Edgar Filing: GMAC LLC

e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2007, or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to .

Commission file number: 1-3754

GMAC LLC
(Exact name of registrant as specified in its charter)


Delaware		38-0572512
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Renaissance Center
P.O. Box 200 Detroit, Michigan
48265-2000
(Address of principal executive offices)
(Zip Code)

(313) 556-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non- accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

GMAC LLC

INDEX


			Page

Part I — Financial Information
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Statement of Income for the Three and Six Months Ended June 30, 2007 and 2006 (As restated)	3
		Condensed Consolidated Balance Sheet as of June 30, 2007 and December 31, 2006	4
		Condensed Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2007 and 2006 (As restated)	5
		Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2007 and 2006	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4.	Controls and Procedures	52
Part II — Other Information
	Item 1.	Legal Proceedings	53
	Item 1A.	Risk Factors	53
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
	Item 3.	Defaults Upon Senior Securities	56
	Item 4.	Submission of Matters to a Vote of Security Holders	56
	Item 5.	Other Information	56
	Item 6.	Exhibits	56
	Signatures		57
Index of Exhibits			58
Amendment No. 1 to Amended and Restated Limited Liability Company Operating Agreement
Separation Agreement and Release of Claims
Computation of Ratio of Earnings to Fixed Charges
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

GMAC LLC

CONDENSED CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended June 30,						Six months ended June 30,
				2006						2006
				(As restated						(As restated
($ in millions)	2007			see Note 1)			2007			see Note 1)


Revenue
Consumer		$2,438			$2,587			$4,966			$5,156
Commercial		754			782			1,477			1,508
Loans held for sale		396			371			874			851
Operating leases		1,728			2,026			3,296			3,954


Total financing revenue		5,316			5,766			10,613			11,469
Interest expense		3,735			4,023			7,407			7,836


Net financing revenue before provision for credit losses		1,581			1,743			3,206			3,633
Provision for credit losses		430			268			1,111			434


Net financing revenue		1,151			1,475			2,095			3,199
Servicing fees		556			446			1,116			918
Amortization and impairment of servicing rights		—			—			—			(23	)
Servicing asset valuation and hedge activities, net		(152	)		(171	)		(454	)		(356	)


Net loan servicing income		404			275			662			539
Insurance premiums and service revenue earned		1,051			1,052			2,092			2,062
Gain on sale of mortgage and automotive loans, net		399			504			363			869
Investment income		227			297			535			555
Gain on sale of equity method investments, net		—			411			—			411
Other income		786			983			1,651			1,986


Total net financing revenue and other income		4,018			4,997			7,398			9,621
Expense
Depreciation expense on operating lease assets		1,173			1,346			2,255			2,786
Compensation and benefits expense		647			665			1,281			1,383
Insurance losses and loss adjustment expenses		563			653			1,136			1,250
Other operating expenses		1,183			1,186			2,429			2,337


Total noninterest expense		3,566			3,850			7,101			7,756
Income before income tax expense		452			1,147			297			1,865
Income tax expense		159			360			309			582


Net income (loss)		$293			$787			($12	)		$1,283


Preferred interests dividends		(53	)		—			(104	)		—


Net income (loss) available to members		$240			—			($116	)		—

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

GMAC LLC

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)


	June 30,			December 31,
($ in millions)	2007			2006

Assets
Cash and cash equivalents		$12,223			$15,459
Investment securities		20,261			16,791
Loans held for sale		20,268			27,718
Finance receivables and loans, net of unearned income
Consumer		121,638			130,542
Commercial		44,018			43,904
Allowance for credit losses		(3,464	)		(3,576	)


Total finance receivables and loans, net		162,192			170,870
Investment in operating leases, net		28,893			24,184
Notes receivable from General Motors		2,118			1,975
Mortgage servicing rights		6,041			4,930
Premiums and other insurance receivables		2,206			2,016
Other assets		25,076			23,496


Total assets		$279,278			$287,439


Liabilities
Debt
Unsecured		$110,816			$113,500
Secured		113,638			123,485


Total debt		224,454			236,985
Interest payable		2,403			2,592
Unearned insurance premiums and service revenue		5,168			5,002
Reserves for insurance losses and loss adjustment expenses		3,081			2,630
Accrued expenses and other liabilities		25,238			22,659
Deferred income taxes		1,121			1,007


Total liabilities		261,465			270,875
Preferred interests		2,226			2,195
Equity
Members’ interest		7,744			6,711
Retained earnings		7,057			7,173
Accumulated other comprehensive income		786			485


Total equity		15,587			14,369


Total liabilities, preferred interests and equity		$279,278			$287,439

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

GMAC LLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

Six Months Ended June 30, 2007 and 2006


	Common							Accumulated
	stock and							other
	paid-in		Members’		Retained			comprehensive		Total			Comprehensive
($ in millions)	capital		interest		earnings			income		equity			income

Balance at January 1, 2006
(As restated, see Note 1)		$5,760		$—		$15,095			$830		$21,685
Net income		—		—		1,283			—		1,283			$1,283
Cumulative effect of a change in accounting principle, net of tax:
Transfer of unrealized loss for certain available for sale securities to trading securities		—		—		(17	)		17		—			—
Recognize mortgage servicing rights at fair value		—		—		4			—		4			4
Dividends paid		—		—		(1,411	)		—		(1,411	)		—
Other comprehensive income		—		—		—			132		132			132


Balance at June 30, 2006
(As restated, see Note 1)		$5,760		$—		$14,954			$979		$21,693			$1,419


Balance at January 1, 2007		$—		$6,711		$7,173			$485		$14,369
Net loss		—		—		(12	)		—		(12	)		($12	)
Preferred interest dividends		—		—		(104	)		—		(104	)		—
Capital contributions		—		1,033		—			—		1,033			—
Other comprehensive income		—		—		—			301		301			301


Balance at June 30, 2007		$—		$7,744		$7,057			$786		$15,587			$289

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

GMAC LLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)

Six Months Ended June 30, 2007 and 2006


($ in millions)	2007			2006

Operating activities
Net cash provided by (used in) operating activities		$6,422			($4,471	)


