April 19 (Bloomberg) -- GMAC LLC's Residential Capital home- lending unit and General Electric Co.'s WMC Mortgage division announced more than 1,400 job reductions as losses mount in the U.S. subprime loan industry.

WMC Mortgage, part of the GE Money consumer-finance unit, today slashed 771 jobs and closed three centers. WMC, based in Burbank, California, has cut more than half its workforce this year. Between 600 and 700 workers at GMAC's Minneapolis-based Residential Capital, known as ResCap, will lose their jobs by midyear, and at least 300 vacant positions won't be filled.

``The subprime mortgage market is going to shrink by 75 percent in terms of jobs and volumes of origination,'' said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley. ``These companies got too big. They were giving people loans they shouldn't have and now they're getting rid of all that.''

ResCap will have about 12,000 employees after the reductions are made, said spokeswoman Gina Proia. In an interview, she said the cuts were made because of ``current market conditions and the deterioration of the U.S. mortgage market.''

More than 50 subprime lenders have halted operations, gone bankrupt or sought buyers since the start of 2006, according to Bloomberg data. Defaults on subprime mortgages tracked by the Mortgage Bankers Association surged to four-year highs in the final quarter of last year.

From Expansion to Tightening

``There will be a decline in employment in virtually every part of the economy that's real estate-related,'' said Christopher Cagan, director of research and analytics at First American CoreLogic, a Santa Ana, California-based provider of mortgage risk data. ``Just as these industries expanded during the boom, so there will be a tightening. It will not ruin the economy. The industries will still exist.''

Subprime loans grew to be 20 percent of new mortgage loans in 2006. ``My guess is it will go back to 5 percent'' in terms of originations, Rosen said in a telephone interview.

Commercial rents could fall in some areas where subprime lenders are cutting jobs, Rosen said. ``The office market in certain loans is going to be hurt badly. Orange County is the biggest place where it's going to be felt.''

Layoffs Follow Losses

The layoffs follow a $651 million fourth-quarter operating loss at ResCap. In the past month, the company has also announced the departure of its treasurer, chief financial officer and chief executive officer.

WMC Mortgage will have about 700 employees in two offices after the cuts, WMC spokeswoman Brandie Young said in an interview. Centers closed today are in Costa Mesa and San Ramon, California and Addison, Texas, she said. Employees were notified today that they were fired. They will receive a 60-day severance package.

WMC Mortgage, acquired by GE about three years ago, originates subprime loans for borrowers with poor or limited credit, and so-called ``Alt-A'' loans to self-employed applicants.

The company replaced some top executives, including the chief executive officer and chief finance officer. It will keep offices in Orangeburg, New York and its headquarters in Burbank, California, Young said.

In the first quarter, GE Money, the consumer division that includes WMC, added $330 million to reserves for its $4.5 billion in assets held for sale, said Mark Begor, who runs GE Money in the Americas, during the company's earnings call April 13. Another $43 million was spent on restructuring, Begor said. He forecast $50 million in costs for cuts in the second quarter.

Lending Curtailed

WMC ``dramatically curtailed'' lending, originating less than $3.4 billion, down from $9 billion in the fourth quarter. About $500 million of loans were originated in March, Begor said.

Last year, WMC provided about $100 million of GE's $20.8 billion total profit. Reuters earlier reported the cuts, which are in addition to the 460 announced in March.

Shares of General Electric, based in Fairfield, Connecticut, fell 13 cents to $35 in New York Stock Exchange composite trading.

General Motors Corp., the world's largest automaker, sold a majority stake in GMAC, formerly General Motors Acceptance Corp., in November to a group led by Cerberus Capital Management LP.

The GMAC cutbacks were reported earlier by the Minneapolis Star Tribune.

To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: April 19, 2007 19:56 EDT