ResCap, once a large source of profits, is now burdened with loans that are rapidly declining in value, the Journal said, adding the situation has triggered concerns its lenders will demand immediate payment or force the unit into bankruptcy protection if GMAC or its owners don't step in with an equity injection or other measures.
NEW YORK (Reuters) - Finance company GMAC's Residential Capital home mortgage unit may be close to violating certain debt covenants due to a plunge in its net worth, the Wall Street Journal reported in its online edition on Thursday.
ResCap, once a large source of profits, is now burdened with loans that are rapidly declining in value, the Journal said, adding the situation has triggered concerns its lenders will demand immediate payment or force the unit into bankruptcy protection if GMAC or its owners don't step in with an equity injection or other measures.
ResCap is the second-largest independent U.S. mortgage lender after Countrywide Financial Corp <CFC.N>. GMAC is partially owned by General Motors Corp <GM.N>.
Representatives from GMAC were not immediately available for comment.
!ADVERTISEMENT!According to the Journal, a GMAC spokeswoman said the lender "is closely monitoring" ResCap and has communicated a turnaround plan.
The newspaper also said concern is heating up among some GMAC investors, which include several private equity firms, banks and hedge funds that backed Cerberus Capital Management LP <CBS.UL>, which bought 51 percent of GMAC from GM last November. GM still owns a 49 percent stake.
According to the Journal, a source familiar with GMAC's strategy said the "temperature" from its big investors "is high as it should be."
(Reporting by Justin Grant; Editing by David Holmes)