Investing activities
Purchases of available for sale securities		(8,892	)		(11,416	)
Proceeds from sales of available for sale securities		3,563			2,323
Proceeds from maturities of available for sale securities		3,511			7,912
Net increase in finance receivables and loans		(47,973	)		(51,739	)
Proceeds from sales of finance receivables and loans		55,742			63,595
Purchases of operating lease assets		(11,579	)		(9,070	)
Disposals of operating lease assets		5,307			3,411
Net increase in notes receivable from General Motors		(121	)		(512	)
Purchases of mortgage servicing rights, net		—			(55	)
Acquisitions of subsidiaries, net of cash acquired		(287	)		(324	)
Proceeds from sale of business units, net of cash (a)		—			8,550
Settlement of residual support and risk sharing obligations with GM		—			1,074
Other, net (b)		2,358			(585	)


Net cash provided by investing activities		1,629			13,164


Financing activities
Net change in short-term debt		(3,565	)		(6,927	)
Proceeds from issuance of long-term debt		33,531			42,226
Repayments of long-term debt		(43,029	)		(43,205	)
Other financing activities (c)		1,897			1,918
Dividends paid		(74	)		(1,411	)


Net cash used in financing activities		(11,240	)		(7,399	)


Effect of exchange rate changes on cash and cash equivalents		(47	)		97


Net (decrease) increase in cash and cash equivalents		(3,236	)		1,391
Cash and cash equivalents at beginning of year		15,459			15,795


Cash and cash equivalents at June 30,		$12,223			$17,186


(a)	Includes proceeds from March 23, 2006, sale of GMAC Commercial Mortgage of approximately $1.5 billion and proceeds from repayment of intercompany loans of approximately $7.3 billion of which $250 was received in preferred equity and net of cash transferred to purchaser of approximately $650.
(b)	Includes $618 and $491 for the six months ended June 30, 2007 and 2006, respectively, related to securities lending transactions where cash collateral is received and a corresponding liability is recorded, both of which are presented in investing activities.
(c)	Includes $1 billion capital contribution from General Motors during the six months ended June 30, 2007, pursuant to the terms of General Motors’ November 30, 2006, sale of a 51% interest in GMAC to FIM Holdings LLC.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation

GMAC LLC (referred to herein as GMAC, we, our or us) was founded in 1919 as a wholly owned subsidiary of General Motors Corporation (General Motors or GM). On November 30, 2006, GM sold a 51% interest in us for approximately $7.4 billion (the Sale Transactions) to FIM Holdings LLC (FIM Holdings). FIM Holdings is an investment consortium led by Cerberus FIM Investors, LLC, the sole managing member. The consortium also includes Citigroup Inc., Aozora Bank Ltd., and a subsidiary of The PNC Financial Services Group, Inc.

The Condensed Consolidated Financial Statements as of June 30, 2007, and for the three months and six months ended June 30, 2007 and 2006, are unaudited but, in management’s opinion, include all adjustments consisting of normal recurring adjustments necessary for a fair presentation of the results for the interim periods.

The interim-period consolidated financial statements, including the related notes, are condensed and are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim reporting. These interim-period Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2006, filed with the United States Securities and Exchange Commission (SEC) on March 13, 2007.

Restatement of Previously Issued Condensed Consolidated Financial Statements

As discussed in our 2006 Form 10-K and Note 2 to the Condensed Consolidated Financial Statements, we are restating our historical Condensed Consolidated Balance Sheet as of June 30, 2006; our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2006; and our Condensed Consolidated Statement of Changes in Equity for the six months ended June 30, 2006. This restatement relates to the accounting treatment for certain hedging transactions under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted (SFAS 133). We are also correcting certain other out-of-period errors that were deemed immaterial, individually and in the aggregate, in the periods in which they were originally recorded and identified. These items relate to transactions involving certain transfers of financial assets, valuations of certain financial instruments, amortization of unearned income on certain products, income taxes, and other inconsequential items. Because of this derivative restatement, we are correcting these amounts to record them in the proper period.

Share-Based Compensation Plans

During the fourth quarter of 2006, the Compensation Committee approved two, new, shared-based compensation plans for executives, a Long-Term Phantom Interest Plan (LTIP) and a Management Profits Interest Plan (MPI). These compensation plans provide our executives with an opportunity to share in the future growth in value of GMAC. While the plans were formed in 2006, no grants were made until the first quarter of 2007.

The LTIP is an incentive plan for executives based on the appreciation of GMAC’s value in excess of a preferred return of 10% to certain of our investors during a three-year performance period. The awards vest at the end of the performance period and are paid in cash following a valuation of GMAC performed by FIM Holdings. The awards do not entitle the participant to an equity ownership interest in GMAC. The plan authorizes 500 units to be granted for the performance period ending December 31, 2009, of which 358 units were granted and outstanding at June 30, 2007. The LTIP awards are accounted for under SFAS No. 123(R), Share-Based Payment (SFAS 123(R)), as they meet the definition of share-based compensation awards. Under SFAS 123(R), the awards require liability treatment and are remeasured quarterly at fair value until they are settled. The compensation cost related to these awards will be ratably charged to expense over the requisite

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

service period, which is the vesting period ending December 31, 2009. The quarterly fair value remeasurement will encompass changes in the market and industry, as well as our latest forecasts for the performance period. Changes in fair value relating to the portion of the awards that have vested will be recognized in earnings in the period in which the changes occur. The fair value of the awards outstanding at June 30, 2007, was approximately $48 million, of which $2 million and $6 million were recognized as expense during the three months and six months ended June 30, 2007, respectively.

The MPI is an incentive plan whereby Class C Membership interests in GMAC held by a management company are granted to senior executives. The total Class C Membership interests are 5,820, of which 3,561 were outstanding at June 30, 2007. Half of the awards vest based on a service requirement, and half vest based on meeting operating performance objectives. The service portion vests ratably over five years beginning January 3, 2008, and on each of the next four anniversaries thereafter. The performance portion vests based on five separate annual targets established at the beginning of each year. If the performance objectives are met, that year’s pro rata share of the awards vest. If the current year objectives are not met, but the annual performance objectives of a subsequent year are met, all unvested shares from previous years will vest. Any unvested awards as of December 31, 2011, shall be forfeited. The MPI awards are accounted for under SFAS 123(R) as they meet the definition of share-based compensation awards. Under SFAS 123(R), the awards require equity treatment and are fair valued as of their grant date using assumptions such as our forecasts, historical trends, and the overall industry and market environment. Annual performance objectives for periods after 2007 have not been established. Therefore, awards with these objectives are not deemed to be granted under SFAS 123(R) as the terms and conditions for vesting have not been communicated to the participants. Compensation expense for the MPI shares is ratably charged to expense over the five-year requisite service period for service-based awards and over each one-year requisite service period for the performance-based awards, both to the extent the awards actually vest. The fair market value of the 2,137 awards deemed granted and outstanding at June 30, 2007, was approximately $12 million, of which $1 million and $2 million were recognized as expense during the three months and six months ended June 30, 2007, respectively.

