Ally Financial Inc (ALLY) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2008 GMAC Earnings Conference Call. My name is Tonya, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Susan Shank, Director of Investor Relations. Please, proceed.

Thank you very much, Tonya. Good morning. This is Susan Shank and I want to welcome you all for joining us -- thank you all for joining us as we review our first quarter 2008 results.

First of all, I'd like to direct your attention to the legend regarding forward-looking statements and risk factors on the second page of the chart set. This is going to govern everything we say in today's conference call.

I should also mention that to comply with the SEC's Regulation G, we have provided some supplemental charts in the back of the package which providing reconciling data between managerial financial results and the GAAP results that are in our financial statements. I'd also like to highlight that we're broadcasting this call via webcast, as well as the telephone lines, and that the financial press is participating.

This morning, Robert Hull, our CFO, will cover the Q1 2008 earnings results. After the presentation part of the call, we'll have 30 minutes set aside for questions from the investors and analysts, followed by another 30 minute for questions with the press.

I'd like to also let you know that we've got several other people here in the room to help us answer questions. With us today are Bill Muir, President of GMAC; Jim Jones, Executive Vice President and CEO of ResCap; Sam Ramsey, Chief Risk Operator -- excuse me, Chief Risk Officer of GMAC; David Walker, Treasurer; Linda Zukauckas, Group Vice President of Finance; David DeBrunner, GMAC Controller; as well as Ken Fischbach, Managing Director of ResCap Investor Relations.

With that, I'd like to turn it over to Rob Hull.

Thanks, Susan. Good morning. Thank you for joining us. As those of you who joined might recall, we said we expected 2008 to be a challenging year and that was certainly the case in the first quarter. So far, we've experience continued capital markets volatility, US economic weakness, and deteriorating consumer credit. This is the backdrop; however, we've narrowed our focus to five critical tactics for the balance of the year. One is restructuring our auto finance operations; two is streamlining ResCap's operations and balance sheet; three, protecting the value of GMAC Insurance; four, growing and leveraging GMAC Bank; and, fifth, ensuring GMAC and ResCap's continued liquidity.

In anticipation of a difficult environment, we took steps in 2007 to de-risk our balance sheet and reduce our overall cost structure. Those efforts are bearing fruit, but those successes didn't outweigh the economic market challenges we faced in the first quarter.

We're reporting a consolidated loss of $589 million, as you can see on slide four of your PowerPoint deck. The loss reflects negative results at ResCap which more than offset profits at Insurance and Auto Finance. Global Auto had net income of $258 million for the quarter, Insurance earned $132 million, and ResCap had a loss of $859 million. That figure includes significant improvements in the US residential business and gains from debt retirement offset by valuation adjustments in the international mortgage and business lending operations.

GMAC and ResCap continue to hold high levels of cash to preserve our flexibility. GMAC's consolidated cash and certain marketable securities was $18.6 billion at the end of the quarter. This number includes ResCap cash of $4.2 billion. The GMAC cash balance came down from our yearend balance of $22.7 billion as we only selectively utilized the capital markets during the quarter.

Moving on to slide five, we provide net income by segment, as well as some of the notable items that drove the quarter. All the items listed below and throughout the balance of this discussion are presented on a pre-tax basis unless otherwise noted. These structuring charges were fairly modes at $33 million in the period. We had a gain of $488 million from repurchased debt at a consolidated level. Auto finance had $55 million of mark downs while ResCap HFS valuations were impaired by $772 million. Consolidated losses on investment securities total $468 million. And finally, impairments of REO, or Real Estate Owned, lot option, and model homes total $183 million.

During the quarter we implemented FAS157 related to fair value accounting and elected to account for certain of our assets and liabilities under the fair value option provided by FAS 159. FAS157 resulted in an increase to the beginning retained earnings of $23 million related to the recognition of day one gains on MSRs and certain residential loan commitments. FAS159 resulted in a decrease to retained earnings of $148 million as we elected to measure $10.5 billion of mortgage loans and certain CDO's. We only elected 159 at the ResCap unit.

With that, let's take a deeper look at the individual segments, starting on slide six. The first slide lays out the key metrics for our auto finance operations. The graph on this slide shows Global Auto's net income for the last eight quarters. Q1 2008 results of $258 million were down compared to year-ago earnings of $398 million. These results reflected weaker credit performance, increased operating expenses, lower gains on sales, and a deterioration in used car prices. We'll go through the detailed income statement in just a moment.

Moving to the right, you can see that GMAC increased new auto originations in Q1 '08 compared to year-ago levels while used originations were stable. Despite lower industry sales in North America, new vehicle financing originations for the quarter amounted to $12.9 billion of retail lending and lease contracts versus $12.3 billion in the first quarter of 2007, reflecting a higher penetration of GM vehicle sales. Used vehicle originations for the quarter were stable at $2.1 billion. In the current economic condition, we've deliberately moderated growth in this portfolio. The graph in the lower left section of the slide highlights the consistency of our origination platform as total service assets came in at $122 billion in line with recent levels. And on balance sheet, retail auto loans were slightly higher in the quarter at $86 billion, reflected fewer ABS and whole loan transactions. The last graph lays out the level of gains on sale from our originate to distribute model. In Q1 '08, we sold fewer loans and booked fewer gains than the year-ago period due to the capital markets disruptions.

If you turn now to slide seven, you'll find the income statement for auto finance and we'll walk through the key drivers. Despite a practically flat asset base, net financing revenue increased as the mix of assets shifted to a higher proportion of leases and our cost of funds actually declined. While our funding spreads have increased year over year in all categories of funding, higher ratio of secured funding has brought the weighted average cost of debt down. Poor capital market conditions and weak credit trends drove $55 million of mark to market write downs on securitization residuals and whole loan interest at Auto and $24 million of impairments and realized losses on investments.

Adverse credit trends also impacted results as we again increased our allowance coverage ratio. At the end of the first quarter, our consumer coverage ration was 3.72% for our North American ops and 1.49% for our international ops. The increased provision in Q1 2008 compares unfavorably to Q1 2007 due to a reduction of reserves as a result of asset sales and the elimination of remaining Hurricane Katrina reserves from 2007.

Slide eight provides a more predictive view than my previous comments about increasing credit provision. It shows a sharp decrease in delinquencies on our managed portfolio compared to last quarter and even a year ago. Before we spend a lot of time on the first quarter of '08 here, let's talk about what these delinquencies rates in 2007. In late 2006 and the first half of '07, we underwrote a number of US loans in the lower credit tiers. These loans are highly sensitive to economic change. When the Company began to weaken, we tightened our purchasing policy to reduce this production. Q1 2008 delinquency rates have improved in part due to that underwriting policy. The results also reflect our stepped up servicing and collections efforts. We are now better positioned to face the current economic weakness in the United States. And that doesn't mean we believe our delinquency rates will continue to fall. The US economy remains weak and consumers are under stress. We know that. However, we believe that we've taken the appropriate actions to ride out the current economic trends.

Slide nine tells a similar story but with a one quarter lag. You could almost overlay the delinquency slide on this slide. Globally, our annualized credit losses rose to 1.34%, the highest level we've seen over the last two years. In North America, both frequency and severity of losses were up versus year-ago levels. The frequency was driven by the same factors that drove up Q3 and Q4 delinquencies. As I mentioned before, we tightened our underwriting in the US and adjusted our pricing to reduce originations of the lowest credit tier paper. Year to date booked contracts on a dollar basis for our lowest credit tier are down by nearly one-half compared to the first quarter of '07, a significant change. We expect our stepped up servicing and the underwriting changes to show up in our losses in Q2. The higher severity reflects weak used car prices in both the US and Canada as well as an up tick in loan to value.

Increased losses in Asia-Pacific reflect the maturing of our portfolio in China. Our Latin American losses are also up as we see weakness in countries such as Colombia and Brazil. Our loan loss reserves in global auto now stand at $1.3 billion, a coverage ratio of 1.8% which we believe is appropriate in the given -- in the current environment.

