Ally Financial Inc (ALLY) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2009 GMAC Incorporated earnings conference call. My name is Ann, and I will be your coordinator for today's call. (Operator Instructions). As a reminder, this conference is being recorded. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session following the presentation.

I would now like to turn the presentation over to Mr. Michael Brown, Executive Director of Investor Relations. Please proceed, sir.

Thank you, Ann, and thanks, everyone, for joining us as we review GMAC's fourth-quarter '09 results. You can find the materials we will reference during the call on the Investor Relations section of our website, gmacfs.com.

I'd like to direct your attention to the legend on the second page of the presentation regarding forward-looking statements and risk factors. The contents of our conference call will be governed by this language.

This morning, Michael Carpenter, our CEO, and Rob Hall, our CFO, will cover the Q4 2009 earnings review. After the presentation portion of the call, around 30 minutes will be set aside for questions from investors, analysts and the press. When we reach that portion of the call, the operator will let you know how to queue to ask a question. To help in answering your questions, we also have with us today David DeBrunner, GMAC's Controller.

Now I would like to turn the call over to Michael Carpenter.

Good morning, everybody. Before I turn it over to Rob Hull to take you through the details of the numbers for the quarter, I wanted to kick off the call with just a few comments on the overall direction of the Company and acknowledge some of the major steps that were taken in 2009.

I think as you know, I joined the GMAC Board in May of last year and became CEO on November 17. So I have the perspective of serving on the Board for at least part of last year, and I can say that 2009 -- and this would be a slight understatement -- was a transformational year for the Company.

Part of that transformation was establishing when I came onboard a more focused set of strategic objectives to serve as a roadmap for the organization going forward. And I would like to restate those objectives for you.

Firstly, in terms of the future of the Company and the future focus of the Company, is to capitalize on the strength of our position in the global auto finance business and develop the opportunities there by becoming a market-driven competitor, transitioning from being a captive and being known for innovative programs for dealers and consumers, increasing our market share and diversification, and also becoming a low-cost and a high-service competitor. I think we have a very strong franchise, a franchise that still has a lot of opportunity contained within it.

Secondly, to improve our access to the capital markets, to reduce our cost of funds, which is obviously important in a business like this, and ultimately to repay the US Treasury investment as soon as we can.

Thirdly, to fully transition to a bank holding company model. Fourthly is to improve the liquidity of the Company and its capital structure by building a stable base of funding at Ally Bank, driven by a strong and unique value proposition for retail banking customers.

And lastly, and by no means least, is to fully resolve the challenges related to ResCap on the legacy mortgage business to minimize its future impact on the Company and its prospects.

I think we've made significant progress towards these objectives during the year in several important areas of the business, including the auto business, our capital liquidity positions and, of course, the numerous year-end actions related to the mortgage business that we've talked about before.

As we go forward in 2010, you should measure us against achieving the following objectives. One, are we strengthening our auto franchise as we go through the year? Two, are we continuing to risk reduce our mortgage business? Three, are we accessing capital markets, improving liquidity, capital structure and cost of funds? My expectation is that you will see steady progress month by month, quarter by quarter on all of these areas.

With that introduction, I hand it over to Rob Hull.

Thanks, Mike. While we clearly had a challenging year from a financial results perspective, we did make strides toward achieving the objectives Mike just mentioned, and we are now focused on profitability for 2010.

As this marks my eighth quarter at GMAC, I will confirm that the progress for 2009 has been transformational. In '09, we reignited our partnership with General Motors, and we added Chrysler, which has begun to diversify our originations and profit base. Our auto business returned to profitability in 2009 and had pretax earnings of around $1.7 billion for the year.

Our capital position improved thanks to substantial investments from the US Treasury beginning in December of '08 and culminating in the $3.8 billion we received in the fourth quarter.

Along with capital, our liquidity profile also improved, as we generated $11 billion of net deposit growth, issued $7.4 billion of TLGP debt and reentered the ABS market with over $1.8 billion in new funding. We also rolled out the Ally brand, which has received strong customer response, and the majority of our new originations are now funded at the bank level through deposits and other cost-efficient sources. And as we announced at the beginning of the year, we've taken the critical steps to fix our legacy mortgage issues.

Not only do these actions minimize the risk of further earnings impact, they also provide us with more flexibility to explore strategic alternatives here.

Okay. So let's turn to some highlights of our financial results, starting on slide four. In the fourth quarter, losses associated with last month's strategic mortgage actions were the big driver of the headline loss of $5 billion, but let's look at some of the other key results.

Net financing revenue was up 6% from last quarter, due in large part to remarketing gains from our lease book. Our loss provision numbers increased significantly this quarter, primarily from our mortgage actions. Our total assets declined again this quarter as several of our legacy portfolios have been sold or are in runoff mode.