Change in Accounting Principle

Financial Accounting Standards Board (FASB) Interpretation No. 48 — On January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies SFAS No. 109, Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained solely on its technical merits. The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the position are to be recognized. The cumulative effect of applying FIN 48 is to be recorded directly to retained earnings and reported as a change in accounting principle. The adoption of this interpretation as of January 1, 2007, did not have a material impact on our consolidated financial position. Gross unrecognized tax benefits totaled approximately $126 million at January 1, 2007, of which approximately $124 million would affect our effective tax rate, if recognized.

We recognize interest and penalties accrued related to uncertain income tax positions in interest expense and other operating expenses, respectively. As of January 1, 2007, we had approximately $116 million accrued for the payment of interest and penalties.

There have been no significant changes to the liability for uncertain income tax positions since the adoption of FIN 48.

Effective November 28, 2006, GMAC, in connection with the Sale Transactions, along with certain U.S. subsidiaries, became disregarded or pass-through entities for U.S. federal income tax purposes. Our banking, insurance, and foreign subsidiaries are generally corporations and continue to be subject to and

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

provide for U.S. federal, state, and local, or foreign income taxes. With few exceptions, we are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years before 1999. We anticipate the Internal Revenue Service examination of our U.S. income tax returns for 2001 through 2003, along with examinations by various state and local jurisdictions, will be completed by the end of 2007. Therefore, it is possible that certain tax positions may be settled, and the unrecognized tax benefits would decrease by approximately $11 million over the next twelve months.

Recently Issued Accounting Standards

SFAS No. 157 — In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about fair value measurements. The standard applies when GAAP requires or allows assets or liabilities to be measured at fair value, and therefore, does not expand the use of fair value in any new circumstance. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an arm’s length transaction between market participants, in the markets where we conduct business. SFAS 157 clarifies that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to data lacking transparency. The level of the reliability of inputs utilized for fair value calculations drives the extent of disclosure requirements of the valuation methodologies used under the standard. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. The provisions of SFAS 157 should be applied prospectively, except for certain financial instruments for which the standard should be applied retrospectively. Management is assessing the potential impact on our consolidated financial condition and results of operations.

SFAS No. 158 — In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158), which amends SFAS No. 87, Employers’ Accounting for Pensions; SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits; SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions; and SFAS No. 132(R), Employers’ Disclosures about Pensions and Other Postretirement Benefits (revised 2003). This Statement requires companies to recognize an asset or liability for the overfunded or underfunded status of their benefit plans in their financial statements. The asset or liability is the offset to other accumulated comprehensive income, consisting of previously unrecognized prior service costs and credits, actuarial gains or losses, and accumulated transition obligations and assets. SFAS 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsor’s year end. The standard provides two transition alternatives for companies to make the measurement-date provisions. The recognition of asset and liability related to funded status provision is effective for us for fiscal years ending after June 15, 2007, and the change in measurement is effective for fiscal years ending after December 15, 2008. Adoption of this guidance is not expected to have a material impact on our consolidated financial condition or results of operations.

SFAS No. 159 — In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items will be required to be reported in earnings in the current period. SFAS 159 also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently assessing the effect of implementing this guidance, which directly depends on the nature and extent of eligible items elected to be measured at fair value, upon initial application of the standard on January 1, 2008.

FASB Staff Position (FSP) FIN 39-1 — In April 2007, the FASB issued FSP FIN 39-1, Amendment of FASB Interpretation No. 39. FSP FIN 39-1 defines “right of setoff” and specifies what conditions must be met

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

for a derivative contract to qualify for this right of setoff. It also addresses the applicability of a right of setoff to derivative instruments and clarifies the circumstances in which it is appropriate to offset amounts recognized for those instruments in the statement of financial position. In addition, this FSP permits offsetting of fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting arrangement and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. This interpretation is effective for fiscal years beginning after November 15, 2007, with early application permitted. The adoption of FSP FIN 39-1 is not expected to have a material impact on our condensed consolidated financial statements.

FSP FIN 48-1 — In May 2007, the FASB issued FSP FIN 48-1, Definition of Settlement in FASB Interpretation No. 48. FSP FIN 48-1 provides guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is applied retrospectively to our initial adoption of FIN 48 on January 1, 2007. The adoption of FSP FIN 48-1 did not have a material impact on our condensed consolidated financial statements.

2. Restatement of Previously Issued Condensed Consolidated Financial Statements

As previously disclosed in our 2006 Annual Report on Form 10-K, subsequent to the issuance of our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2006, management concluded that our hedge accounting documentation and hedge effectiveness assessment methodologies related to particular hedges of callable fixed-rate debt instruments funding our North American automotive operations did not satisfy the requirements of SFAS 133. One of the requirements of SFAS 133 is that hedge accounting is appropriate only for those hedging relationships for which a company has a sufficiently documented expectation that the relationships will be highly effective in achieving offsetting changes in fair values attributable to the risk being hedged at the inception of the hedging relationship. To determine whether transactions continue to satisfy this requirement, companies must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively.

