JULY 2004

GMAC Supports Counseling
to Prevent Foreclosures

An initiative to offer free credit counseling to financially troubled mortgage borrowers that GMAC started two years ago is about to expand. GMAC Residential Funding Corp. (the non-conforming mortgage unit of General Motors Corp.) is convinced that credit counseling for delinquent borrowers substantially reduces the foreclosure rate it experiences on its mortgage portfolio. GMAC-RFC pays credit counseling agencies a flat fee for each of its borrowers who is counseled. About 25,000 borrowers have used the program to date, at a cost to GMAC-RFC of about $100 per borrower. According to the American Banker, the company has found that half of these borrowers brought their mortgage payments up to date within 6 months of counseling. Given that the company’s experience with subprime loans is that foreclosure and repossession costs about 50% of the loan amount, the preventive benefits from counseling seem well worth the cost.

In January 2004 GMAC-RFC, along with other major lenders, established a partnership with the city of Chicago to make telephone counseling available to troubled borrowers through the city’s service hotline. The city agreed to pick up the cost of advertising the program on postcards and on billboards. The company will replicate the Chicago initiative in nine other cities during the remainder of 2004. It also established in 2003 the Homeownership Preservation Enterprise Foundation (acronym HOPE) as a non-profit center to develop programs to prevent foreclosures and to conduct industry research.