On the capital side, our Tier 1 ratio was 14.1%, and we continue to be well above the regulatory definition of well-capitalized.

We also want to highlight some of the notable items impacting the quarter. Approximately $3.3 billion of our loss was related to the year-end mortgage actions which we discussed in January. We expect that these steps will minimize the impact of future ResCap losses as we now move riskier components of our book to held-for-sale and mark them down to around $0.41 on the dollar.

We remain focused on mortgage repurchase claims, and this quarter built our reserve, resulting in a $573 million charge for the period. We had around $300 million of amortization expense of the OID, or original issue discount, from our December '08 bond exchange. As you will recall, this is a non-cash item hitting our interest expense line that will continue to hit our P&L and capital, but will diminish over time.

There is continued stress in our legacy Nuvell subprime auto book, and we've increased our allowance accordingly. This portfolio is winding down, and we would expect to see expense decline over the next 12 months with it.

We made some one-time changes to our valuation assumptions on our MSR, which had an unfavorable impact. As you know, the value of this Level 3 modeled asset fluctuates over time.

We continue to wind down certain international auto operations, which generated $118 million of losses in the quarter. In addition to those having an impact on pretax earnings, we also booked a valuation allowance on our deferred tax asset. This increased our net loss by about $1 billion. As we demonstrate earnings, we will be able to release this reserve.

Before I begin with segment results, it is important to explain the change we made to segment reporting on slide five. The revised segment results reflect the Company's management of funding and interest rate risk at the corporate level, using a funds transfer pricing, or FTP, methodology for the majority of the auto and mortgage ops. The methodology insulates our business segments from interest rate volatility, enabling them to focus on serving customers, rather than managing interest rates. The FTP system assigns charge rates and credit rates to classes of assets and liabilities, respectively, based on expected duration and the LIBOR swap curve, plus an assumed credit spread.

The net impact of the FTP methodology is captured in the Corporate unit. We provided a comparison at the bottom of the page to demonstrate the impacts of the revised segment view. Just for clarity, FTP has been fully implemented in our North American operations, while only partially rolled out in International ops, insurance and mortgage ops, which will be complete by year-end.

All right. Let's move on to performance by business segment on slide six. As we walk through the segments, I will focus on results from continuing operations for Q4 and prior quarters. North American Auto had pretax income from continuing ops of $369 million, for the fourth consecutive quarter of pretax profitability. Conditions stabilized for this business in '09, as new car sales and used car values normalized from their lows.

International Auto ops had a pretax loss this quarter, primarily related to wind-down expenses as we further streamlined the business. Nearly 85% of our new International op originations are now focused on five core countries, where we see the best opportunity going forward.

Insurance has been streamlined to focus on dealer-related products and had $86 million of pretax profit for the period.

Mortgage ops had a pretax loss of $4 billion for the quarter, driven by the marks associated with moving assets to held-for-sale and building the repurchase reserve, which we mentioned. We expect that the majority of the losses associated with legacy assets are behind us.

Finally, Corporate and Other had a pretax loss of $767 million, largely stemming from OID. Note that as part of the Corporate and Other line, $349 million related corporate treasury activity, which includes the funds transfer pricing methodology we implemented.

I want to mention that during the quarter, we have further isolated certain non-core International Auto, Insurance and Mortgage businesses as discontinued, and will begin to report them separately from the primary segment information. We have more details on discontinued ops on slide 23.

As a matter of clarification, when I use the term wind-down, it refers to businesses and runoff, but still in continuing operations, which are separate and distinct from those classed as discontinued.

Let's turn to slide seven and review the highlights of the Auto business. Global Auto includes both our domestic and international auto finance businesses, as well as our insurance business. With another quarter of profits, we are encouraged by the performance of our core businesses as we've seen normalization from an origination and performance perspective.

The results of our core businesses were dampened by wind-down costs in International, as well as provision expense from our runoff US subprime book, which I mentioned before. You can see on the bottom left that we are continuing to deploy the capital we received, and our $8.2 billion of consumer originations are up again this quarter.

On the bottom right, you can see our asset base had another slight decrease, as our book is running off faster than new originations can replace it, the result of lower industry volumes over the past year.

On slide eight, we focus on our North American segment, which, as you know, we call NAO. The US market was down approximately 13% with the end of the Cash for Clunkers program in Q3.

GM, whose market share was up slightly in the fourth quarter, remains a critical partner for us and the largest portion of our auto originations. Our GM retail penetration was down slightly, but well above the depressed levels in the fourth quarter of '08.