Management determined that hedge accounting treatment should not have been applied to these hedging relationships. As a result, we should not have recorded any adjustments on the debt instruments included in the hedging relationships related to changes in fair value due to movements in the designated benchmark interest rate. Accordingly, we have restated our historical Condensed Consolidated Balance Sheet at June 30, 2006; our Condensed Consolidated Statement of Income for the three and six months ended June 30, 2006; and our Condensed Consolidated Statement of Changes in Equity for the six months ended June 30, 2006, from the amounts previously reported to remove the recorded adjustments on these debt instruments from our reported interest expense during 2006. The elimination of hedge accounting treatment introduces increased funding cost volatility in our restated results. The changes in the fair value of fixed rate debt previously recorded were affected by changes in the designated benchmark interest rate (LIBOR). Before the restatement, adjustments to record increases in the value of this debt occurred in periods when interest rates declined, and adjustments to record decreases in value were made in periods when interest rates rose. As a result, changes in the benchmark interest rates caused volatility in the debt’s fair value adjustments that were recognized in our historical earnings, which were mitigated by the changes in the value of the interest rate swaps in the hedge relationships. The interest rate swaps, which economically hedged these debt instruments prior to May 1, 2007, were recorded at fair value with changes in fair value recorded in earnings. Refer to Note 8 to the Condensed Consolidated Financial Statements for accounting treatment beginning May 1, 2007. We are also correcting certain other out-of-period errors that were deemed immaterial, individually and in the aggregate, in the periods in which they were originally recorded and identified. These items relate to transactions involving certain transfers of financial assets, valuations of certain financial instruments, amortization of unearned income on certain products, income taxes, and other inconsequential items. Because of this derivative restatement, we are correcting these amounts to record them in the proper period.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table sets forth a reconciliation of previously reported and restated net income for the period shown. The restatement decreased January 1, 2006 retained earnings to $15,095 million from $15,190 million. The decrease of $95 million was composed of a $191 million decrease for the elimination of hedge accounting for certain debt instruments and an increase of $96 million for other items previously deemed to be immaterial.


	Three months ended			Six months ended
($ in millions)	June 30, 2006			June 30, 2006

Previously reported net income		$900			$1,572
Elimination of hedge accounting related to certain debt instruments		(192	)		(383	)
Other, net		9			(70	)


Total pre-tax		(183	)		(453	)
Related income tax effects		70			164


Restated net income		$787			$1,283


% change		(13	)		(18	)

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the effects of the restatement on the Condensed Consolidated Statement of Income. Certain amounts in the previously reported columns have been reclassified to conform to the 2007 presentation. The most significant reclassifications relate to servicing fees; amortization and impairment of servicing rights; servicing asset valuation and hedge activities, net; and gain on sale of mortgage and automotive loans, which were previously included in mortgage banking income and other income and are now reflected as separate components of total net financing revenue and other income.


	Three months ended						Six months ended
	June 30, 2006						June 30, 2006
	Previously						Previously
($ in millions)	reported			Restated			reported			Restated

Revenue
Consumer		$2,548			$2,587			$5,114			$5,156
Commercial		782			782			1,508			1,508
Loans held for sale		371			371			851			851
Operating leases		2,026			2,026			3,954			3,954


Total financing revenue		5,727			5,766			11,427			11,469
Interest expense		3,819			4,023			7,380			7,836


Net financing revenue before provision for credit losses		1,908			1,743			4,047			3,633
Provision for credit losses		285			268			420			434


Net financing revenue		1,623			1,475			3,627			3,199
Servicing fees		446			446			918			918
Amortization and impairment of servicing rights		—			—			(23	)		(23	)
Servicing asset valuation and hedge activities, net		(171	)		(171	)		(356	)		(356	)


Net loan servicing income		275			275			539			539
Insurance premiums and service revenue earned		1,052			1,052			2,062			2,062
Gain on sale of mortgage and automotive loans, net		504			504			869			869
Investment income		297			297			555			555
Gain on sale of equity method investments, net		411			411			411			411
Other income		1,003			983			2,018			1,986


Total net financing revenue and other income		5,165			4,997			10,081			9,621
Expense
Depreciation expense on operating lease assets		1,346			1,346			2,786			2,786
Compensation and benefits expense		665			665			1,383			1,383
Insurance losses and loss adjustment expenses		653			653			1,250			1,250
Other operating expenses		1,171			1,186			2,344			2,337


Total noninterest expense		3,835			3,850			7,763			7,756
Income before income tax expense		1,330			1,147			2,318			1,865
Income tax expense		430			360			746			582


Net income		$900			$787			$1,572			$1,283

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the effects of the restatement on the Condensed Consolidated Balance Sheet.


	June 30, 2006
	Previously
($ in millions)	reported			Restated

Assets
Cash and cash equivalents		$17,186			$17,186
Investment securities		18,808			18,808
Loans held for sale		20,455			20,455
Finance receivables and loans, net of unearned income
Consumer		134,736			134,784
Commercial		47,568			47,568
Allowance for credit losses		(2,883	)		(2,866	)


Total finance receivables and loans, net		179,421			179,486
Investment in operating leases, net		34,495			34,495
Notes receivable from General Motors		5,140			5,140
Mortgage servicing rights		5,093			5,093
Premiums and other insurance receivables		2,147			2,147
Other assets		25,637			25,535


Total assets		$308,382			$308,345


Liabilities
Debt
Unsecured		$122,833			$123,506
Secured		124,945			124,945


Total debt		247,778			248,451
Interest payable		3,200			3,200
Unearned insurance premiums and service revenue		5,183			5,183
Reserves for insurance losses and loss adjustment expenses		2,642			2,642
Accrued expenses and other liabilities		23,041			22,713
Deferred income taxes		4,463			4,463


Total liabilities		286,307			286,652
Equity
Common stock and paid-in capital		5,760			5,760
Retained earnings		15,338			14,954
Accumulated other comprehensive income		977			979


Total equity		22,075			21,693


Total liabilities and equity		$308,382			$308,345

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents the effects of the restatement on the Condensed Consolidated Statement of Changes in Equity.