Moving now to slide ten, the streamlining and leveraging economies of scale is a key objective for us. We announced a sizable restructuring of our US and Canadian auto finance operations in February which you may know. In the US, we'll migrate from 16 offices down to four. GMAC Canada will migrate from four offices to a single regional center in Toronto. We expect to incur somewhere between $65 million to $85 million in charges, mostly in the second half of 2008, and we estimate the restructuring will yield approximately $175 million in annual run rate savings. We booked $11 million of these charges in the first quarter. Our retail and dealer customers will not see a change in our service delivery. In fact, originations in the first quarter have been strong in spite of the changes underway.

Okay. Turning to GMAC Insurance, slide 11 lays out what we consider to be the most important measures for this steady business. Net income for the first quarter of $132 million was down compared to year-ago levels due to higher losses and expenses stemming in part from our acquisition of Provident Insurance in the UK in 2007. Core earnings which is down to the right shows essentially the same results as net income. Remember that core earnings excludes capital gains and is the industry's preferred measure of year over year performance. Q1 2008 losses increased and expenses were up. These factors drove the combined ratio up to 93.8% in Q1 '08. You can see that in the lower left-hand corner.

Moving to the premiums written graph in the lower right-hand corner which gives you an indication of future revenue, results are up year over year but the market remains quite competitive. Our international operations are posting strong growth which more than offset difficult pricing for personal lines, products in the US, and slightly lower sales of our extended service contracts here as well.

On slide 12, we have a condensed income statement for insurance, highlighting these trends. Earned premiums have increased, thanks to growth in our international business. Investment income was flat year over year despite the rollercoaster ride in the debt and equity markets. We've shifted our portfolio to a more defensive posture, now with more than 90% of the assets in low-risk, fixed income securities. The insurance loss line is up year over year, reflecting a shift in the mix of our business. The acquisition and underwriting expense line is also up year over year as we've wheeled out a new sales force to expand our dealer products and personal lines.

On a more fundamental level, a strong rating is critical to maintain and grow the Insurance business. We're implementing a plan that we believe will enable GMAC insurance to maintain its financial strength rating from AM Best and slide 13 provides some color on this. The restructuring is designed to separate voting and economic interest while maintaining a strong incentive for GMAC and GMAC Insurance to continue to work together to grow this business.

Finally, ResCap on slide 14. As you know, we've worked intensely to reduce ResCap's risk, resize the operation to reflect the reality of today's mortgage market. In our US residential operations, we've reduced the size and risk of the balance sheet. We're currently focused almost exclusively on originating prime, conforming mortgages in the United States. A majority of that production is now being originated at GMAC bank, roughly 75% of it, capitalizing on the bank's lower cost of funds. We're only originating other products when there's funding and distribution capacity for those assets.

We're managing down our business lending portfolio and curtailing international production as well as looking at strategic alternatives across the base. We completed an operational restructuring in 2007 and we've announced additional efforts already in 2008. These efforts have taken root and are starting to have effect. We met our internal operating expense targets in the first quarter of '08. Our balance has decreased by roughly $7 billion since the beginning of 2008. Prime conforming government production was also strong, up 71% from a year ago. And our servicing operation generated very strong MSR hedge results.

Unfortunately, this has not been quite enough to offset the continuing deterioration of the global markets. We continue to experience impairments and mark to market losses on our remaining assets due to falling home prices in the US and tight mortgage liquidity around the world.

These trends are especially strong in business lending and international operations. The graphs on slide 15 tell a bit of the story. ResCap had losses of $859 million for the quarter which included a gain of $480 million from the retirement of debt. Total assets are down by roughly $7 billion from yearend 2007, due in part to asset write downs and impairments, but mostly to a $6 billion reduction due to the election of fair value accounting which we mentioned earlier. In all, we took total write downs and impairments in ResCap in Q1 of $1.4 billion pre-tax, excluding the fair value adjustment.

Our mortgage servicing portfolio is up due to valuation increases and positive hedge results. Loan production was down year over year, reflecting our shift away from non-prime and prime non-conforming assets. While overall US mortgage production was down, originations of prime conforming and government product increased 71% for the first quarter and are even up 23% over the fourth quarter on a linked basis. We did not originate non-prime product in the quarter and our prime non-conforming product has been dramatically cut over the past year.

International originations declined to $2.2 billion in Q1 versus $6.5 billion in the same quarter a year ago. This decline illustrates the dramatic steps taken in primarily the UK and continental Europe to reduce originations as market liquidity has evaporated. Our remaining international production is either the runoff of preexisting commitments we've made, which is small, or our remaining business in the UK, Australia, and Canada. Note that the majority of our international production is in the UK and has pre-arranged or pre-sold distribution with a third party.

On slide 16, you can see how all these trends translate into performance. Net financing revenue is down sharply. Our total financing revenue fell by $870 million year on year due to the balance sheet reduction, but our interest expense only decreased by $596 million. Although debt balances at ResCap are significantly decreased, the cost of that debt has risen. Again, our servicing platform remains a source of strength for us. Servicing fees are down by about $55 million in Q1, due to the sale of certain servicing assets. While the value of our MSR asset decreased to $4.3 billion, our MSR hedge valuations, related activity, and earnings were up sharply. The changes in interest rates and a steepening of the yield curve drove the favorable hedge performance in the quarter.

Moving down to the loss line, loss on sale line, you can see how a lack of liquidity in the mortgage markets continues to constrain our results. Our international operation in particular had more than $600 million of realized and unrealized losses primarily due to falling mortgage rates in the UK and continental Europe. That flows to the loss on sale line. Our other income line is a bit noisy this quarter. The loss on investment securities was $444 million in the quarter as the value of our residuals and other securities declined. This was offset, however, by a $480 million gain on the retirement of $1.2 billion face value debt. These are bonds that GMAC bought in the open market and contributed to ResCap as I mentioned before.

Moving on to the expense side, our provision for credit losses is down year over year, reflecting the reduction in non-prime risk and in the size of our balance sheet. Our coverage ratio is also down to 2.14% in Q1 '08, compared with 2.80% a year ago, as a result of better quality asset mix. Non interest expense was also down as the cost savings from our restructuring efforts and headcount reductions begin to take hold. We continue to make progress in reducing ResCap's exposure to non-prime risk as well and you can see that on slide 17.

Our non-prime servicing portfolio continues to run off and is now falling below $50 billion while our prime servicing book has increased as production ramps. Shifting to the right, you can see that we've made progress winding down the non-prime component of our warehouse lending business as well. You might be surprised to see that the non-prime component of our held for sale book is up in the lower left corner. This is not due to increased production of HFS, rather, we transferred $1.5 billion of help for investment loans to held for sale due to a change in our intent to sell those loans in the current period.

The last graph on the page shows the progress we've made in reducing the non-prime component of HFI. In Q1 2008, that portfolio continued to run off and, as I mentioned earlier, we transferred $1.5 billion of non-prime out of this category into the held for sale bucket. Remember, we do not own a lot of risk in our HFI book. $9.7 billion of that $35 billion on that chart is in on balance sheet securitizations and we only have $256 million of economic risk held against these loans. A significant portion of the on balance sheet securitizations are non-prime as well.

On slide 18 we've laid out credit trends for the ResCap book. The trend you see in the upper left-hand quarter looks alarming, but there's a bit of noise in the first quarter '08 number. The non accrual percentage of 16.2% is misleading as we've adopted fair value accounting for certain loans in the HFI book, as mentioned, resulting in a mark down of $6 billion in the quarter. We've recalculated the ratio excluding the loans impacted by FAS159, providing a more realistic view of non accrual levels.

If you look at the graph below, you can see that the switch to fair value accounting on some of our assets has also impacted losses, but this time favorably. The loans with fair value are no charged off. Instead, they are simply marked down as the value declines so that the total dollar value of our charge-offs has fallen.

Moving over to the top right graph, the year over year trend for ResCap's lending receivables is better. Q1 2008 was 7.2%, a material change from the 10.9% a year ago; however, that improvement reflects the write off of certain non-performing loans. The last graph on this page illustrates the lumpy nature of charge-offs in our lending receivables portfolio. During Q1, we wrote up a bit more than $90 million, driving that ratio up to 1.07%.