Results continue to improve with our new OEM partner, Chrysler. Our retail penetration nearly doubled from Q3, and we originated around $1 billion of retail loans and leases in the quarter.

Regarding wholesale, we've completed the onboard process of Chrysler dealers and approved nearly 94% of the almost 1500 Chrysler dealer applicants. Our wholesale penetration of 77% rose from the third quarter and we now have approximately $4 billion in outstandings with Chrysler dealers.

On the upper right of slide eight is our US remarketing data. That is what we are getting at auction when we sell off-lease vehicles, shown as a percentage of our estimate at the time we wrote the lease. The green line shows used-car prices are down slightly from last quarter's high, but remain well above Q4 '08 and seasonal trends.

Because the sales proceeds have exceeded our estimates, we have continued to benefit from strong remarketing gains in the fourth quarter. Limited supply and increased demand continue to fuel the used vehicle prices. We've seen a recent increase in leasing activity across the industry and expect this to continue. On slide nine will, we will review how these trends affect the North American income statement.

Despite a shrinking asset base and a lower gross revenue, our net financing revenue increased this quarter due to both lower interest expense and less operating lease depreciation, fueled in part by strong remarketing gains.

Our provision for loan losses jumped because of the $262 million provision for the legacy Nuvell subprime book we mentioned before. We stopped originations in Nuvell in March of last year. Excluding the Nuvell provision, the overall NAO provisions have normalized.

Nuvell was a separate subprime platform we decided to wind down due to funding and operational constraints in the unit. We've now centralized the full spectrum of our underwriting and servicing in auto under North American auto operations.

Over the course of '09, proceeds from the rise in used vehicle prices drive more than $500 million of gains to the bottom line. On slide 10, we will discuss International ops, which, as you know, we call IO.

As we've streamlined operations over the past year, our International segment is now primarily focused on five main countries where we see the most opportunity. You can see them at the bottom of the page. Germany, Brazil, UK, Mexico and China are the countries in our IO footprint where both GMAC and GM have very strong positions, and GMAC can generate acceptable returns for our shareholders.

As a result of this sharpened focus, this quarter we reclassed an additional eight operations as discontinued, and these will be sold or wound down over time. IO now has 36 continuing operations, 14 originating and 22 in wind-down. We also have 11 total in discontinued operations.

The table at the bottom of the page shows the $1.3 billion, or 85% of IO volume, coming from the core five countries. We are seeing particularly strong originations in Brazil and China, and see potential for growth in both places.

Funding conditions are improving overseas, particularly in Latin America, where we were able to do our first Brazilian wholesale securitization of roughly $120 million in receivables.

Okay, on to the IO income statement on slide 11. Net financing revenue was steady quarter over quarter and higher than the fourth quarter of '08. However, several factors led to $146 million pretax loss in this unit.

Consumer provision expense was higher quarter over quarter and year over year, largely driven by expected losses in Mexico and Colombia. $55 million of losses on auto loans were driven as we moved some European loans to held-for-sale. In conjunction with our efforts to wind down non-core operations, we have $63 million of corresponding wind-down and severance costs which flow through the net interest expense line.

On slide 12, we address global auto delinquencies, and you will see they are relatively flat versus third quarter and higher from the fourth quarter a year ago. While our overall portfolio delinquencies were flat, if you strip out the Nuvell subprime book, our delinquency percentage is 2.6%, which is actually a substantial drop from earlier periods and encouraging. You will see Nuvell makes up about 38% of the delinquent NAO balances, but only makes up around 12% of the total NAO portfolio.

We are still cautious about delinquencies given overall economic conditions, but are encouraged by overall trends and expect further normalization, particularly as Nuvell runs off.

Slide 13 shows our global losses are higher from last quarter. Similar to the story on delinquencies, which are generally predictive of losses, Nuvell is having an outsized impact on our loss numbers. While delinquency levels have stabilized across the whole pool, we are seeing higher roll rates, particularly in Nuvell.

Our overall net loss rate was 3.6%, which is up versus historical levels. You may remember in the third quarter we had an artificially high net loss due to implementation of FFIEC charge-off policies.

The top right chart shows that North American loss severity per vehicle rose approximately $350 quarter over quarter to around $9,600, although it remains favorable to prior year and it helps improve our net loss rate overall.

Slide 14, we provided our coverage ratio or credit allowance as a percentage of assets. Both NAO and IO coverage ratios are up this quarter. Importantly, more than 50% of the end of year North American allowance balance relates to Nuvell. While our reserves continue to reflect weak economic trends, we would expect our coverage ratios to moderate as Nuvell winds down, and if we start to see an improving unemployment picture.

