Fitch Inc. on Thursday cut its rating on Residential Capital LLC by two notches, to junk.
Fitch is the first ratings agency to cut the GMAC Financial Services unit to speculative-grade. The development is a troublesome one for ResCap, which once was considered the crown jewel of GMAC and had maintained an investment-grade rating above its parent's junk status.
"We're clearly disappointed in the actions today that affected several companies in this mortgage business," GMAC spokeswoman Gina Proia said about the downgrade.
"We're focused on turning around the real estate finance business amid this very challenging market."
ResCap began having trouble last year when it said a slowdown in the housing market was cutting into its earnings.
On Tuesday, ResCap said its liquidity position had increased. Its cash balances were $3.7 billion at the end of the second quarter, up from $1.1 billion in the first quarter.
Fitch's cuts left ResCap with a BB+ rating, down from BBB.
GMAC, which is majority owned by the private equity firm Cerberus Capital Management LP, is also rated BB+.
Fitch, which also downgraded Countrywide Financial Corp. (See
"While these actions are primarily prompted by reduced liquidity, other factors such as weakening operating performance and deteriorating asset quality beyond Fitch's expectations are also considerations," the rating agency said.