ResCap ended the quarter with $4.2 billion of cash and cash equivalents as you can see on the next slide. The cash balance is down slightly from yearend levels; as we renewed facilities, the advanced rates are generally declining which puts pressure on the cash position, as do margin calls as the collateral is then revalue. ResCap ended the quarter with total equity of $5.8 billion. During the quarter, GMAC contributed ResCap bonds with a face value of $1.2 billion and a market value of just over $600 million, as mentioned, in exchange for a preferred instrument with an equivalent market value. This transaction will enable the Company to exceed its tangible net worth covenant.

Despite rumors, we haven't drawn on revolving credit facilities and they remain available to us, as does the FHLB funding for GMAC bank. Our attention is focused on ensuring we maintain liquidity and we're taking aggressive actions to meet that goal. On April 18, GMAC entered into an agreement to provide ResCap with a $750 million revolving credit facility secured mainly by a portion of GMAC's $4.3 billion in MSR rights. We're funding most of our prime, conforming US originations through GMAC Banks; however, we continue explore various strategic alternatives related to all aspects of ResCap's business although market conditions continue to complicate the situation. There is a cost to all this as we renewed or replaced maturing credit facilities in '07 and '08, our cost of funds increased, but, as we said before, we're more focused on restoring the health of the core business at ResCap than short-term profits.

Slide 20 takes our focus to GMAC Bank. We thought we'd show you a little bit about it this quarter. It's a $30 billion conductor loan core as part of GM's critical funding equation. GMAC Bank is a source of production and growth for both the mortgage and auto businesses, as illustrated in the top table. To fund this production, the bank currently provides low-cost access to roughly $10 billion of current FHLB balances, $9.8 billion of broker retail deposits and $3.3 billion of direct retail deposits. I'm sure you're aware that the FDIC is currently reviewing Cerberus's application to retain long-term control of GMAC Bank. The FDIC has been a great partner for us to date and we're working with them to make sure they get all the information they need to make a decision. We can't predict what the FDIC will ultimately decide, but we're encouraged by their level of attention and are optimistic about the outcome.

Now, let's move back to the consolidated GMAC level on slide 21. We closed the quarter with $18.6 billion in cash and securities, compared to $22.7 billion at yearend. As turbulence in global credit markets continued, we elected to use some of our cash to fund production, to pay off maturing debt, and to repurchase ResCap debt. The table provides you with a consolidated cash and roll forward. We continued to roll our asset backed auto commercial paper and we renewed several secured bank facilities, albeit with less favorable terms. We continue to utilize our long-term whole loan forward flow agreements. That said, we only issued a modest amount of public auto ABS during the quarter as market volatility persisted. Advanced rates and pricing remain extraordinarily challenged, even for the highest quality collateral that we have.

On slide 22, in the second quarter, our focus will be on renewing our unsecured facility at GMAC and ResCap with our $12 billion NCAT revolver. We're currently working with our banking partners to renew the NCAT facility in line with current commitments. Additionally, we're exploring a variety of ideas for our unsecured revolvers. We're also considering strategic alternatives, including those related to liability management to ensure access to liquidity. Our goal in this process is to solidify GMAC and ResCap's access to liquidity in a way that also meets the needs of our lenders. These initiatives are consistent with our diversified funding strategy and we expect to be in the market shortly.

To wrap this up, we knew going into 2008 that we'd face challenges and that has clearly been the case. At the macro environment level, the capital markets are challenging to say the least and the US economy continues to weaken on us. Though we've implemented strategies to reduce our credit risk profile, increase our liquidity, and dial back our costs. We expect earnings to continue to be challenged if these uncertain economic conditions persist. We're targeting return to profitability in 2008 as we were in the first quarter, but if these adverse market conditions remain, the timeline for that goal could extend well into 2009.

We told you last quarter we'd remain focused on GMAC's core strengths and we're still confident and are focused on them. Those included our scalable servicing platforms, our broad international footprint, our large and growing share of retail and commercial auto, our consistent insurance business, and exclusive 90 year partnership with GM, approximately 18 million retail accounts as well. As a result, we will spend the balance of 2008 reinforcing the franchise around the five critical tactics I mentioned up front and those are the restructuring of our North American auto finance operations - that's well underway; streamlining ResCap, both in terms of headcount, as well as assets under balance sheet - once again, well underway; protecting and rating the value -- protecting and rating the value of GMAC Insurance through a redesign of the ownership structure which we've discussed; growing and leveraging GMAC Bank with its lower cost of funds; and, of course, driving renewals of GMAC and ResCap's bank lines and other critical funding sources.

We started 2008 with high expectations for GMAC and ResCap. Our efforts to date have started to generate results. Clearly, we still have a lot of work in front of us. With that, we'll open up for Q&A.

Thank you, Rob. Tonya, we're ready to take calls with investors. Can you remind the callers how to queue for questions?

(OPERATOR INSTRUCTIONS) Our first question will come from the line of Chester Luy with Barclays Capital. Please, proceed.

Are you there?

Chester, your line is open. Please, check your mute feature on your phone. Our next question will come from the line of Douglas Carson with Banc of America. Please, proceed.

Great, guys. Can you hear me?

We can.

Great. Thank you. I had a quick question on the liquidity. ResCap ended the quarter with I think $4.2 billion in cash. If you can help us with some color on why GMAC extended them a $750 million credit facility and they drew down $400 some odd million, if they had $4 billion in cash. Just trying to understand what the need for that was.

There are two parts to that answer, Doug, and the first part of that answer is the contributions to ResCap circled to a certain degree around the equity of that business. There's a covenant in certain lending agreements that we need to preserve to remain in the $5.4 billion, and, as you know, we closed the quarter higher than that. So that contribution was to preserve that. Having said that, ResCap's cash needs move up and down for the quarter. Some of that cash is in GMAC Bank which isn't always immediately accessible to the current cash needs of the line of business. So, having said that, the cash needs are up and down and there's a certain amount of volatility in the quarter that we funded to meet that. Jim, would you mention anything else?

Yes. I'd just say that the peak cash requirements are in our servicing advances. That occurs mid-month and we tend to have more cash available end of month. So there's a cycle to it.

Okay. Great. And then turning to GMAC's auto side. The 30 day delinquencies in the consumer book looked like they fell sequentially in North America by about 30 basis points and also globally. And I wonder, how does that compare to 60 day delinquencies? And what's forcing that positive change in delinquencies given the market seems so bad to everybody?

Two parts. Part of it I'll hand over to Bill Muir who runs that business. But we mentioned in the comments that the 30 day improvement was due to tightening underwriting standards repeatedly and that's what you're seeing come through. So it's a reduction in underwriting effectively in product mix away from the lower tier credit paper. And that's directly correlated with the reduction in delinquencies. So we've changed some tactic in our mix there. The second piece on the 60 day, I'll pass to Bill.

60 days, we don't report that. But it's been pretty stable and has not shown near the volatility that we've seen in the 30 day delinquency. The other thing that I would add to what Rob said is while we tightened up on our underwriting standards a little bit, the other thing we did is significantly expand how our servicing and collection activities during the same time period to try and get on top of this and it's showing a lot of benefits.

Great. And then, finally, the portion of the mortgaging servicing rights that have been pledged, is that something that you can share with us? And how much of that revolver is drawn now, if you can share that with us, compared to what you reported a couple weeks ago?

Sure. Jim, you want to talk about the MSR asset and how much has been pledged?

Well, it's a $750 million facility and we can talk to you about sort of as follow up with regard to exactly what the nature of those MSRs were. They were assets that were previously not pledged in any facility and so they were available in terms of supporting the line. We have not additional drawn on the line versus what was originally disclosed.

Okay. Alright. Thanks, guys. I'll let someone else get in the queue. I appreciate it.

You're welcome.

Our next question comes from the line of James Leda with Merrill Lynch. Please, proceed.

Good morning. Can you hear me?

We can hear you.

Thank you for taking my questions. I'll ask two of them. The first one, in the release you call out that in order to preserve liquidity and meet upcoming maturities, one of the options would be to potentially extend maturities. My question specifically is how much runway do you think that you need in terms of extending those maturities? And I guess part B of that question is, is this going to be a situation where you'll cross that bridge as you get to it, meaning that as each maturity comes up, you'll address it? Or should we think about kind of a certain period of time over which you anticipate the business stabilizing and a certain amount of runway that you would like to get yourself in that regard?