On the commercial side, our coverage ratios are relatively flat but remain elevated relative to prior years, as the number of dealers in a stressed or wind-down situation, both domestically and internationally, exist.

On slide 15, you can see the results of our Insurance segment where we worked hard to streamline our focus on dealer-centric products, like extended service contracts and dealer inventory insurance. [Pretax] income for this business has remained steady despite its shrinking size; positive performance in the investment book is a key driver. And as we've continued to prune and sharpen this segment, we've placed our UK property and casualty insurance business into discontinued ops for the quarter, much as we did with our US property and casualty business last quarter. Written and earned premiums were slightly lower as a result of lower inventory levels and industry volumes.

All right. Let's turn to Mortgage Ops on slide 16 and 17. Remember that mortgage ops includes the ResCap LLC legal entity, plus our other retail mortgage platforms at Ally Bank in the US and ResMor in Canada.

Our Mortgage Operations experienced a pretax loss of $4 billion, as I mentioned at the outset. It was driven by the $2.6 billion fourth-quarter marks from continuing ops and $573 million of repurchase expense that we announced on our conference call in early January. These actions strategically helped GMAC in many ways. First, they help protect GMAC from future ResCap issues. They position GMAC for improved financial performance. And last, they enable GMAC to maximize strategic alternatives for ResCap and the mortgage business.

The year-end actions also improve the credit quality stats of our remaining balance sheet within Mortgage Ops. Our HFI book has been more than halved to $12 billion, with roughly $10 billion at Ally and the balance at ResCap in the form of on-balance-sheet securitizations. ResCap's total balance sheet has been significantly cut to $19 billion from a high point of $140 billion back in '06.

Our non-core commercial mortgage portfolio has been wound down from about $1.7 billion to approximately $300 million.

On slide 17, you can see Mortgage Ops had strong originations this quarter. We are pleased. $18.1 billion is nearly a 15% jump from the $15.9 billion originated in the third quarter due to higher overall market volume. Domestically, purchase originations were 34% of the total, while the remaining two thirds were refinancings. Similar to last quarter, originations were 98% concentrated in conforming and government loans, which we distribute to the agencies.

We also continue to pick our spots in the prime jumbo space, and originated a very limited amount of these loans in the quarter and held them on balance sheet. We are the fifth-largest servicer in the US, and our primary servicing portfolio has been pretty steady this year. Obviously, the majority of this book is serviced by GMAC, but previously securitized or sold to third parties. As a servicer, we continue to participate in the Government's Home Affordable Mod Program, and have started over 32,000 trial modifications and executed nearly 10,000 permanent modifications.

The mortgage income statement is on slide 18. Net servicing revenue, which is a combination of servicing fee revenue and the net valuation and hedging of our servicing asset, declined this quarter from the third quarter. The decline was primarily the result of higher payoffs and negative hedge results due to hedge counterparty limitations.

The gain on sale line declined from last quarter as a result of product mix, but core business margins remain very healthy, and the gain was favorable versus the fourth quarter of a year ago.

Provision for loan losses rose dramatically, as we moved a significant part of our riskier loans from held-for-investment status to held-for-sale, and we took the significant marks in the process.

As I mentioned, one of our large numbers driving the mortgage P&L this quarter was the $573 million of expense we set aside for repurchase reserves, shown in the notable items section at the bottom of the page.

Let me take a minute to just talk about this key topic. The mortgage industry has seen a material rise in claims for breaches of reps and warranties. Based on the additional expense this quarter and expected trends, we've now built up our reserve liability for future losses to $1.3 billion.

Our reserve was sized based on many factors, such as loan characteristics, home price expectations, general market behaviors of counterparties, as well as specific discussions we have with counterparties in the industry. We are extremely focused on the issue. We discontinued our low doc loan programs back in 2008. And we've taken aggressive steps to minimize further earnings impacts.

The latest quarterly mortgage coverage ratios are on slide 19. Since we reclassed several pools of mortgages in the fourth quarter as held-for-sale and marked them down accordingly, we no longer hold an allowance against those loans. As a result, you can see our consumer allowance declined in the fourth quarter. However, our coverage ratio still increased, as we built our allowance around regulatory input, macroeconomic uncertainty and continued stress within the prime mortgage area.

On the commercial side, our coverage ratio declined this quarter, as we resolved the majority of our non-bank, non-core assets.

The remaining $2 billion of loans here are largely high-quality warehouse lines from Ally Bank's correspondent lending operations.

Let's turn to slide 20, and we will walk through the composition of our remaining held-for-investment residential mortgage book. We started the quarter with around $21 billion of carry or book value in the HFI book, split between the ResCap legal entity and Ally Bank. As a result of the fourth-quarter actions, around $6.5 billion of this moved to held-for-sale, and was significantly marked down.

