Oct. 28 (Bloomberg) -- GMAC LLC, the money-losing auto finance and home-loan lender, said it was granted access to the U.S. Federal Reserve's new program to help unlock short-term commercial credit markets.

``We did apply and we were approved to participate,'' Gina Proia, a spokeswoman for the Detroit-based company, said in an interview. Proia said the company can tap the Fed program through its investment-grade New Center Asset Trust unit, which issues asset-backed commercial paper and has a capacity of about $10 billion.

The Fed's Commercial Paper Funding Facility may help ease a cash squeeze at GMAC, the primary lender to customers of General Motors Corp. GMAC Chief Executive Officer Al de Molina said in an e-mail to employees this month that the company has ``limited if any access to funding'' for its mortgage and auto-lending units. The Detroit-based company racked up $5.4 billion of losses in the past year.

The Fed began buying commercial paper from companies yesterday to reduce rates, lure back investors and unlock the market, which seized up last month following the bankruptcy of Lehman Brothers Holdings Inc. General Electric Co., which sold debt to the Fed yesterday, Korea Development Bank and Morgan Stanley are among several dozen companies that have signed up for the program, which was announced on Oct. 7.

Cerberus Capital Management LP, the New York-based buyout firm, owns 51 percent of GMAC and GM, the biggest U.S. automaker, owns the rest.

Credit Rating

The Fed program is aimed at borrowers with the highest ratings. GMAC is rated junk by Standard & Poor's, Moody's Investors Service and Fitch Ratings, and both GM and GMAC have battled speculation about their survival. GM may face bankruptcy as the credit crunch drives down business, Standard & Poor's analyst Robert Schulz has said. GMAC in June had to arrange more than $60 billion of credit for itself as foreclosures put the firm's home mortgage unit on the brink of failure.

New Center Asset Trust purchases highly rated securities backed by auto loans and other assets from GMAC units, financing its activities by issuing asset-backed commercial paper. GMAC's paper issued through New Center Asset Trust is rated P-1 by Moody's Investors Service and F1+ by Fitch Ratings.

A Federal Reserve spokesman declined to comment specifically on GMAC's participation.

``We have made no exceptions to our program; we only accept A-1, P-1 or F1-rated paper,'' said New York Federal Reserve Bank spokesman Andrew Williams. ``We don't comment on which firms are registered for the Commercial Paper Funding Facility.''

Loan Halt

GMAC said today it will halt new vehicle loans through its financial services unit in seven European countries. The company previously curbed auto loans in the U.S. to borrowers with credit scores of at least 700, making it harder for some customers to buy a car or truck.

GMAC's Residential Capital LLC, the 12th-biggest subprime mortgage lender in 2006, has reported seven straight quarterly losses amid the worst housing market since the Great Depression. Since July, GMAC has sold its home-services unit, closed all 200 GMAC Mortgage retail offices and dismissed 60 percent of ResCap's staff.

Proia declined to say if Minneapolis-based ResCap or any other GMAC units were receiving federal help.

Ford Motor Credit has registered for the commercial paper program, spokeswoman Brenda Hines said in an interview. Ford Credit won't provide any details until parent company Ford Motor Co. reports third-quarter financial results on Nov. 7, she said.

Chrysler Financial Corp. has also applied under the program, according to a person familiar with the request who asked not to be named because the auto loan company's plan hasn't been made public. Cerberus also owns Chrysler Financial.

Bond Prices

Justin Leach, a U.S. spokesman for Toyota Motor Corp.'s finance unit, said Toyota Motor Credit, parent company of Toyota Financial Services, hasn't yet decided whether it will participate in the Federal commercial paper program.

GMAC's $4 billion of 8 percent notes due in 2031 rose 3.4 cents on the dollar, or 8.8 percent, to 42.5 cents in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds, which have tumbled 22 percent in the past two months, yield 19 percent, or 15 percentage points more than similar-maturity Treasuries, according to Trace.

To contact the reporters on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net.

Last Updated: October 28, 2008 20:23 EDT