GMAC relaxes credit restrictions to boost sales

[BeatleBoot]

Source: The Detroit News

The number of GM cars and trucks the lender wrote loans for dropped by more than half after GMAC tightened underwriting standards amid the country's escalating financial crisis. GM sales dropped 41 percent in November, as U.S. auto sales plunged 37 percent to a 26-year low.

"The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers," GMAC President Bill Muir said today in a prepared statement. "We will continue to employ responsible credit standards, but will be able to relax the constraints we put in place a few months ago due to the credit crisis. We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the U.S."

GMAC, which finances about 75 percent of inventory at GM dealers, was a major source of loans to GM car buyers until it was frozen out of credit markets after losses totaling $7.9 billion.

The easing of credit restrictions comes hours after Treasury agreed to invest $6 billion in GMAC to provide the auto and mortgage finance company with badly needed liquidity and help more credit-strapped customers buy vehicles. Treasury bought $5 billion in equity from GMAC and also


Read more: http://www.detnews.com/apps/pbcs.dll/article?AID=/20081230/AUTO01/812300412

[bstender]

1. great

now i get to help people buy f-ing cars.

check this out: http://blip.tv/file/1528079

[Baby Snooks]

3. And a year from now...

This time next year we will probably have millions of repossessed cars and trucks to go with the millions of repossessed homes. And of course Congress will be negotiating another bail-out for everyone.

Some of course are enjoying the new mortgage rates and are refinancing. Those with the cash to refinance anyway. Everyone else is still getting the "pre-foreclosure" and "foreclosure" notices.

Apparently the help for homeowners Congress promised is for those with cash to refinance with. Everyone else, well, you know. Sorry.

[earthlover]

6. good to hear from a super-conservative viewpoint here!

Why open up lending to more folks? Just let the super rich get the loans, with their squeaky-clean credit scores!

Seems like GM is more progressive here, and....they are not lowering their credit score requiments all that low either!

[Baby Snooks]

8. Didn't say I agreed with that....

What I said was that Congress seemed to agree with it. Just the same, reality is reality. And going back to "sign here, we'll run the credit report later" is just an invitation to an even bigger disaster.

[Fovea]

12. I find it a wee bit ironic

that someone with a username like earthlover wants more cars.

The sort of economic stimulus needed is one that employs GM workers (and all sorts of other workers)
to create a green infrastructure.

I oppose any more bailouts without a mechanism in place to rescue our economy as a whole.
This ala carte, disorganized crap is going to waste resources like a freakin big dog. And in the end
it will not save the American auto industry, because the basic paradigm of the automobile/exurbia
is unsustainable.

If we just randomly rescue players, the conservatives will take most all the rescue and move beyond jurisdiction.


We really need to do better than this. We are facing a real emergency, not another BS war on terror.

[earthlover]

14. you seem to be putting words in my mouth

I am not arguing for more cars. I am pointing out that the tightening credit standards is a HUGE part of why our economy is in a slowdown.

It started with the housing debacle. What started this? The credit crunch. A higher than usual number of foreclosures made wall street call due a bunch of bundled money securities....as a result, many mortgage lenders went belly up. All the while, the vast majority of even the "high risk" loans did NOT go into foreclosure! The conservative press has made it sure nobody hears about that fact!

So....GM makes credit a bit easier...what is it, a 621 score? That is not a particularly low score. Back in the heyday of mortgage loans, you could get a house with a 540 score or even lower, if you wanted to pay enough interest!

i think GM is doing a smart thing.

If you make fun of my screen name, take a hard look at yours! Real politic is not exactly,,,,,PROGRESSIVE! HA!

[BeatleBoot]

16. The Basic Paradigm

Exactly what is the basic paradigm that is unsustainable?

Not being argumentative, but rather inquisitive.

[customerserviceguy]

19. There are a lot of people who think

that we all need to be crowded into giant cities, and that everything outside those cities should be farmland and undeveloped space.

I disagree with them, but I think I state their position adequately.

[Fovea]

11. I wish I could recommend a reply for the greatest page.

The Republican economy is going to have to crash and a few gated communities will burn before those mother fuckers shut up.

[chucktaylor]

2. Welcome to the sub-prime car loans. An all new loan for people to default on.

So now people who shouldn't get a loan will take a 15-20% depreciation the minute they drive of the lot. Immediately being upside down on their car loan.

This is utterly foolish.

[Kutjara]

5. 15-20% is optimistic.

There pretty much isn't a used car market any more, because people can't get loans to buy them either. Drive a new car off the lot these days, and it's basically worth nothing.

[BeatleBoot]

17. 620 is sub prime?

We are blessed to have so many experts on this board.

Truly blessed.

Such a wealth of information here, offered by the experts for free!

[Sen. Walter Sobchak]

4. ...relaxes credit restrictions to boost sales

Definition of insanity anyone?

[surrealAmerican]

7. This is exactly what the bail-out was supposed to do.

They are talking about "relaxing" the newly implemented restraints to the point where they were before the crisis, not exactly to risky levels. This could actually work to give GM a competitive advantage over other auto makers who don't offer financing, and may save the company.

[bstender]

18. yippee

but the bailout was supposed to turn the whole economy around.

all of which turns out to be the expected boondoggle, the economy has to contract to balance the bad debt. failed institutions like GM and the rest have to go away in order for things to come back. this just postpones the recovery.

[Idealism]

9. Considering you need over a 725 credit score to qualify for a car currently

I don't think this is a bad thing at all. The Big Three are losing money because the few would-be buyers they have can't get approved for a loan.

Too many people in this country have shit for a credit score

[roamer65]

10. I still won't buy one, even at 0%.

Not until I know where the bottom of this depression lies.

[hay rick]

13. The TARP transformer.

TARP is like one of those weird robot toys. It keeps changing in form and purpose. Now it's being repurposed to prop up a car loan company. Or what was once a car loan company. GMAC is going through it's own metamorphosis, segueing into a bank holding company... One article here: http://www.bloomberg.com/apps/news?pid=20601087&sid=aUlUYbxht7PI&refer=home

An interesting quote from the article- "The collapse of GMAC would leave GM at risk of losing as many as 40 percent of its 6,500 U.S. dealerships, Martin NeSmith, a liaison to the lender as a member of GM’s National Dealer Council, said Dec. 10. The dealerships rely on GMAC to finance cars and trucks on their lots while they wait for consumers to buy them."

So it's not just about putting less creditworthy folks into new cars...

The fact that GM was able to offer easier credit terms within hours of the deal makes the previous use of TARP funds look even more pathetic.

[2Design]

15. Good I am looking at a chevy hhr - my pt crusier has 114,000 miles

car is leaking some oil, needs tires, etc. So rather than pump money into the old one, I am looking at the hhr. I wanted another pt cruiser but they change the design some on the door entry and it is shorter and I hit my head getting in and out and there is less head room.