We also moved an additional $1.7 billion of primarily securitized international loans to discontinued ops, and have normal course amortization and other activity of around $1.2 billion. That leaves us with around $11.8 billion on the books as HFI loans.

The $1.8 billion in ResCap is primarily loans securitized in nonrecourse transactions and therefore bears limited, if any, further economic risk to us. The $9.7 billion at Ally is the remaining exposure from a credit perspective, and we've included some additional details on the characteristics of that portfolio below.

As you can see in the table at the bottom of slide 20, the credit quality of the remaining book at Ally is substantially better now than the pool we transferred to HFS and marked down. The percentage of second liens in the remaining Ally loans is approximately 19%, and 30 plus delinquencies have dropped to 3%. The average refreshed FICO score is around a high of 725, and average LTV has dropped to 96%. Finally, we reduced exposure in the remaining Ally loans to some of the more challenged geographic regions.

On slide 20, we provide you with teardown of the ResCap legal entity balance sheet, as we did in the investor call in January. The point here is that out of the $19 billion left on the balance sheet, around $12 billion is what we classify loosely as cash accounting and other less value-sensitive assets.

Half of the remaining $7.3 billion of the next grouping is the asset base that was marked down to around $0.40 on the dollar in December. Another $2.5 billion of the $7 billion relates to MSR values, which are marked to fair value, as you know, and the remaining line items are all similarly carried at fair value or at net realizable value.

On slide 22, you will find Corporate and Other with a pretax loss of $767 million for the quarter. As a reminder, Corporate and Other includes the commercial finance business, our resort finance business, OID expense and treasury activities, such as asset liability management and the residual impacts of our FTP system.

As a result of realigning our Corporate and Other reporting around FTP and the economic capital model, this segment now centralizes corporate treasury activity, as I mentioned, and also includes our commercial finance business and investment management. The biggest items here are net financing loss, which is largely the OID, and provision for loan loss from our commercial finance division.

Slide 23 provides additional detail on our 15 businesses classed as discontinued ops. As we narrow our focus, 11 additional businesses were added to discontinued ops in the fourth quarter, primarily from many of our overseas operations. And you can see them listed here. We took a significant hit in the fourth quarter from the losses associated with these businesses, but clearly they will be winding down or sold over time.

On slide 24, we detail both our cash balance and liquidity sources. At the top of the slide, you can see that our cash balance increased around $600 million this quarter. The primary driver of the change in our consolidated cash balance was the $3.8 billion of capital received from the US Treasury to conclude the ESCAP process.

The table on the bottom right lays out the available liquidity at the parent company. We've defined available liquidity here as cash, highly liquid, unencumbered securities, committed borrowing capacity under various facilities and our forward flow commitments. Using that definition, total available liquidity at the end of the quarter was $31 billion, of which $12.5 billion is available based on current collateral.

We increased our availability under our secured, committed facilities as we paid down drawn balances. We expect to reenter the unsecured market this year at the parent company level as conditions in that market have improved. You may have seen we recently received some upgrades from the rating agencies, acknowledging the progress we've made during the year, which also helps our ability to tap this market.

On slide 25, I will take a minute on other liquidity sources, including Ally Bank. We've continued to grow our net deposits despite some tough headwinds in the market, with more customers/investors seeking higher yields in the capital markets. We recently added a checking product to our suite and are focused on continuing to grow the quality as well as the quantity of our deposit base.

Our cost-efficient deposit base has supported our consumer lending efforts, as we are now funding or pushing approximately 60% of our new originations through the bank level. You can see the breakout of funding composition at Ally Bank on a pie chart in the lower left corner. We expect to see the securitization and retail deposit portions of that pie chart grow in 2010.

Okay, on to (technical difficulty), slide 26. Our Tier 1 ratio declined just a little bit to 14.1%. While our capital levels were bolstered by the US Treasury investment from the second part of the stress test process, we absorbed fully the $5 billion loss from the quarter and paid nearly $500 million of preferred dividends, which impacted our final common equity levels.

Regarding the adoption of FAS 166 and 167, we expect to put back approximately $7 billion of auto and $13 billion of mortgage assets from off-balance-sheet securitizations onto our balance sheet in Q1. The ultimate impact from this accounting change will be affected by potential strategic actions on the mortgage side.

With that, let's conclude on slide 27, with our 2010 focus and what you can expect from us at GMAC going forward. We will continue to narrow our focus on our core businesses, specifically the auto finance platform and improving operating performance there.

We intend to demonstrate access to both the unsecured and ABS markets as conditions have improved for us to tap these markets. We will continue to build a more robust deposit base, as Ally Bank is a key focus of our strategy.