Two parts to that answer, James. First, on the liquidity -- on the broader liquidity and maturity side, our broader financing portfolio, as I mentioned in the comments, is under review and we're in dialogue with our various creditors. And so, part of that rematuritization or extension is part and parcel of that discussion and you have to expect that. Obviously, I can't offer any clarity on it. It's not just a "we'll deal with it when we'll get there". We have an organized strategy to deal with it and to approach it and that's well under way. I'll stop and hand it over to Sam Ramsey, our Chief Risk Officer, if he has any further comments he would add.

As Rob mentioned, we're talking with our agent banks about the various strategies that are available to us and clearly are objective as to ensure adequate access to funding in the current capital markets environment and in a scenario that could actually work. So, that is our objective and it is our intent to preserve the liquidity of the Company through those conversations and actions.

So, the comment regarding extensions in maturities, does that apply only to the bank loans or can we extrapolate that to the bonds that are outstanding as well?

We're not going to offer any clarity at this time. When we finally come to market with our global restructuring, that will be made more clear.

And the second question is a quick one. It's a follow-up on something Doug asked. With regard to that peak cash usage that was mentioned before, how should we think about the minimum level of cash that you would want to maintain at the ResCap ex-GMAC Bank level. Because as I read the slide, I think ResCap ex-GMAC Bank has about $2.2 billion in cash. I'm not sure if that's a low watermark but we're probably approaching it.

It's a little more than that. But having said that, we may have our internal targets for what cash we'd like to use there based upon kind of inter-month volatility but I'd be hesitant to share a figure publically on that. It varies and it will continue to vary as we work down that balance sheet.

Okay. Thank you.

Our next question comes from the line of Mark Alter with Credit Suisse. Please, proceed.

Hi. Good morning. Thank you. Couple of things. Unless I missed it in the beginning, what was the driver of the big swing in the commercial ops to a loss there?

On the other?

On the other. What's in other on the summary?

The big drivers in the other is largely our -- there are two pieces to it. One is increased funding cost at the center and you're seeing it aggregate there. It's effectively some residual funding costs. It's not pushed out to the units. And the other piece is the value of our 21% interest in cap market commercial mortgage and that's flowing through at a large loss where we had a significant profit in prior quarter same - prior year, same quarter.

A loss because of their own results?

Yes. Flow through of their earnings into ours.

Okay.

And it's immaterial. It's a material delta. We were at a significant positive a year ago and now we're at a negative.

Just to clarify, that reflects our 21% ownership interest in Capmark. They had a sizable loss for the quarter, so our 21% impacted -- that negatively affected our results. That was positive, as Rob mentioned, in prior quarters and years.

Is that -- I mean, is their business deteriorating? Or is that a one time thing? What do you expect there going forward?

We can't speak -- that's a minority equity interest and we can't speak to their performance?

Okay. Then in ResCap, versus the beginning of the year, I know a lot -- most of the secured funding expires this year. What's been the success year to date on extending or renewing those secured facilities? What's been the run rate?

I'll let Sam Ramsey talk to that.

We have continued to work with our lenders to provide adequate support for what is a shrinking balance sheet and anticipate that we will continue that success.

Are you happy with the success then, if I can ask it a different way?

We are satisfied with the success. Yes.

Okay. Just, last question, on the drivers of the retail losses, was it mostly what you're experiencing in the used car market versus the frequency? How would you divide the mix there?

Bill, do you want to talk to frequency and severity?

Sure. The -- if I look at the first quarter this year versus last year, there was a bit of frequency in the fact that we entered the year with a significant hangover -- a high number of delinquent accounts at December 2007 we kind of carried into the first quarter. So that was something that matured into losses in the first quarter. But the bigger reason clearly was severity, not frequency. If you look at the loss per unit -- new unit repoed in the first quarter, it was about $10,000 versus roughly $8,800 in the first quarter a year ago. So severity was the driver and severity, I think as you can imagine is being driven by weakness in used car prices primarily.

Great. Thank you.

Next caller?

Our next question comes from the line of Monica Keany with Morgan Stanley. Please, proceed.

Hi. Good morning.

Good morning.

I was wondering if you could clarify -- I know in the 10K you talk about the liquidity portfolio at ResCap which seemed to be a little bit different than what the cash balance was if you just backed out GMAC Bank. I'm wondering if you have that number on hand and what it was at quarter end?

We can't really address that question for you. You're asking more about liquidity less the cash balance at GMAC Bank? Is that what you're asking?

I know in the 10K you talked about liquidity portfolio which is basically the cash at ResCap less the bank, less what would be operating cash to maintain in the business segments to cover the timing of related outflows. I'm wondering what that number was at the end of the quarter.

That number at the end of the quarter looked like around $1.3 billion.

$1.3 billion. Okay. And at yearend that was $2.2 billion? Correct?

I believe that is correct.

And then in the press release, you talked about the potential for a secured line from GMAC to meet debt maturities. Were you referring to the $750 million that was just completed? Or is there potential to do more at the GMAC level to meet ResCap maturities?

Can you rephrase the question, Monica? So you're asking whether we're doing more at the GMAC level to address maturities at ResCap?

Meaning you talk about in the press release to meet the upcoming maturities there's the potential to have secured funding to be provided by GMAC and I was just curious, was that referring to the $750 million you just completed last week? Or is the potential to do even more?

There's always a potential to do even more. As we look at a broader funding solution that Sam Ramsey's team is attacking, every option is on the table for funding, for the broader GMAC ResCap enterprise.

Okay. And another question regarding - the rating agencies raised the issue regarding the departure of the independent directors. I was wondering if you had any comments regarding why they choose to leave at this juncture and are you close too any appointments in that regard?

What I can tell you is that there's an action plan to replace the independents. They've both served a long time and done great work and we're living with our plan to replace them.

Okay. Thank you.

You're welcome.

Our next question comes from the line of Angelo Graci with Merrill Lynch. Please, proceed.

Good morning. There's a lot of discussion about addressing some facilities and debt coming due. I was wondering if we can talk a little bit about the operating side of the cash flow? Can you give us some indication if you're able to achieve the turning out, if you will, of secured and unsecured funding let's say for the next couple of years? How should we view the cash needs on an operating basis at ResCap? Is there the ability to achieve closer to break even on an operating basis? How does the origination and sale of production and mortgages affect that outlook? If you could give us a little bit of color there on how to view the cash needs of the Company outside of the financing, that would be very helpful.

Without providing kind of hard dollars, what I would tell you, Angelo, is that we have a plan in ResCap to restructure that organization largely around conforming domestic products and we believe that can get both to an earnings or P&L profits position as well as a cash flow generative position. And that's all I'd address that with. I don't know if, Jim, if you'd add any color to that?

In addition to that, you can think about the business more being routed as Rob described before through the bank in terms of its origination and production activities and that the businesses outside of the bank will have a diminishing cash requirement over time.

Would it be fair to say that outside of the bank, given what you just said, that the sale or any sales that you can achieve of inventory outside of the bank would be material as far as offsetting any operating cash burn?

That depends upon what the advance rate is of the facility that's currently supporting it.

Okay --

But -- go ahead.

I'm sorry.

Angelo, do you have another question?

Yes. I have one more question. Countrywide also reported their results this morning. One of the items that they addressed in their earnings was provisions for representations and warranties. I was wondering if there was anything similar to that within the first quarter results and if you can quantify that?

Jim?

We have a provision for reps and warrants. I'm not sure that we call that separately but we'd have to check in terms of our disclosures vis-a-vis the Q. One thing to point out on page 29 of the deck, we did a reference to repurchase and other reserves that were about $33 million in Q1 of 2008. Those were down from the first quarter of last year as a result of the shrinking of the portfolio and the maturing nature of the portfolio.

I noticed that the MSR dropped during the quarter. Can you give some explanation as to what happened there?

A couple things. There was sale of some MSRs within the quarter as well as just the various valuation adjustments that are laid out as well on slide 29.

And looking at the cash balance, I'm assuming that was -- the proceeds were used to pay down I guess any secured debt against that? Or was there a positive impact from the sale?

I wouldn't jump to that conclusion on that. It was a small sale, several hundred million. And so, no, you can't make that conclusion.

Great. Thank you.

No problem. Next caller?

