Aug. 22 (Bloomberg) -- Residential Capital LLC's ability to raise capital is ``under significant pressure'' and the company, the biggest privately held U.S. mortgage lender, is now relying on credit lines, Moody's Investors Service said.

Moody's said in a report today it can't estimate how long the constraints will last. Minneapolis-based ResCap, a unit of finance company GMAC LLC, was cut to non-investment grade last week by Moody's and Fitch Ratings because of concerns about a protracted freeze in demand for non-agency mortgage debt and ResCap's loss of access to markets used to fund new home loans.

Investors have been hesitant to buy the asset-backed commercial paper that companies like ResCap use to fund loans, following losses this year on other mortgage-backed debt. ResCap had tapped that market for $5.6 billion as of June 30 and is now having to roll much of that maturing short-term debt into other credit lines, Moody's analysts led by Philip Kibel wrote.

While the company's ability to access funding is ``sufficient to meet the company's maturities and other obligations in the near term,'' available funding through unused credit lines, ``has declined'' as they absorb maturing asset-backed commercial paper debt and fund new mortgage loans, the analysts said. ResCap has a committed borrowing capacity of $23.3 billion, the analysts said.

``We're committed in turning the business around,'' ResCap and GMAC spokeswoman Gina Proia said in an interview, noting efforts made to scale back origination of subprime loans and loans with terms that don't conform to those demanded by government- chartered companies Fannie Mae and Freddie Mac.

``ResCap remains a part of GMAC's long-term diversified business strategy,'' Proia said.

Fifteen mortgage lenders have been driven into bankruptcy this year. They are among more than 90 lenders that have closed operations or sought buyers since the start of 2006 as the U.S. real estate market contracted and investors shunned mortgage securities.

Cerberus Stake

ResCap's woes come less than nine months after Cerberus Capital Management LP, a New York-based private-equity firm, bought a 51 percent stake in GMAC from General Motors Corp. for $7.4 billion.

``We don't believe Cerberus is willing to throw in the towel just yet given the size of its investment, but clearly the mortgage market is going through an unprecedented liquidity crunch,'' JPMorgan analysts led by Kabir Caprihan in New York wrote in a report yesterday.

Alvaro de Molina, the former Bank of America Corp. finance chief who joined Cerberus in June, was named GMAC's chief operating officer and will oversee the ResCap unit.

Molina's hiring ``suggests that Cerberus is willing to throw very good talent at the problem,'' Caprihan wrote. He estimates ResCap has about $20 billion of ``reliable'' funding sources.

Credit Default Swaps

Sellers of credit-default swaps tied to ResCap, a unit of finance company GMAC LLC, today were demanding upfront payments of 18 percent and 500 basis points to assume the risk that the company will default on its bonds in the next year, according to prices from CMA Datavision LLC. That implies a 38 percent chance of default by September 2008, according to a JPMorgan Chase & Co. pricing model.

ResCap's $2.49 billion of 6.375 percent notes due in 2010 have fallen almost 17 cents on the dollar since Aug. 1. They rose 4 cents on the dollar to 77 cents as of 3:18 p.m. in New York, according to Trace, the bond-price reporting system of the NASD. The debt yields 18 percent, or 13.9 percentage points more than similar-maturity Treasuries, Trace data show.

Bonds that trade at a spread of 10 percentage points or more to Treasuries are considered distressed, indicating investors are concerned about a default.

ResCap's downgrade to non-investment grade, or junk, status last week is likely to cost the company $150 million annually, Banc of America Securities LLC analyst John Guarnera wrote in an Aug. 17 report.

That may add to losses of $1.16 billion the company reported for the first half of this year, compared with profit of $749.6 million during the same period in 2006. Funding costs may rise to $300 million if there is another downgrade, he said.

To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net

Last Updated: August 22, 2007 17:28 EDT