing businesses.

This is further evidence that we’re not anywhere near the end of the mortgage crisis or recovering, because, if we were, GMAC would have been able to weather the storm. The U.S. has still not felt the effects of the Option ARM resets that will take place next year, and until that period is over (2010 maybe?), we won’t see any indications that the economy and housing markets are recovering.

What is interesting to note is the contrast between the two Party Conventions that have been taking place over the last ten days. The Democrats harped extensively on how down the economy is — particularly the middle class, who’ve been affected most by the mortgage crisis — and offered solutions to fix a broken bank regulatory system, however, the Republicans, in two days of their convention, have yet to mention plans to revitalize the economy, or how they would go about fixing the housing crisis. We’ll have to wait and see what is discussed tonight and tomorrow as Governor Sarah Palin and Senator John McCain will speak on consecutive nights. McCain’s former economic adviser was Phil Gramm.