GMAC, the ailing auto finance giant, announced plans on Dec. 30 to expand lending for vehicles to a wider spectrum of customers a day after getting a $6 billion U.S. government bailout. The company said it would modify its credit criteria two months after placing tight restrictions on loans to only the most creditworthy borrowers.
GMAC, which won approval last week from the Federal Reserve to become a bank holding company with greater access to Fed credit lines, said it would now approve loans to borrowers with a credit bureau score of 621 or above, compared to the 700 rating (based on a maximum level of 800) put in place two months ago.
"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," said GMAC president Bill Muir. "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."
The U.S. Treasury said on Dec. 29 it would purchase $5 billion in senior preferred equity with an 8% dividend from GMAC and make a one-billion-dollar loan to General Motors so GM can participate in a rights offering in support of GMAC's reorganization as a bank holding company.
Copyright Agence France-Presse, 2008