Our next question comes from the line of Ryan O'Connell with Citigroup. Please, proceed.

Great. Thanks very much. I just want to clarify a couple things. Could you tell us what the amount you have right now is of unsecured -- sorry, unencumbered mortgage servicing rights? I think several callers have tried on this. So, could you tell us after the $750 million facility that you recently set up, the first question is what's the amount of currently unencumbered MSRs that you could pledge to get additional secured financing?

Ryan, can we get back to you with that number? We don't have it to hand. But we --

Okay. That's fine, Susan. And then if we could just go to page 21, I just wanted to clarify a couple of things here on the liquidity chart. The inter-company secured loans of $600 million, I assume that's the inter-company financing for the resort properties -- is that correct?

Yes. That is correct.

Okay. And so is it fair to assume that at such time as that transaction goes forward and that loan is repaid, that's not really going to be a cash drain on ResCap, right?

Depends on what sale revs would be.

Okay, Jim. Fair point. And then down to the other component, fairly large number, the $1.2 billion, could you give us an idea what's in there? I assume some of it's the operating loss. But are there other components as well? In terms of the negative cash item there?

Again, it would've been in some cases changes in advance rates on secured facilities or pay downs on secured facilities.

Okay. Is there any way to give us some sense of how directionally that might move in the future?

No. Not at this time, Ryan.

Okay. Thank you.

Next question?

Our next question comes from the line of (Barry Groveman) with Deutsche Bank. Please, proceed.

Go ahead, Barry.

Someone asked a similar question earlier. What percentage -- since November, since maybe even October, what percentage of your secured securitization facilities with banks in the form or repos has been renewed to date? Would it be 75 - ? I'm looking just for a rough -

Yes. Barry, I don't have that exact percentage on the secured facilities renewals at this time. We can get back to you on it.

Okay. Also, on page 28 -- slide 28, you have held for investment, 1.5 moving to held for sale?

Yes. We mentioned that in the dialogue as $1.5 billion of it.

What type of mortgages are those?

Those were largely non-prime.

And some of that is in the write down or - ?

Some of that would absolutely be in the write down. As we move those assets out of help for investments, where the intent or docketing to sell to them, we marked them down on the way over.

Just one more question. The -- excluding the non-prime held and securitizations, I think you said 9.7 --

Right. Out of the 35. Right?

What else is in HFI at this point and sort of a follow-up on that, is any of those creating funding pressures with regard to aging provisions that you might have?

Regarding the aging provision, Jim, can you address that? I don't --

Well, we pay fairly persistent attention to that. There are facilities that certainly have provisions that as they age advance rates either lower or the products become ineligible but I don't know that there's anything particular precipitous that's there.

In terms of the -- in terms of refinancing them when the aging provisions come up, that's where I'm looking at.

That's just something that we manage as part of our normal process for what needs to be financed at ResCap and how we do it. We would include the aging of those products in our forecast. There's nothing there that has us particularly worried. It's included in our forecast and we've got the strategies we think we need to finance them.

Okay. Thank you.

Welcome. Next caller?

Our next question comes from the line of (Peter Plott) with Imperial Capital. Please, proceed.

Thanks for taking the call. Just a couple questions. I guess the first one is -- a previous caller asked about the unencumbered mortgage servicing rights, what's available. Would you have a number if we looked across the entire assets for both ResCap and GMAC after considering everything that's been secured thus far in terms of what you have that are available for securing as you look to extend your liquidity options both from GMAC and ResCap?

Yes. Peter, we actually do track unencumbered assets, obviously, because that's effectively dry powder for borrowing. That will be disclosed in the 10Q. We don't --

Fair enough. Second question is in regards to your 10K and in previous conference calls you mentioned, obviously, that one potential drain on liquidity would come from any margin calls. And obviously, you've done a very good job of shifting stuff, particularly the subprime to basically the held for sale category rather than the held for investment category. I was wondering if there's any concern on your part or anything that would lead to some significant requirements for liquidity due to margin requirements based on the different patterns of shifting from held for investment to held for sale?

I don't really think it's the patterns of shifting that's driving massive volatility in the collateral there?

It doesn't generally affect the funding facility in terms of our accounting definition. So they're going to look to the asset itself rather than how we've defined it as being for sale or for investment.

It's just valuation that will drive that up and down and we've watched the value collateral calls be 500 to $1 billion at a given moment but it's not predictive.

Okay. And then I guess lastly, obviously, since the credit crisis last year you've taken a shift in terms of underwriting more conforming loans and letting the subprime, obviously, be in more of a run off state. Obviously, using greater use, as you mentioned in your press release, of GMAC Bank. But just moving forward, is underwriting conforming loans going to be a strategic focus of ResCap? Or do you believe as -- when and if you come out of the credit crisis in a much stronger position that you could be moving backwards into the more higher margin subprime business? Because it seems like it would be a very difficult proposition to go up against the banks, particularly the way your ratings are, just doing conforming business going forward.

Right. We said two things in the presentation, Peter. One was that we would only underwrite product that we could distribute. So if that remains a guiding principal, then non-conforming product is not going to fit into that. Having said that, we have an incredible servicing platform at ResCap, in flexible and scalable, working at a fraction of its capacity now. So when the market for non-conforming comes back, I think we fully plan to utilize it. Jim, would you add anything to that?

No. I think that's very much the issue. What's available to us right now is our conforming distribution and what's eligible to fund more on a longer basis inside the bank and to the extent that we see a securitization market return, why we would gladly try to take advantage of that.

Peter, we're continuing to scale back, as we mentioned, the overhead in reach of that business until which time we'll revisit what kind of product we can originate, but for now it's products with prearranged distribution or distribution of one sort or another.

Thank you so much for your candid responses.

You're welcome. Next caller?

Our next question comes from the line of Brian Johnson with Lehman Brothers. Please, proceed.

Back on the global auto finance business, we've heard from some dealer checks and some other auto companies that there's a swing back to leasing in the US market. Could you comment on three things? One, have you seen that trend? Two, given what's going on with used car pricing, how comfortable are you with the residual assumptions in the new leases? And therefore, three, where do you expect this to go?

Okay. A couple questions in there and I'll answer some of it and draw on Bill Muir to answer some more of it. On the swing back to leasing, I'm not going to really comment on that trend but in your comments and in our volumes you can see we are -- we recognize leasing as a big part of our business. And it is. We have flattened that production largely. We've gone back to sort of a core base in that business, attendant with our appetite for risk. So that business, while dictated in part by GM subvention models, is largely flat for us for the time being. So I -- I really can't speak to broader market trends. And I'll draw on Bill on that in a moment.

On residuals, you know we're sitting on $33 billion of auto assets relative to our lease portfolio. We watch that asset very, very closely. We accelerate depreciation when we see that we need to continue to adjust the views, the value of the residual assets. We're aware that the value of residuals is under pressure in the market for a lot of reasons. We actually think that GM's residual values aren't as badly hurt as others may be. We have a broad mix of autos in our base and the length of the leases we operate is a little bit longer. There's a lot about our portfolio composition that gives us some comfort but we do watch things like vehicle index to watch where they're going and they are going down and they've been going down for six months. So, we are sensitive to it and I think you can expect there will be more adjustment downward for anybody in this business who has a large auto leasing portfolio. Bill, would you add anything to that?

Who is this? Brian?

Yes.

Hello. The -- I guess it depends on where in the country you're talking to dealers. Because a lot of that is regional. You may actually hear that from some pockets and not others. But the -- if you look at last year to this year, first quarter last year we wrote 135,000 leases. First quarter this year we wrote 136,000. So it's pretty flat. On an overall volume, this is in North America, it was similar. It was like 442,000 last year. We're down a little bit to 433,000. So there's really not been a mix shift, at least on GM's part. We have seen kind of consist flow of APR programs. There was a big push with that with GM in March. So, no. It's pretty -- it's actually pretty consistent.

And no evidence, what I would worry about, that competitors are using old ALGs to set a residual price which may not be reflective of where the used markets are actually clearing as the lease is written?