We are focused on driving profitability, and will be looking harder than ever at both the revenue and cost side of the business. We'll explore strategic actions for the mortgage business and find ways to further limit any potential remaining risk to GMAC in that platform.

We'll continue to implement best practices and driving out our bank holding company model. And finally, achieving these objectives will accelerate our return to profitability and, of course, our repayment of the US Treasury's investment.

With that, Michael, let's move to Q&A.

Thanks, Rob. And, we are ready to take questions. Please tell our callers how to queue up.

(Operator Instructions) Sarah Thompson, Barclays Capital.

A question on your shareholders' equity. It looks like your shareholders' equity at September 30 was $24.9 billion. You took $5 billion of losses, and you've got $3.8 billion in capital infusion from the government, which would bring you to $23.7 billion, and you guys obviously have it booked at $20.8 billion. I'm assuming that the difference is because you didn't put the government money in at par. One, is that correct? And two, if it is, can you just tell us where you put (technical difficulty)?

I think I got it. You trailed off in the end, but a couple pieces to that that you should know. First of all, of the $3.8 billion the government invested here, $2.5 billion of it was in trust preferreds, which don't get classed as equity. Those get classed as debt. So that is going to be a big piece of it. You're also going to see [dividends] erode equity each time. So I think that answers a big piece of your question, which again, I didn't hear the full question.

That is perfect. Thank you very much.

Doug Karson, Bank of America.

My first question relates to the bonds coming due at ResCap. And on January 5, you announced that GMAC contributed $2.7 billion to mortgage loans and debt forgiveness. And then I think cash looks like, on slide 24, with $600 million to ResCap. The ResCaps, I think, got about $1.3 billion of unsecured bonds and $700 million or so (technical difficulty) that will mature in May, June and September. Can you kind of help us outline what the game plan is for those bonds coming due?

Yes, I mean, a couple things. So you're right, there is -- in the May June time frame, there is about -- there are about $2 billion of maturities coming due in ResCap. Obviously, we continue to make cash planning at GMAC and ResCap sort of job one around here, and we are well aware of it. We are obviously working through our cash position in both places. And as we have said with every passing quarter on ResCap, we make decisions that are in the best interest of the aggregate stakeholder base every single quarter. And we continue to kind of work through our plans on how we will handle the cash needs at ResCap.

For the time being, we did in fact make -- it is actually closer to $2.8 billion of contributions at year-end, as you alluded, in a combination of cash, debt forgiveness and contributional loans from Ally Bank. But again, we will continue to make contributions to ResCap if it is in our interest each time, and continue to bolster their liquidity as needed.

They do have outstanding lines with GMAC parent, both in the form of our revolver and two other lines that [we] have with us. So we will tap those lines as needed and navigate the cash waters with them as we go.

So ResCap -- I can't see from the slides here -- but how much cash is at ResCap right now?

We actually are not -- we actually are not giving out individual balances. But if you go to the GMAC liquidity slide, which is slide 24, you will see the LLC, which is the ResCap legal entity, is sitting on just under $1 billion in cash at this point.

Okay, so theoretically, you could use lines or sell assets to meet those maturities?

That's exactly right -- standard cash management actions. And remember, we put a big piece of that LLC's asset base, as I said, it's almost all marked to fair or net realizable value, and much of it held-for-sale. So there are many ways to raise liquidity in that business.

Okay, thank you for that. I have just one or two quick others. So originations were $18.2 billion?

That's right.

It looks like they are mostly performing [prime]. Were those majority originated at Ally Bank? I think I heard 60%. Was that right?

No -- 98% would have flowed to the GSEs and therefore through Ally Bank. So the vast majority of that paper -- as I said, a teeny bit of jumbo held on book, but the vast majority is created and originated and distributed to Fannie, Freddie and Ginnie.

So how many loans originated through the ResCap business?

ResCap and Ally have a partnership where they're originated and underwritten by both shops and then sold through under those criteria. So the vast majority of that comes out of the ResCap-Ally channel as one.

But if ResCap was gone, Ally Bank would be able to continue kind of originating the way that it was in Q4?

Let me take a crack at this one. I think if you are assuming that Ally Bank's customer base is a significant source of mortgage originations, that is not the case. There are several sources of origination that we have. We have Ditech, which you are familiar with. We have a correspondent relationship with a cadre of mortgage brokers. And then thirdly, we mine our own book of business and refinance mortgages from long-standing customers. So those are the three resources of mortgage origination. So Ally Bank itself is not a source of origination of mortgages.

Right. Okay. And as a last question, the legacy Nuvell business, how much -- how many assets does that book have? I know -- I think it stopped originating -- I think you said March of last year.

