Residential Capital LLC has agreed to post $200 million of collateral to Fannie Mae, which in return will continue doing business with the unit of GMAC LLC.
In a Securities and Exchange Commission filing Monday, GMAC, which is majority-owned by Cerberus Capital Management LP, said that ResCap's net worth fell below $1 billion in the third quarter. Under their contract, this event gave Fannie the right to restrict ResCap from selling or servicing loans for the government-sponsored enterprise. Fannie also can force ResCap, a Minneapolis company, to transfer servicing rights to another company.
The GSE will refrain from exercising any of these remedies until Jan. 31, GMAC said. As part of the deal, ResCap agreed to sell the servicing rights on $12.7 billion of loans, or about 9% of the total it services for Fannie. Selling these rights "will have an incremental positive impact on ResCap's liquidity and overall cost of servicing, since it will no longer be required to advance delinquent payments on those loans," GMAC said. (ResCap's overall servicing portfolio stood at $392 billion at Sept. 30.)
But posting the collateral will hurt the unit's liquidity, GMAC said, and if Fannie still deems ResCap's net worth inadequate on Jan. 31, and opts to exercise its contractual rights, "it would adversely affect our profitability and financial condition."
Last week, GMAC warned that, without its support as parent, "substantial doubt exists regarding ResCap's ability to continue as a going concern."