I can't talk about what other people do. We're always using the most recent ALGs that we can get and then we're always updating our expectations in terms of residuals with our depreciation policy and how we price the leases. So we're trying to stay on top of it. It shouldn't be a surprise to anybody what's happening with used car prices. When we look at our proceeds, our proceeds are down about 7% year over year. If you look at a comparable mix of leases. The Mannheim Index I think is down 5.6%. So we're tracking and it reflects a slightly higher mix in trucks in our portfolio which is heavily impacted by the gas prices. But if you look at some of the other big three competitors, they have even a higher concentration and are struggling with even more challenges than we are.

And one last question. Any evidence, and since you're both a mortgage company and an auto company, you can maybe answer this, that mortgage holders are becoming more aggressive in pursuing their deficiency judgments against consumers? That's a ResCap question. And does that therefore impact their ability of that consumer to continue to keep their auto loans current even if they've started the default process on their mortgage?

Brian, two things on that. The first is that we always have a view, wrong or right, that auto delinquency and losses trend safer or behind home, right? And for one reason or another, people need to hold on to their automobiles. That's a view we hold. Having said that, I can't address the deficiency judgment on the mortgage side. I guess I could ask Jim Jones if he has a view on that. Is that accelerating? Are people taking more action against us?

I don't know that it's particularly accelerating. We've had a view of pursuing people to the extent that they've not honored their contract and that they have the capacity to do so. But I don't know that there's any particular change in that.

Okay. Thanks.

No problem. Next caller.

Our next question comes from the line of David Andrews with PIMCO. Please, proceed.

I wanted to talk a little bit big picture in terms of your relationship between ResCap and GMAC. A number of years ago you had set up fairly separate companies with firewalls between them and, obviously, as ResCap has deteriorated there's been a lot of capital contributed to ResCap which somewhat blurs the idea of firewalls. You set up a forward flow agreement which is available to both entities but it really has different segregated assets. My question is, as you look forward, as you're trying to deal with the current situation, does it seem possible in your discussions and considerations of all your options that facilities that now are separately available to GMAC and ResCap may in some form or shape on an unsecured basis end up being wrapped into one? The credit differences between GMAC and ResCap are going to become less and less and or in fact the same.

That's a fair question, David. I think there are a bunch of issues in there. As far as going to one consolidated sort of umbrella set of facilities despite the existence of the firewall which, you're right, the operating agreement that drives that firewall in ResCap. We're really just not going to comment on that. That's a conceivable component of a broader bank restructuring that we talked about underway but any details on that will be available before too long. I can't speak to that. But those divisions do still exist. We have lenders on both sides. We have bond holders on both sides. And we see it as our responsibility to manage them all. And so I leave it at that. I'm not sure if there was another question embedded in there. You said something about going forward what would our behavior be?

It sounds like -- if I read you correctly, that's not necessarily out of the question but it may not be your first choice or preference.

I would just stay tuned on that one. There will be more data to come.

Okay. And then in terms of the new loan that's been asked a lot about, the mortgage servicing rights loan, I'm not sure what else to call it. If I understand, that matures in October of 2008. Correct?

That's right.

It's in a sense some sort of an interim bridge. Is it conceivable that that facility could -- and its debt and collateral be wrapped into a new potential bank facility?

Absolutely. There would be no reason to think that we would leave $750 million of LIBOR plus 200 paper hanging out there alone while we refinance the rest of the enterprise. So it's a fair assumption.

Okay. So that's available. And then, in terms of your purchases -- open market purchases in the first quarter of ResCap by GMAC, it appears to me that there's still $4 billion of unsecured obligations to some ResCap this year, that most of those purchases were for maturities beyond 2008. Why? Why not buy 2008 paper and release some of these short-term liquidity pressures on yourself?

You're right. We obviously spoke a lot about those buybacks and the contribution to equity, to ResCap of those bonds. Let me let Sam talk to you, what maturities we might've bought.

In terms of buying bonds in the open market, certainly supply is one driver of strategy. The other thing that we obviously look at as we decide what maturities to buy is what level of support was implied in the operations given the network covenants. So it's a complex decision process where we look at both what's available and what our strategy is going to be.

I would've thought liquidity would've been a prime driver irrespective of other considerations.

It's part of the equation.

Lastly, maybe Jim can help me a little bit. As I look through on slide 29, the various categories here of significant items which have obviously been the driver of costs over the last several quarters, it looks like the provision for losses which presumably is mostly for the held for investment risks seems to be moderating. The held for sale adjustments were large and that was expected. In my understanding that's mostly from an international book. Correct me if I'm wrong. And then in the loss of investment securities, obviously would've been the market changes in various obtained interests and coordinated tranches. As we look at those three buckets which seem to be generating the largest losses, what would be the best guess of expectations going forward? Not specifically numbers, but in broad based expectations. Can we expect that held for sale adjustments to likely decline as your held for sale book declines? Or do we still think there's pretty significant risks in that bucket?

Let me save Jim the response to that. We can't offer you predicative outlook on these significant items. They're large. They're often one-time in character. And that's why they're listed here. I think you've got generally the texture of what they are pretty close on right down to the credit residuals that were marked through loss of investment securities. You're right on the right track. But we're not going to give you an indication of where they go. I think we'd be shooting in the air for that. So unless you have any further questions, we should go on.

And our expectation is -- I guess at this point, when you get to another quarter you're going to have a new bank facility at some point, right? So the minimum net worth will probably end up being some sort of a new covenant, correct?

We would certainly like to not have that as a critical covenant in our list there, so -- it doesn't take much to imagine that, right? It's neither flexible nor dynamic with the way we run the business. But other than that I wouldn't offer any further color.

Thank you.

Okay. Next caller.

Our next question comes from the line of Michael Weinstock with Monarch. Please, proceed.

Hi. This is (Adam Sklarr) with Monarch. My question was actually just along the same lines as the gentleman before but a little bit less predictive and more just if you could dig into the line items specifically that he referenced on page 29, into that gain and loss on investment securities and maybe give us one addition layer of detail so we can really understand where those losses were coming from?

Sure. On the gain and loss on investment securities, some color on that would be the largest single part of that that's going to be split between our NAAO, North American Auto Operation and ResCap. Obviously ResCap's the largest piece at roughly $400 million of that animal. Within that, the domestic business RFG, our domestic mortgage operations business is over $250 million of that and the international piece is the balance. So the majority of the loss in investment securities, losses on credit residuals and retained bonds, is largely driven by ResCap. A small piece of it comes out of our auto operation and within ResCap it's the international piece which we call IBG, and our domestic mortgage business.

And then in a similar vein on the held for sale valuation adjustments, given your origination mix over the past few quarters, I was surprised to see a number this high given the fact that you've treaded more on the prime side. Can you talk about, just again, kind of in general, kind of color, in terms of what changed in the first quarter and where you kind of took harsher marks?

Sure. I'll give you a little piece of that and I'll let Jim give you some more color. The HFS marks of a total of $772 million, Adam, were that the UK was the largest piece of that at roughly $320 million, Europe at $260 million, and there was another roughly $200 million for our -- what we call our PIA or distressed asset pool in the United States. That's now docketed for sale. We talked about that moving into HFS. Jim, any other color you can give on that?

Yes. I would say that in particular, this is flowing from two areas, one of which is disposal of assets generated in the UK and continental Europe and the other of which is distressed asset operations in the US. As far as continental Europe and the UK are concerned, throughout the fourth quarter, we had still been able to do securitizations in Germany, Netherlands, and execute a number of whole loan trades in the UK at a better market tone than certainly what existed in the first quarter and we've seen further restrictions when we've responded to that in terms of our valuations. Distressed asset sales on the US side are pretty much the same story, these assets that we are not continuing to acquire so they are aging and therefore continue to be of less value over time.

Thanks. And one last question for me is just can you comment on both in the UK and in continental Europe it seems that we've kind of seen the lag in terms of changes in valuations of the different types of loans you're making over there. It seems to be kind of three quarters or maybe even a year behind what we saw in the US. Are you seeing the same type of trend where there may be quarter over quarter marks to be taken on those assets? Or do you think, based on what you're seeing in kind of April of this year that it was more of a one-time mark and the values there are holding up?

