Sept. 3 (Bloomberg) -- GMAC LLC and its Residential Capital LLC home loan unit plan to dismiss 5,000 employees, or 60 percent of the unit's staff, and close all 200 GMAC Mortgage retail offices because of weak real estate markets.

The first 3,000 job cuts will cost $90 million to $120 million, mostly during the third quarter, with more expenses later, according to a statement today from the Detroit-based lender. Loans originated by outside brokers through Minneapolis- based ResCap's Homecomings unit will cease, business lending will be curtailed and parts of the company may be sold.

The cuts renewed doubt about GMAC's effort to rescue ResCap, ranked eighth among U.S. mortgage companies last year and 12th in subprime home loans for 2006, according to trade journal Inside Mortgage Finance. GMAC lost $5.4 billion over the past year, and ResCap's losses in the last seven quarters total $7.2 billion. GMAC arranged a $60 billion refinancing in June to keep ResCap from bankruptcy.

``This company is in really rough shape,'' said Sean Egan, president of Egan-Jones Ratings Co., a Haverford, Pennsylvania- based credit-rating company. ``There are no obvious avenues for support. The amount of support they need is quite substantial.''

GMAC is 51 percent controlled by Cerberus Capital Management LP, with the rest held by former parent General Motors Corp. GM last month reported the third-biggest loss in its 100-year history on plunging sales of pickups and sport-utility vehicles, and GMAC remains the primary source of funds for the automaker's dealers.

Capital Needed

Egan, who has a junk rating on GMAC debt, estimates the company may need to raise at least $10 billion to avoid failing in the next two quarters. With the mortgage unit struggling to originate loans and the auto-finance unit losing money, he doesn't expect them to stay solvent.

GMAC doesn't have any comments beyond its previous statements about its liquidity, spokeswoman Gina Proia said. Today's actions don't reflect an inability to meet terms of the June agreement, she said.

``They are a reflection of the market environment we are in,'' she said. ``We're streamlining and refocusing our resources on parts of the business that have a more compelling business model. Unfortunately, that includes a good deal of right- sizing.''

Retail loan officers will be leaving their jobs over the next two weeks while the company fulfills its loan commitments to existing borrowers, spokeswoman Jeannine Bruin said. About 2,000 jobs are expected to be eliminated as the company divests its GMAC home services business, including the real estate brokerage unit.

Overdue Loans

ResCap employed more than 14,000 people at the end of 2006 during the height of the real estate boom, according to Bloomberg data.

``This gives you a full flavor of how terrible the mortgage market is,'' said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan. ``The past year has been horrible and it doesn't look like there is any improvement on the horizon with continuing declines in home values and rising delinquencies.''

The company is ``evaluating strategic alternatives'' for units including GMAC Home Services and the non-core servicing business, GMAC said, using language that typically means a property is for sale.

GMAC's $1 billion of 6.625 percent notes due in 2012 fell 0.19 cents to 58.6 cents on the dollar, down from 79 cents in June, Trace data show. The debt yields 24 percent, or 21 percentage points more than similar-maturity Treasuries, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

To contact the reporters on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.

Last Updated: September 3, 2008 16:49 EDT