	Six months ended
	June 30, 2006
	Previously
($ in millions)	reported			Restated

Common stock and paid-in capital
Balance at January 1 and at June 30,		$5,760			$5,760
Retained earnings
Balance at January 1,		15,190			15,095
Net income		1,572			1,283
Cumulative effect of a change in accounting principle, net of income taxes:
Transfer of unrealized loss for certain available for sale securities to trading securities		(17	)		(17	)
Recognize mortgage service rights at fair value		4			4
Dividends paid		(1,411	)		(1,411	)


Balance at June 30,		15,338			14,954


Accumulated other comprehensive income
Balance at January 1,		828			830
Other comprehensive income		132			132
Transfer of unrealized loss for certain available for sale securities to trading securities		17			17


Balance at June 30,		977			979


Total equity
Balance at January 1,		21,778			21,685
Net income		1,572			1,283
Recognize mortgage servicing rights at fair value		4			4
Dividends paid		(1,411	)		(1,411	)
Other comprehensive income		132			132


Total equity at June 30,		$22,075			$21,693


Comprehensive income
Net income		$1,572			$1,283
Other comprehensive income		132			132
Recognize mortgage servicing rights at fair value		4			4


Comprehensive income		$1,708			$1,419

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

3. Other Income

Details of other income were as follows:


	Three months ended					Six months ended
	June 30,					June 30,
($ in millions)	2007		2006			2007		2006

Real estate related revenue and other investment income	$	158	$	202			$329		$344
Interest and service fees on transactions with GM (a)		85		147			159		294
Interest on cash equivalents		91		178			209		297
Other interest revenue		157		128			297		249
Full service leasing fees		80		71			155		135
Late charges and other administrative fees		43		41			87		82
Mortgage processing fees		31		41			64		116
Interest on restricted cash deposits		43		31			86		59
Insurance service fees		36		28			78		57
Factoring commissions		14		15			27		30
Specialty lending fees		10		15			21		30
Fair value adjustment on certain derivatives (b)		18		(14	)		35		(22	)
Other		20		100			104		315


Total other income	$	786	$	983		$	1,651	$	1,986


(a)	Refer to Note 9 to the Condensed Consolidated Financial Statements for a description of related party transactions.
(b)	Refer to Note 8 to the Condensed Consolidated Financial Statements for a description of derivative instruments and hedging activities.

4. Other Operating Expenses

Details of other operating expenses were as follows:


	Three months ended					Six months ended
	June 30,					June 30,
($ in millions)	2007			2006		2007			2006

Insurance commissions		$225			$211		$465			$454
Technology and communications expense		156			134		301			264
Professional services		106			111		199			216
Advertising and marketing		83			92		153			176
Premises and equipment depreciation		48			62		100			126
Rent and storage		60			54		114			121
Full service leasing vehicle maintenance costs		68			63		137			123
Lease and loan administration		53			53		106			107
Auto remarketing and repossession		49			75		93			122
Operating lease disposal (gain) loss		(18	)		21		(6	)		(28	)
Other		353			310		767			656


Total other operating expenses	$	1,183		$	1,186	$	2,429		$	2,337

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5. Finance Receivables and Loans

The composition of finance receivables and loans outstanding was as follows:

June 30, 2007

December 31, 2006

($ in millions)

Domestic

Foreign

Total

Domestic

Foreign

Total

Consumer

Retail automotive

$36,401

$22,572

$58,973

$40,568

$20,538

$61,106

Residential mortgages

59,552

3,113

62,665

65,928

3,508

69,436

Total consumer

95,953

25,685

121,638

106,496

24,046

130,542

Commercial

Automotive:

Wholesale

16,173

8,435

24,608

12,723

7,854

20,577

Leasing and lease financing

338

868

1,206

326

901

1,227

Term loans to dealers and other

2,021

802

2,823

1,843

764

2,607

Commercial and industrial

9,212

2,592

11,804

14,068

2,213

16,281

Real estate construction and other

3,169

408

3,577

2,969

243

3,212

Total commercial

30,913

13,105

44,018

31,929

11,975

43,904

Total finance receivables and loans (a)

$126,866

$38,790

$165,656

$138,425

$36,021

$174,446


	(a)	Net of unearned income of $5.3 billion and $5.7 billion as of June 30, 2007, and December 31, 2006, respectively.

The following table presents an analysis of the activity in the allowance for credit losses on finance receivables and loans.


	Three months ended June 30,
	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total

Allowance at April 1,		$3,070			$663			$3,733			$2,542			$369			$2,911
Provision for credit losses		384			46			430			241			30			271
Charge-offs
Domestic		(417	)		(303	)		(720	)		(320	)		(24	)		(344	)
Foreign		(46	)		(5	)		(51	)		(39	)		(3	)		(42	)


Total charge-offs		(463	)		(308	)		(771	)		(359	)		(27	)		(386	)


Recoveries
Domestic		53			4			57			50			2			52
Foreign		17			1			18			11			—			11


Total recoveries		70			5			75			61			2			63


Net charge-offs		(393	)		(303	)		(696	)		(298	)		(25	)		(323	)
Impacts of foreign currency translation		1			(4	)		(3	)		6			—			6
Securitization activity		—			—			—			1			—			1


Allowance at June 30,		$3,062			$402			$3,464			$2,492			$374			$2,866

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Six months ended June 30,
	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total

Allowance at January 1,		$2,969			$607			$3,576			$2,652			$433			$3,085
Provision for credit losses		884			227			1,111			429			5			434
Charge-offs
Domestic		(843	)		(382	)		(1,225	)		(641	)		(70	)		(711	)
Foreign		(87	)		(56	)		(143	)		(85	)		(4	)		(89	)


Total charge-offs		(930	)		(438	)		(1,368	)		(726	)		(74	)		(800	)


Recoveries
Domestic		110			5			115			103			6			109
Foreign		28			1			29			24			3			27


Total recoveries		138			6			144			127			9			136


Net charge-offs		(792	)		(432	)		(1,224	)		(599	)		(65	)		(664	)
Impacts of foreign currency translation		1			—			1			8			1			9
Securitization activity		—			—			—			2			—			2


Allowance at June 30,		$3,062			$402			$3,464			$2,492			$374			$2,866

6. Mortgage Servicing Rights

The following table summarizes activity related to mortgage servicing rights (MSRs) carried at fair value.


	Six months ended
	June 30,
($ in millions)	2007			2006

Estimated fair value at January 1,		$4,930			$4,021
Additions obtained from sales of financial assets		928			770
Additions from purchases of servicing rights		—			5
Changes in fair value:
Due to changes in valuation inputs or assumptions used in the valuation model		506			654
Other changes in fair value		(322	)		(355	)
Other changes that affect the balance		(1	)		(2	)


Estimated fair value at June 30,		$6,041			$5,093

As of June 30, 2007, we pledged MSRs of $3.2 billion as collateral for borrowings, compared to $2.4 billion as of December 31, 2006. For a description of MSRs and the related hedging strategy, refer to Notes 9 and 15 to our 2006 Annual Report on Form 10-K.