There's about -- and it's in the slides -- there is about $4 billion worth of balance there. It will be run down to $2 billion by end of the year, maybe a little less than that. So it is a very small piece of our overall sort of consumer HFI auto book.

Great. Okay. Thanks, guys. That's it for me.

Eric Selle, JPMorgan.

Just starting from the top, when do you guys expect auto originations to exceed your runoff? When do you expect that to reverse?

I would just tell you, you have to look at the dynamics, right? We've got $16 billion worth of lease assets. And as you know, the lease business is now probably 5% of our origination flow. We would like it to be more. We would like it to be maybe as much as double that. But until leasing gets up to a big number, you are going to continue to have material runoff in that book of $1 billion to $2 billion a quarter.

I think we have a good bit of time before we start to finish and start to build the auto book back up again, because it is just a huge legacy base of lease to work through. But it could be any time in the next 12 months.

Okay. And then talking to bankers, how do you guys assess your access and cost of ABS post-TALF? Is that going to change materially?

We don't think so. And as long as the market stays open -- what has been interesting in the two TALF deals that we've done, which foot to about $1.8 billion, is that a big piece of the buyer population are cash buyers and haven't used the New York Fed's credit enhancement or support for that.

So we like to think that -- and we were glad TALF is here, because the markets wouldn't have reopened without it, at least that is conventional wisdom, but we would like to think we will be okay when it goes. And again, we are -- as we said, we are eager to go back into the market for more TALF and more unsecured. And we are encouraged by results so far.

That is what we are hearing here. There is just a Bloomberg article out there that we may both need to call and correct.

Looking at your LTV of 96%, how did you value the denominator of this? Did you guys go out and reappraise all the real estate value, or is that a stale number, or is it a real number?

You're talking about in Ally Bank and the loans in the corrected portfolio? Yes, the major -- we use market data to look at that, so like Case-Shiller analytics and updated market information, to assess current values over which the loan would be divided into.

Okay, so that is a live number?

Yes.

And then finally, you know, it is a month after you made your announcement. Are you guys selling these mortgage assets at the levels you mark them down to?

It is a great question. Obviously, we mark them down, as you recall, from sort of a 77%, 78% of UPB down to $0.40-odd on the dollar of UPB. We set those to sort of a 20% level yield. I really can't comment on whether those are market-clearing prices, but we think we mark them appropriately. So when we finally do go to sell them, hopefully we will -- they will be -- those will be equal to or better than where the market is. But again, I really can't comment on how the market would trade those assets.

All right. Thank you for your time.

(Operator Instructions) David Andrews, PIMCO.

My question regards the subprime book, particularly as it impacts GM. Historically, part of the exclusivity agreement you had with GM required a certain amount of buydown. And so what is your now stance with regard to subprime assets, and how does that impact your relationship with GM?

So I will give you a comment or two, and then see if Mike Carpenter has anything he would further add, because obviously he is very close to GM and the GM relationship.

So our contract with GM, you know, you are right, the old contract, we were committed to buying at certain credit tiers and certain amounts. We now have a much more open contract with GM. We are not in a box to sell a certain amount of subprime or write a certain amount of subprime.

Having said that, we view them as a critical partner to us. So we are going to write all throughout the credit spectrum and we are going to make sure we do it right, and we know they need us to be there in all the places. So by no means have we -- will we stop writing in any of the credit tiers.

What we can do in the bank, obviously, is a slightly different story, because there are limitations on FICO scores that we can write in an FDIC-governed bank. Having said all that, I don't -- I mean, I don't foresee any problems writing the credit spectrum they need, and I'll hand it to Mike and see if has anything to add to that.

I think that in order to be of -- to have the strength of franchise in the dealer community that we have, we have to participate across the credit spectrum and we also have to participate in the lease marketplace as well. And the question is not that so much as how do you do it. And I think one of the things the organization has done since not being a captive is taken a more thoughtful approach to risk-based pricing.

And so there are what I will call contemporary risk-based pricing models in place that allow us to price for the risk that we see in the subprime marketplace. And so we are able to participate. I don't think, obviously -- to state the obvious, subprime doesn't go as deep as it once did either.

We also take into account of the underwriting, the degree to which a low FICO score borrower might actually post an additional down payment so the LTV is somewhat lower than it might have been. So I think the underwriting as a captive -- I'm going to overstate it, and I don't really know all the history -- but the underwriting of the captive was more one of we'll take the whole basket and the whole basket will play out okay.

We are more underwriting on a case-by-case basis to sophisticated risk models that you would expect a company like this to do. And so we do participate in all those markets. I think the market actually we would be least competitive in today is the super-prime marketplace, because you have a number of banks out there that have tremendous excess liquidity, and at the very highest level of the credit structure, it is a pretty attractive place to put capital.