The only point I would add to that is you're asking about the HFS book a second ago, Adam. We've marked that book pretty aggressively. It's probably got a mark in the low 90s, if that. And so, we've aggressively reviewed these assets and one of the reasons we believe there is so much value locked in ResCap is because we've marked these assets aggressively. Whether there's more to come or not, I certainly won't comment on. But again, we believe the $70 billion asset base at ResCap holds value beyond what we're carrying it at. Jim, is this a fleeting thing in Europe or are we going to see further marks?

I really don't know. To a great extent we've stopped production there. And we're in an asset run-off mode. That's going to be very much dictated by what our counter party opportunities look like.

That leads me to one last question very quickly. Are you looking to -- is there a possibility of selling the platform in Europe since it's kind of in run off mode? And do you kind of think there would be logical buyers for that assets?

Adam, I think we said before and we also said this last quarter. We are open to strategic options regarding our international operations in general and we have advisors that are supporting us in that effort. If there was interest and value in some of our assets overseas, be they broad or individual, we would entertain them.

Thank you all so much.

You're welcome. Before we take the next call, Susan Shank wants to makes a note.

We would like to invite the press to queue up for questions as well. Tonya, can you remind the press how to get in the queue for questions.

(OPERATOR INSTRUCTIONS)

And as we're waiting for the press to queue up, we'll take two more investor calls.

Our next question will come from the line of Cyril Battini with Credit Suisse. Please, proceed.

Yes. Hi. Good morning. And thank you for taking my question. The first question is ResCap has about a $400 million cushion from its minimum net worth covenant. Can you discuss to what extent -- and this is because mostly of the support from GMAC. Can you discuss to what extent GMAC or Cerberus will continue to support ResCap and any plans you have to sort of mitigate tripping this covenant?

Sure. Cyril, the major issue here is the same as we stated last quarter which is that GMAC and its investors are committed to supporting ResCap to the extent it doesn't imperil the broader franchise. We believe we've not come to that point yet. And so we're committed to making it work. I also mentioned just a moment ago, we believe that $70 billion balance sheet has value beyond its carry and if we didn't believe and if we didn't believe the value in the servicing platform was of greater value then we wouldn't be standing by it. So you're absolutely right in terms of our propping up that covenant and we'll continue to do so as required as long as we're under these current financing agreements, as long as we think it's in the interest of our various stakeholders.

Okay. Great. And my second question, at the end of the earnings report, you outline four strategies to meeting your maturities. More secured funding from GMAC using your credit facilities, liquidating assets. Can you just maybe give us which preferences -- which one would you use first as opposed to second, third, and fourth?

That's a pretty simple answer. We have an inventory of assets, particularly at ResCap, that we would like to liquidate. We're not going to do it at fire sale values but we want to be thoughtful about how we liquidate them. That would always be the first choice in reducing obligations. We would go there first. And we have other funding sources and other alternatives lined up behind that to generate liquidity including expanded use of GMAC Bank which we're doing.

Alright. Thank you very much.

You're welcome. Next caller.

Our next question comes from the line of (Ruben Cuthberg) with Redwood Capital Management. Please, proceed.

Hi. Good morning. First question. On slide 18, you show the evolution of your known accrual loans and you show the adjustment for FAS159. Can you please refresh to us how should we use that table? What should we be comparing?

I'm not sure entirely what you're looking for except to say, Ruben, this is to give you a view on an apples to apples basis of how our base of non-accrual assets are of the total. So, all we've tried to do is give you a corrected view because we basically reduced HFI assets through the 159 one-time election at the beginning of 2008 by a base of roughly $10 billion. So, by reducing that number we give you a -- we want to give you a pro forma view without that number in it, of what the real percentage should be. And so you can see that 12.2% is a little more realistic compared to the 12.7%. We're just trying to give you a corrected pro forma view of that percentage.

Okay. Thanks. On the international loans, you sold, you took a loss of $682.5 million. Can you tell us what the face value of the loans sold were?

I can't provide you that information at this time.

Okay. And can you give us some idea on your held for investment portfolio, how many more international loans remain?

About $7 billion.

The HFI book?

I believe it's about $7 billion.

$7 billion less of our IBG assets within that book? That sounds about right.

Okay. And can I ask you for on the held for sale -- I mean, I assume you haven't originated -- it seems like you moved some held for investment back to held for sale and so how many international loans are in the held for sale side?

Within the ResCap environment where our March held for sale book is about $12 billion, it's about half and half domestic and international.

Okay. And I guess the last question, when we look at the income you make or the loss you take on the loans, it's sometimes hard for us to separate what's existing versus what's originated. Can you walk us through the margins you're making on the new loans you're originating?

We generally don't address margins by product on these calls. I'd be hesitant to share that with you. Obviously, profitability changes as the spreads available to us in the marketplace change. So they're going to change over the course of time and they'll be less than they might've been some time ago. But I'm not going to give you any more clarity at this time on margin performance or gain on sales.

Okay. Thank you very much.

Welcome.

Our next question comes from the line of Eric Selle with JPMorgan. Please, proceed.

Hi, guys. Getting back to Monica's question, what do you see as the likelihood that GMAC's going to provide permanent secured financing here? And on the same question, what's your confidence in getting these refi-ed with independent bank parties?

Sure. In terms of providing permanent secured financing from GMAC to ResCap -- was that your question?

Just outside of GMAC, getting that through the traditional banks. What's your confidence in doing that?

We've tried to give some indication that we're in the market, obviously, or we're in dialogue and we'll be in the market before too long. We really can't offer further color at this time. But I will say that we're encouraged by the dialogues with the banks. They've all been -- it's been very constructive and we're all committed to seeing GMAC and ResCap move on. I would offer that. There will be more clarity and more information in the weeks to come here.

Then looking past the refi, do you guys see having sufficient liquidity to run ResCap as a prime conforming underwriter in the long-term?

That's our view. Otherwise we wouldn't be committed to going back for more financing, if we didn't think it were a viable entity. Having said that, remember what we said about this being a conforming production entity. We're going under the pretext that it is a conforming shop unless we have prearranged flow or distribution agreements. And that's our shop and we'll scale the expense base to match it. So the answer's "yes".

And then just one question on that. Looking at the lease book on the auto side, used values are down, liquidity's tight. What drives the decision to grow leases today?

I think we talked to you a little bit about the fact -- in our comments and Bill's comments earlier that we're taking a very careful eye to growing our lease book and it is, as Bill mentioned, the units are dead flat year on year for the most part in terms of production. So leasing is an important part of General Motors' distribution and sales strategy. So you're not going to see that change. I will say if you look at the -- our base of leased assets at the time of the acquisition of Cerberus' interest in it, there was a carve out of $12 billion worth of leased assets that was left behind with General Motors. And so some of the growth you'll see getting to the $33 billion balance that we have now is a result of catch-up on that. But, no, we would see a very steady, careful, largely flat growth in our leased business until conditions change in the economy.

And then one final question. What drove the exchange date for the GMAC ResCap preferred? Is that January 1, 2009? Is there some magic reason behind that number?

No tremendous magic other than to say we wanted to push it out far enough to give ResCap the chance to continue to rebuild their footing and beyond a lot of the stated maturities. So this option that we have to convert that into the holding company's stock in the bank was far out enough to be fair to all stakeholders involved.

Okay. Thanks a lot for your time.

Next caller.

Our next question comes from the line of Alexis Renault with WestLB. Please, proceed.

Yes. Good -- I say good morning. Alexis Renault speaking from WestLB Mellon Asset Management. I have a of couple questions. I would like first to ask perhaps on outlook on the GMAC auto business. What sort of profitability you expect for 2008? Is there any worsening condition now compared to what you were seeing after the Q4 result? My second question relates to the new financing in the auto ABS market. How much did you issue in Q1 2008? And how much do you need to issue in 2008 to continue to do your business in the auto business?

Okay. I think there were four questions in there, Alexis. That's alright. Let me see if I can hit them. You asked for an outlook for GMAC for 2008?

Yes. Auto business.

Auto business. I understand. But you also asked for profitability for 2008. Was that just an auto question or do you want to talk about GMAC in its entirety?

I would like to know more about the outlook of the auto business.

We don't offer forward-looking outlooks for the most part. At a total view, Alexis, we did say we're still on targeting profitability for the total enterprise. So you can pull out the ResCap numbers and basically back into what that might mean for GMAC, albeit non-ResCap businesses. There's no reason to think that they wouldn't be profitable. They're profitable now for the balance of 2008. And obviously ResCap is the critical lynch pin in the equation about getting profitability going forward.