Changes in fair value, due to changes in valuation inputs or assumptions used in the valuation models, include all changes due to a revaluation by a model or by a benchmarking exercise. This line item also includes changes in fair value resulting from a change in valuation assumptions or model calculations or both. Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and the economic run-off of the portfolio, as well as foreign currency adjustments and the extinguishment of MSRs related to clean-up calls of securitization transactions.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Key assumptions we use in valuing our MSRs are as follows:


	June 30,
	2007			2006

Range of prepayment speeds		0.0–39.7	%		7.0–38.5	%
Range of discount rates		8.0–13.0	%		8.0–14.0	%

The primary risk of our servicing rights is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher-than-expected prepayments, which could reduce the value of the MSRs. We economically hedge the income statement impact of these risks with both derivative and non-derivative financial instruments. These instruments include interest rate swaps, caps and floors, options to purchase these items, futures, and forward contracts or purchasing or selling U.S. Treasury and principal-only securities. At June 30, 2007, the fair value of derivative financial instruments and non-derivative financial instruments used to mitigate these risks amounted to $127 million and $1 billion, respectively. The change in the fair value of the derivative financial instruments amounted to a loss of $638 million and $655 million for the six months ended June 30, 2007 and 2006, respectively, and is included in servicing asset valuation and hedge activities, net in the Condensed Consolidated Statement of Income.

The components of servicing fees were as follows:


	Six months ended
	June 30,
($ in millions)	2007		2006

Contractual servicing fees, net of guarantee fees and including subservicing		$764		$640
Late fees		74		62
Ancillary fees		61		59


Total		$899		$761

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7. Debt

In the following table, we classify domestic and foreign debt on the basis of the location of the office recording the transaction.


	June 30, 2007									December 31, 2006
($ in millions)	Domestic			Foreign			Total			Domestic			Foreign			Total

Short-term debt
Commercial paper		$724			$1,278			$2,002			$742			$781			$1,523
Demand notes		6,372			216			6,588			5,917			157			6,074
Bank loans and overdrafts		887			6,272			7,159			991			5,272			6,263
Repurchase agreements and other (a)		17,039			6,446			23,485			22,506			7,232			29,738


Total short-term debt		25,022			14,212			39,234			30,156			13,442			43,598
Long-term debt
Senior indebtedness:
Due within one year		16,166			15,278			31,444			20,010			15,204			35,214
Due after one year		128,367			26,168			154,535			135,693			22,589			158,282


Total long-term debt		144,533			41,446			185,979			155,703			37,793			193,496
Fair value adjustment (b)		(644	)		(115	)		(759	)		(3	)		(106	)		(109	)


Total debt		$168,911			$55,543			$224,454			$185,856			$51,129			$236,985


(a)	Repurchase agreements consist of secured financing arrangements with third parties at our mortgage operations. Other primarily includes non-bank secured borrowings, as well as Notes payable to GM. Refer to Note 9 to our Condensed Consolidated Financial Statements for further details.
(b)	To adjust designated fixed rate debt for changes in fair value resulting from changes in the designated benchmark interest rate in accordance with SFAS 133.

The following table summarizes assets that are restricted as collateral for the payment of related debt obligations. These restrictions primarily arise from securitization transactions accounted for as secured borrowings and repurchase agreements.

June 30, 2007

December 31, 2006

Related

secured

secured

($ in millions)

Assets

debt (a)

Assets

debt (a)

Loans held for sale

$14,903

$12,773

$22,834

$20,525

Mortgage assets held for investment and lending receivables

69,482

58,088

80,343

68,333

Retail automotive finance receivables

27,778

21,122

20,944

18,858

Wholesale automotive finance receivables

287

152

376

240

Investment securities

4,273

4,449

3,662

4,523

Investment in operating leases, net

13,364

12,157

6,851

6,456

Real estate investments and other assets

9,583

4,897

8,025

4,550

Total

$139,670

$113,638

$143,035

$123,485


(a)	Included as part of secured debt are repurchase agreements of $9.0 billion and $11.5 billion where we have pledged assets, reflected as investment securities as collateral for approximately the same amount of debt at June 30, 2007, and December 31, 2006, respectively.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Liquidity Facilities

Liquidity facilities represent additional funding sources. The financial institutions providing the uncommitted facilities are not legally obligated to advance funds under them. The following table summarizes the liquidity facilities that we maintain.


	Committed				Uncommitted				Total liquidity				Unused liquidity
	facilities				facilities				facilities				facilities
	Jun 30,		Dec 31,		Jun 30,		Dec 31,		Jun 30,		Dec 31,		Jun 30,		Dec 31,
($ in billions)	2007		2006		2007		2006		2007		2006		2007		2006

Automotive Finance operations:
Syndicated multi-currency global credit facilities (a)		$6.0		$7.6		$—		$—		$6.0		$7.6		$6.0		$7.6
ResCap (b)		3.9		3.9		2.0		1.9		5.9		5.8		3.0		2.7
Other:
U.S. asset-backed commercial paper liquidity and receivables facilities (c)		12.0		18.3		—		—		12.0		18.3		12.0		18.3
Other foreign facilities (d)		3.5		3.3		10.3		8.8		13.8		12.1		4.1		3.1


Total bank liquidity facilities		25.4		33.1		12.3		10.7		37.7		43.8		25.1		31.7


Secured funding facilities Automotive Finance operations (e)		48.0		36.6		—		—		48.0		36.6		17.2		9.8
ResCap (f)		32.4		29.4		100.5		73.3		132.9		102.7		99.7		59.7
Whole-loan forward flow agreements		42.5		45.5		—		—		42.5		45.5		42.5		45.5
Other (g)		3.0		3.9		—		—		3.0		3.9		1.1		2.3


Total secured funding facilities		125.9		115.4		100.5		73.3		226.4		188.7		160.5		117.3


