GMAC ResCap, Inc. was a residential

mortgage loan A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...

originator and servicer based in

Minneapolis Minneapolis () is the largest city in Minnesota, United States, and the county seat of Hennepin County. The city is abundant in water, with thirteen lakes, wetlands, the Mississippi River, creeks and waterfalls. Minneapolis has its origins ...

, United States. As a result of its exposure to

subprime lending In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subpri ...

during the

subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline ...

, the company filed for

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

protection in 2012 and underwent

liquidation Liquidation is the process in accounting by which a company is brought to an end in Canada, United Kingdom, United States, Ireland, Australia, New Zealand, Italy, and many other countries. The assets and property of the company are redistrib ...

in December 2013.

History

In 1982, Residential Funding Company LLC was formed as a subsidiary of

Northwest Bank Northwest Bank is a bank headquartered in Warren, PA. It is the leading subsidiary of Northwest Bancshares, Inc., a bank holding company. It operates 170 branches in central and western Pennsylvania, western New York, eastern Ohio, and Indiana. ...

. In 1990, the company was acquired by GMAC Mortgage Corp. In 2005, GMAC (now

Ally Financial Ally Financial is a bank holding company organized in Delaware and headquartered in Detroit, Michigan. The company provides financial services including car finance, online banking via a direct bank, corporate lending, vehicle insurance, mortgage ...

), a subsidiary of

General Motors The General Motors Company (GM) is an American Multinational corporation, multinational Automotive industry, automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and ...

, transferred ownership of GMAC Mortgage Corporation and Residential Funding Corporation (GMAC-RFC) to Residential Capital Corporation (ResCap) and contributed $2 billion of equity. In January 2007, the company eliminated 1,000 jobs. In October 2007, the company eliminated 3,000 jobs. At the beginning of 2007, the company had 14,000 employees. In May 2008, the company reported that it may run out of money. In June 2008, the company completed a $60 billion refinancing. In 2009, it was reported that

Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net w ...

was evaluating buying the company. On April 17, 2012, the company missed an interest payment. On May 14, 2012, the company filed for a pre-packaged bankruptcy that included the separation of the company from its parent, Ally Financial. On December 11, 2013, the company's Plan of Reorganization was approved by the bankruptcy court.

Litigation

In September 2008, after suffering heavy losses during the subprime crisis, New Jersey Carpenters Health Fund sued the company and the underwriters of residential mortgage-backed securities issued by affiliates of the company, claiming that the prospectuses and registration statements of the RMBS did not adequately disclose the risks, were misleading to investors, and violated securities law. The company settled for $100 million and the 3 underwriters,

Citigroup Citigroup Inc. or Citi (Style (visual arts), stylized as citi) is an American multinational investment banking, investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking ...

Goldman Sachs Group Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, Hong ...

and

UBS AG UBS Group AG is a multinational Investment banking, investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres ...

, settled for $235 million, which was approved by the court in 2015.

References

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RFC RFC may refer to: Computing * Request for Comments, a memorandum on Internet standards * Request for change, change management * Remote Function Call, in SAP computer systems * Rhye's and Fall of Civilization, a modification for Sid Meier's Civ ...

Financial services companies established in 1982 Financial services companies disestablished in 2013 Mortgage lenders of the United States Defunct financial services companies of the United States Defunct companies based in Minneapolis Subprime mortgage lenders Subprime mortgage crisis