Profitability continued to elude GMAC Inc. in the third quarter amid persistent losses stemming from toxic mortgage loans.

Despite extraordinary help from the  government - including $12.5 billion of federal funds and access to cheap debt - GMAC is struggling to return to the black as it takes hit after hit on its mortgage unit, Residential Capital LLC. ResCap, one of the largest lenders to borrowers with shaky credit, is still reeling from risky loans it made at the peak of the real estate market.

The  government currently owns 35.4% of GMAC and is its largest shareholder. The extent of federal help GMAC has received underscores the auto lender's role in federal efforts to resuscitate the ailing auto makers General Motors and Chrysler. GMAC provides loans to auto dealers that use the funds to stockpile their inventory of new vehicles. It also lends to consumers buying cars.

The lender posted a third quarter loss of $767 million, compared to a year-earlier loss of $2.52 billion. But the extent of GMAC's loss narrowed from a year ago as revenue jumped to $2.1 billion from $1.2 billion a year earlier.

The third quarter loss narrowed also because the company squirreled away a smaller amount - $704 million - to reserve for potential losses. This is down from $1.1 billion a year ago and $1.2 billion in the second quarter.

GMAC's mortgage business, including ResCap, lost $747 million, before taxes, from continuing operations. ResCap alone lost $649 million in the third quarter, its 12th consecutive quarterly loss.

GMAC said it is focused on resolving matters at ResCap. The company's objective is to find a resolution by the end of the year, said Robert Hull, GMAC's chief financial officer, during a Web cast Wednesday morning discussing the company's third quarter results. This time frame is "not a promise but an objective," said Hull. He declined to discuss the options being considered for ResCap. Losses at ResCap totaled $9.96 billion in 2008 and 2007.

The red ink stemming from faulty mortgages offset earnings, before taxes, of $395 million from continuing operations at GMAC's auto business.

Financing of loans for new cars totaled $6.8 billion in the third quarter, down from $9.2 billion a year ago but up from $5.6 billion in the second quarter.

Last year, GMAC, strapped for capital and struggling with mounting losses on its auto and mortgage loans, dramatically shrank its lending operations.

To survive, GMAC registered as a bank in December, giving it access to the Treasury's Troubled Asset Relief Program bailout funds and allowing it to borrow at cheaper rates. All told, GMAC has gotten $12.5 billion in TARP funds; it's in talks with the Treasury to get a third infusion of $2.8 billion to $5.6 billion.

GMAC has to raise this capital to satisfy the requirements of the government-conducted stress tests earlier this year. Hull said discussions with the Federal Reserve related to the capital raise have been "helpful and constructive."

Deposits - a central plank of GMAC's funding strategy - at Ally Bank, the company's re-branded online banking unit, increased to $28.8 billion, up from $17.6 billion a year ago and $26.3 billion in the second quarter.

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