Total		$151.3		$148.5		$112.8		$84.0		$264.1		$232.5		$185.6		$149.0


(a)	The entire $6.0 is available for use in the United States, $0.7 is available for use by GMAC International Finance B.V. and $0.5 is available for use by General Motors Acceptance Corporation (UK) plc.
(b)	ResCap maintains $3.9 of syndicated bank facilities, consisting of a $1.8 syndicated term loan committed through July 2008, an $875 million syndicated line of credit committed through June 2010, an $875 million syndicated line of credit committed through June 2008, and a $386 million Canadian syndicated bank line committed through December 2007.
(c)	Relates to New Center Asset Trust (NCAT), which is a special purpose entity administered by us for the purpose of funding assets as part of our securitization funding programs. This entity funds assets primarily through the issuance of asset-backed commercial paper and it represents an important source of liquidity to us. At June 30, 2007, NCAT had commercial paper outstanding of $6.5, which is not included in the Condensed Consolidated Balance Sheet.
(d)	Consists primarily of committed and uncommitted credit facilities supporting operations in Canada, Europe, Latin America and Asia-Pacific.
(e)	Consists primarily of U.S. and international conduits, a $6 variable note funding facility, as well as a $10 facility with a subsidiary of Citigroup.

(f)

ResCap’s primary sources of secured funding include whole-loan sales, secured aggregation facilities, asset-backed commercial paper facilities, and repurchase agreements. ResCap’s collateralized borrowings in securitized trusts totaled $45.1 and $53.3 as of June 30, 2007, and December 31, 2006, respectively. In addition, MINT I, LLC (MINT I) was created during the second quarter of 2007 to provide ResCap with additional financing through the issuance of extendable notes, which are secured by mortgage loans and warehouse lending receivables. MINT I is an on-balance sheet secured aggregation vehicle that provides us with financing for mortgage loans during the aggregation period and for warehouse lending receivables. MINT I obtains financing through the issuance of extendable notes, which are secured by the mortgage loans and warehouse lending receivables. As of June 30, 2007, MINT I had uncommitted liquidity of approximately $25 with approximately $106 million of extendable notes outstanding.


(g)	Consists primarily of Commercial Finance secured funding facilities.

The syndicated multi-currency global credit facilities include a $3.0 billion five-year facility (expires June 2012) and a $3.0 billion 364-day facility (expires June 2008). The 364-day facility includes a term-out option, which if exercised by us before expiration, carries a one-year term. Additionally, a leverage covenant

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

in the liquidity facilities and certain other funding facilities restricts the ratio of consolidated borrowed funds (excluding certain obligations of bankruptcy-remote special purpose entities) to consolidated net worth (including the existing preferred membership interests) to be no greater than 11.0:1, under certain conditions.

More specifically, the covenant is only applicable on the last day of any fiscal quarter (other than the fiscal quarter during which a change in rating occurs) during such times that we have senior, unsecured, long-term debt outstanding, without third-party enhancement, which is rated BBB+ or less (by Standard & Poor’s), or Baa1 or less (by Moody’s).

Our leverage ratio covenant was 8.0:1 at June 30, 2007; therefore we are in compliance with this covenant as of this date.

8. Derivative Instruments and Hedging Activities

We enter into interest rate and foreign-currency futures, forwards, options, and swaps in connection with our market risk management activities. In accordance with SFAS 133, as amended, we record derivative financial instruments on the balance sheet as assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative financial instrument and whether it qualifies for hedge accounting treatment.

Effective May 1, 2007, we designated certain interest rate swaps as fair value hedges of callable fixed-rate debt instruments funding our North American automotive operations. Prior to May 1, 2007, these swaps were economic hedges of this callable fixed rate debt.

Effectiveness of these hedges is assessed using regression of thirty quarterly data points for each relationship, the results of which must meet thresholds for R-squared, slope, F-statistic, and T-statistic. Any ineffectiveness measured in these relationships is recorded in earnings.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the pre-tax earnings effect for each type of hedge classification, segregated by the asset or liability being hedged.


	Three months ended June 30,						Six months ended June 30,
($ in millions)	2007			2006			2007			2006			Income statement classification

Fair value hedge ineffectiveness (loss) gain:
Debt obligations		($78	)		$—			($78	)		$—		Interest expense
Loans held for sale		—			1			(1	)		1		Gain on sale of mortgage and automotive loans, net
Cash flow hedge ineffectiveness gain:
Debt obligations		—			—			—			1		Interest expense
Economic hedge change in fair value:
Off-balance sheet securitization activities:
Financing operations		19			(13	)		30			(21	)	Other income
Foreign-currency debt (a)		(6	)		6			—			58		Interest expense, Other operating expenses
Loans held for sale or investment		214			48			179			158		Gain on sale of mortgage and automotive loans, net
Mortgage servicing rights		(596	)		(275	)		(638	)		(655	)	Servicing asset valuation and hedge activities, net
Mortgage related securities		(54	)		(23	)		(68	)		(30	)	Investment income
Callable debt obligations		(12	)		(225	)		35			(454	)	Interest expense
Other		(11	)		10			(13	)		26		Other income, Interest expense, Other operating expenses


Net losses		($524	)		($471	)		($554	)		($916	)


(a)	Amount represents the difference between the changes in the fair values of the currency swap, net of the revaluation of the related foreign-denominated debt.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

9. Related Party Transactions

Balance Sheet

A summary of the balance sheet effect of transactions with GM, FIM Holdings and affiliated companies follows:


	June 30,			December 31,
($ in millions)	2007			2006

Assets:
Available for sale investment in asset-backed security (a)		$406			$471
Finance receivables and loans, net of unearned income
Wholesale auto financing (b)		816			938
Term loans to dealers (b)		200			207
Lending receivables (c)		234			—
Investment in operating leases, net (d)		303			290
Notes receivable from GM (e)		2,118			1,975
Other assets
Receivable related to taxes due from GM (f)		—			317
Other		54			50
Liabilities:
Unsecured debt
Notes payable to GM		422			60
Other		2			—
Accrued expenses and other liabilities
Wholesale payable		1,000			499
Subvention receivables (rate and residual support)		(427	)		(309	)
Lease pull ahead receivable		(62	)		(62	)
Other (payables) receivables		42			(100	)
Preferred interests		2,226			2,195
Equity:
Dividends to members (g)		—			9,739
Capital contributions received (h)		1,033			951
Preferred interest accretion to redemption value and dividends		104			295