Having said that, you also asked about new auto ABS finance. There was one securitization in the first quarter, Alexis, for a little over $200 million -- it was my recall on it. What was the total amount? -- billion? At LIBOR plus 175 and advance rates of 94.5 is my recall on it. Sam?

We did one transaction in the US that Rob just mentioned. We also did a $270 million deal in China. I believe that was China's first public market securitization. And the second part of your ABS question was what do we need to do over the remainder of the year. We obviously have access to a great deal of alternatives with regard to the financing and distribution of our paper. We have significant flow agreements that are committed. We also have significant conduit arrangements with banks as well as a variety of parities that we work with on one time or whole loan transactions. So I wouldn't put a number out there and say, "This is what we have to do." We will selectively access the public markets as we think that that is a prudent option for us relative to our other options.

So one ABS transaction in the United States and one in China for the first quarter.

Okay. So you can live with your sale and financing without having to issue on the ABS market?

The ABS market is still important to moving our auto collateral for sure. We do have two very large flow agreements in the United States for auto paper. I'm not going to say whether we live with or without ABS securitization on the auto side, but it's certainly a critical part of our business.

And what -- when do you expect to come back to the market about these important clients for GMAC and high securities? One or two weeks? Or by end of June?

Sam, the question is when do we reenter the ABS market?

I believe -- were you --

Bank line market or ABS market?

Bank line?

Bank line.

What we say, as we've disclosed before, we have significant maturities, bank facilities at both GMAC and the ResCap level in early June. So obviously any activity around those needs to be concluded in that time frame.

Thank you very much.

We have time for two more questions.

Next caller.

Our next question comes from the line of (Joseph Scats) with Goldman Sachs. Please, proceed.

Hi. Good morning. It's actually Louise Pitt at Goldman Sachs. I just had a question for you with respect to the provisions and the allowance that you have now for the HFI book at ResCap. Can you just go a little bit into why the provisions sell so much and why the allowance is roughly about a third of what it was last year now?

Are you asking about one particular side of the equation or just in total?

Well, the provisions in the quarter and then the allowance at the end of the quarter.

The allowance at the end of the quarter, we actually have different things moving on different sides of the equation. So the balance sheet answer obviously is going to be driven obviously by auto and ResCap separately. On the auto side of the equation, again, that provision's expanded a little bit. ResCap, it's contractive because we have reduced that balance sheet dramatically and you'll see that. I want to say yearend it was $2.4 billion and now it's down to roughly $2.1 billion was my last look at it. All the reduction, $1.4 billion is auto. All the reduction is attributable to ResCap. So as we've scaled that balance sheet back, priced it at $7 billion less than it was at yearend, so goes the provision. And also, we have a less risky base of assets which will require less providing for as well.

But basically the movement of the $1.5 billion of subprime is the main reduction in the HFI book or have you also reduced the primary conforming products in the second line product as well. Because that seemed like a relatively low level of provisions for the risk.

No. It's the reduction in the riskiest assets in that book is driving that provision down.

Okay. And will the Q have more details as to what the provisions with respect to the different products in the HFI portfolio?

My understanding is it will have more detail on that.

Yes. With regard to provision year over year, to you question, you need to keep in mind a couple things. You'll recall last quarter we talked about, as Rob mentioned, overall the balance sheet has decreased substantially year over year. Part of that's due to the deconsolidation of assets we talked about last quarter that reduced provision as well as in the current quarter. You've got about $10 billion in HFI assets. So we elected 159 that are now marked through the P&L that don't go through the provision lines. So that's impacting it as well.

That's great. Thanks a lot.

Other questions, Louise?

Nope. That's it. Thanks.

Next caller.

Our next question comes from the line of (David Knutson:) with LGMA. Please, proceed.

LGMA. Yes. The questions primarily were answered. I did have a question regarding the -- and this goes back to a question about an earlier caller regarding the MSR loan. Given the current firewalls, is it conceivable that in an exchange or in some kind, you mentioned a liability management alternative? Could you provide collateral or could GMAC provide collateral that it has to ResCap creditors? Or would the current structures forbid that kind of transaction?

My understanding is that the current structures would forbid that. We wouldn't be providing GMAC collateral crosswise to borrowers against ResCap. Having said that, there will be more clarity in time, very shortly, when we go to market with our broad restructuring. And you'll get more at that time.

One last question that also regarding the repurchase -- are you bumping up against any creeping tender rules on series of securities that you've been buying back? Do you have room left to do more?

No. We haven't bumped up against any dead ends there and we can go back in the market from time to time and if we so chose and it makes sense to us. So, no.

Thank you.

You're welcome. Next caller.

Our next question comes from the line of Dave Miller with Elliott Associates. Please, proceed.

You mentioned a low 90s mark on your held for sale portfolio. Just by way of clarification, was that in reference to the European portfolio or to the Company's entire portfolio?

No. That's a weighted average mark across roughly sort of $20 billion -- no. That was just ResCap. I'm sorry. And that weighted average mark there was $12 billion-ish of HFS base. So it's $90 billion including both international and domestic.

And what's the weighted average FICO and LTV in each of the HFS and HFI buckets?

That's not information we generally give out on that asset.

What is the contingency plan to address the potential failure to receive a waiver on GMAC Bank from a funding standpoint?

Good question. As we disclosed in that, we're operating under that waiver, under a temporary license there. And as I said in my comments, we're in constructive discussion with the FDIC staff and we will -- we are dealing with that. We have contingency views that use other sources of financing if need be. We can do structural changes in the way we treat the GMAC Bank for status and other animals like that. We have other sources of financing including our unsecured revolvers and other financing sources in general. We're going tactic by tactic to continue to renew that and make it a permanent animal. But we're ready should it not come to fruition.

You've mentioned on several occasions the notion of a broader restructuring. By broader, do you mean restructuring that would encompass both GMAC and ResCap? Or just - ?

Yes.

Yes?

Yes. Meaning a restructuring of the debt profile, the broader debt profile of both companies.

The recent resignation of the two independent directors, I guess without explanation and sort of suddenly, is a recently remarkable coincidence. What would the Company say -- obviously, they didn't say anything about why they resigned. What does the Company have to say by way of clarification to investors as to why that happened?

I wouldn't read anything into that and expect any signaling of it. Those two -- as I said before, those two independents have been with us awhile and have done good work and I think they decided that they wanted to move on. We're in a process to put two more folks in place there and I would leave it at that. There's no messaging that I can see.

Right. You mentioned the possibility of extending maturities or modifying debt. Obviously those are things that are very rarely done because there are certain capital market implications. What would sort of weigh on your decision as to whether to refinance as opposed to extend debt maturity?

Let Sam take that.

I think what Rob was referring to and I'll let him correct me if I'm wrong, when he was talking about extending maturity, as I said, we have -- we have lines with our banks that roll in the beginning of June. The 364 day unsecured revolver at GMAC, the similar facility at ResCap, the commercial paper backup lines for our asset backed commercial paper program at GMAC. And we have a significant number of bilateral lines both at ResCap and GMAC. And when we talk about extending maturities, we're talking about the maturities at those facilities.

I guess how would you think about the decision of whether to extend the maturity by a handful of years as opposed to refinancing that facility with a new facility that would have a maturity several years out?

As Rob said, we are looking at all of our options. We're working very closely with our agent banks and putting together what we believe is a proposal that provides both adequate liquidity for our operations and at the same time addresses the market environment in which we're operating.

Is it your expectation that any accommodations that the banks may be willing to make would be conditioned upon actions of other stakeholders of the Company?

Can you repeat that one?

Would you expect that any accommodations that the banks maybe willing to make would be conditioned upon certain actions or cooperation of other ResCap stakeholders?

I would not have any comment on that.

Thank you. That's all my questions.

Terrific. Thanks, everybody who joined us on the call today. We appreciate your support and we're very glad that you joined us for the call. We will be holding these calls every quarter and you can continue to find information about GMAC and about our scheduled conference calls on our website at www.gmacfs.com. Thank you. And thank you, operator.

You're welcome. This concludes the presentation. You may now disconnect and have a great day.