So subprime has been in the range of, I guess, 12% to maybe 15% of your book. Going forward, where do you see that shaking out, in rough ranges?

I don't know the answer to that one. Do you --?

It certainly won't be any more than that. My guess is it will be a little bit less than that, but I think that is the ceiling you can expect going forward.

Okay. And since we are talking about GM and your role -- or former role as captive and now as sort of a -- not a captive, but it is, I guess, a partner, it is an unusual relationship in the auto industry. And over time, GM may or may not be at a competitive disadvantage if it doesn't have a captive it is quite as close to as others. How do you respond to that? How do you try to deal (multiple speakers)?

No -- look, I think that is a great question. And I think that the answer to that question has to be that we have a very close relationship with the manufacturer, as well as a very close relationship with the dealers. The fact that we finance about 85%, 88% of the floor planning of GM dealers gives you an indication of how embedded we are in the system.

But your point, in terms of long-term competitiveness, is absolutely right on. And the implication of that is we have to have, and we do have, a continual dialogue with the manufacturer, whether it is about some venture programs or how do you respond to the Toyota debacle, or how do we develop a stronger lease product over time.

I think the only -- I think the real difference between being a partner versus a captive is that, as a partner, the economic decisions that the manufacturer makes, in terms of, if you will, subsidizing the sale of the automobile by using financing, becomes obvious and transparent as opposed to buried. And I actually think in the long term that is actually positive for the auto companies, because it forces them to make an economic decision in a very rigorous way.

I think the relationships -- I've spent a fair amount of time in the last several weeks at GM and with Chrysler and with dealers. And I don't think there is any structural reason why an arm's-length company cannot be as effective in helping the manufacturer achieve their sales objective as a captive.

And I guess a year ago, the ownership structures would have kept you apart. Now you've got common ownership. So is there any thought to at some point bringing the two of you back together?

Look, I think the answer to that question is if we provide -- there is no discussion going on along those lines, if that is the question. But if -- I think the issue is in order for GM to be successful, in order for GMAC to be successful and (inaudible), it has got to be an incredibly tight partnership on a going-forward basis. And I think the relationships are very good. I think that can be accomplished going forward.

I think GM's ownership -- and as you know, they are an owner currently -- I don't think you can rely on either the contract, nor on their ownership, as something to -- I don't think you assume either one of those things is a long-term asset for GMAC. This has to be built on the assumption that those two things don't exist long-term and that it is the nature of the partnership on the economic relationship. And importantly, not just with manufacturer, but maybe even more importantly with the dealer, that is critical to the long-term success of this (inaudible).

I would just add -- I completely agree, and I would add the idea of having a best-in-class bank holding company that is -- whose focus is on being an auto bank, that you've got targeted investment dollars and intellectual horsepower toward being focused on this category and executing as well as possible, I think is something here, in addition to the cost of funding opportunities that exist for a bank holding company with deposit base funding. I think all those play into why this model is really just starting to take off for us.

That's helpful. And last question was on page 26, I wasn't sure I understood what a regulatory agency deferral option is. Is that basically a waiver to your required ratios for a period of time, or what does that mean?

When you categorize the impacts of the 166, 167 -- and I've got our Chief Accounting Officer, who can be very helpful here -- when you categorize, there is the GAAP impact, which is immediate, right, and there is the reg capital impact, which is staged over Qs 4 and 3, and I'll let David talk --.

There was guidance put out in mid-December where you are allowed -- you can elect to defer the impact from the regulatory capital ratios of the implementation of that accounting standard such that in the first two quarters of 2010, it did not count in that calculation. The second two quarters, you could count 50% of it, and then a year from now, it would be 100% impacted. So that's an option you can elect.

And I think it is important to note, when you are done doing the math, the impact to capital ratios is almost zero, oddly enough.

Okay, thank you.

We have time for one more call today.

(inaudible), [Scott Wood].

Good morning. Thank you very much. I was wondering -- I have a question about the mortgage repurchase reserves. What is the total size of the reserves, and what is the breakdown between first and second lien, please, if you announced it?

The total reserve, which I mentioned, is approximately $1.3 billion. Remember, we booked up 573 in this period and 515 last quarter. And again, that is to cover a wide panoply of potential claims and claimants. And I wouldn't be comfortable giving out any more color at this time than that.

Okay, thank you.

All right. That's all the time we have this morning. If you have additional questions, please feel free to contact Investor Relations. Thanks to all of you for listening and for your interest in GMAC. Thanks, Ann.

You're welcome, have a great day. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.