	(a)	In November 2006, GMAC retained an investment in a note secured by operating lease assets transferred to GM. As part of the transfer, GMAC provided a note to a trust, a wholly owned subsidiary of GM. The note is classified in Investment securities on our Condensed Consolidated Balance Sheet.
	(b)	Represents wholesale financing and term loans to certain dealerships wholly owned by GM or in which GM has an interest.
	(c)	Primarily represents loans with various affiliates of FIM Holdings.
	(d)	Includes vehicles, buildings, and other equipment classified as operating lease assets that are leased to GM-affiliated and FIM Holdings-affiliated entities.
	(e)	Includes borrowing arrangements related to our funding of GM company-owned vehicles, rental car vehicles awaiting sale at auction, our funding of the sale of GM vehicles through the use of overseas distributors, and amounts related to GM trade supplier finance program. In addition, we provide wholesale financing to GM for vehicles, parts, and accessories in which GM retains title while consigned to us or dealers in the UK, Italy, and Germany. The financing to GM remains outstanding until the title is transferred to the dealers. The amount of financing provided to GM under this arrangement varies based on inventory levels.


	(f)	In November 2006, GMAC transferred NOL tax receivables to GM for entities converting to an LLC. For all non-converting entities, the amount was reclassified to deferred income taxes on the Condensed Consolidated Balance Sheet. At December 31, 2006, this balance represents a 2006 overpayment of taxes from GMAC to GM under our former tax-sharing arrangement and was included in Accrued expenses and other liabilities on our Consolidated Balance Sheet. At June 30, 2007, this balance was included in Notes receivable from GM on the Condensed Consolidated Balance Sheet. The note bears interest at a fixed annual rate of 7% and is due in quarterly installments of interest only starting June 15, 2007, with one final payment of all unpaid amounts on December 15, 2007.


	(g)	Amount includes cash dividends of $4.8 billion and non-cash dividends of $4.9 billion in 2006. During the fourth quarter of 2006, in connection with the Sale Transactions, GMAC paid $7.8 billion of dividends to GM, which was composed of the following: (i) a cash dividend of $2.7 billion representing a one-time distribution to GM primarily to reflect the increase in GMAC’s equity resulting from the elimination of a portion of our net deferred tax liabilities arising from the conversion of GMAC and certain of our subsidiaries to a limited liability company; (ii) certain assets with respect to automotive leases owned by GMAC and its affiliates having a net book value of approximately $4.0 billion and related deferred tax liabilities of $1.8 billion; (iii) certain Michigan properties with a carrying value of approximately $1.2 billion to GM; (iv) intercompany receivables from GM related to tax attributes of $1.1 billion; (v) net contingent tax assets of $491; and (vi) other miscellaneous transactions.
	(h)	During the first quarter of 2007, under the terms of the Sale Transactions, GM made a capital contribution of $1 billion to GMAC. The amount in 2006 was composed of the following: (i) approximately $801 of liabilities related to U.S. and Canadian-based, GM-sponsored other postretirement programs and related deferred tax assets of $302; (ii) contingent tax liabilities of $384 assumed by GM; and (iii) deferred tax assets transferred from GM of $68.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Income Statement

A summary of the income statement effect of transactions with GM, FIM Holdings, and affiliated companies follows:


	Three months ended						Six months ended
	June 30,						June 30,
($ in millions)	2007			2006			2007			2006

Net financing revenue:
GM and affiliates lease residual value support (a)		$233			$208			$450			$375
Wholesale subvention and service fees from GM		66			45			131			88
Interest paid on loans with GM		(5	)		(10	)		(4	)		(27	)
Interest on loans with FIM Holdings affiliates		4			—			11			—
Consumer lease payments from GM (b)		5			21			12			61
Insurance premiums earned from GM		63			77			129			157
Other income:
Interest on notes receivable from GM and affiliates		33			67			65			136
Interest on wholesale settlements (c)		49			49			87			93
Revenues from GM leased properties, net		3			28			6			54
Derivatives (d)		5			—			8			—
Service fee income:
Rental car repurchases held for resale (e)		—			4			—			11
U.S. Automotive operating leases (f)		9			—			13			—
Expense:
Employee retirement plan costs allocated by GM		—			30			—			64
Off-lease vehicle selling expense reimbursement (g)		(9	)		8			(17	)		14
Payments to GM for services, rent and marketing expenses (h)		35			24			76			47


	(a)	Represents total amount of residual support and risk sharing earned under the residual support and risk sharing programs and earned revenue previously deferred related to the settlement of residual support and risk sharing obligations in 2006 for a portion of the lease portfolio.
	(b)	GM sponsors lease pull-ahead programs whereby consumers are encouraged to terminate lease contracts early in conjunction with the acquisition of a new GM vehicle, with the customer’s remaining payment obligation waived. For certain programs, GM compensates us for the waived payments, adjusted based on the remarketing results associated with the underlying vehicle.
	(c)	The settlement terms related to the wholesale financing of certain GM products are at shipment date. To the extent that wholesale settlements with GM are made before the expiration of transit, we receive interest from GM.
	(d)	Represents income related to derivative transactions that we enter into with GM as counterparty.
	(e)	Represents a servicing fee from GM related to the resale of rental car repurchases. At December 31, 2006, this program was terminated.


	(f)	Represents servicing income related to automotive leases distributed to GM on November 22, 2006.


	(g)	An agreement with GM provides for the reimbursement of certain selling expenses incurred by us on off-lease vehicles sold by GM at auction.
	(h)	We reimburse GM for certain services provided to us. This amount includes rental payments for our primary executive and administrative offices located in the Renaissance Center in Detroit, Michigan.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Retail and Lease Programs

GM may elect to sponsor incentive programs (on both retail contracts and operating leases) by supporting financing rates below the standard market rates at which we purchase retail contracts and leases. These marketing incentives are also referred to as rate support or subvention. When GM utilizes these marketing incentives, it pays us the present value of the difference between the customer rate and our standard rate at contract inception, which we defer and recognize as a yield adjustment over the life of the contract.

GM may also sponsor lease residual support programs as a way to lower customer monthly payments. Under residual support programs, the customer’s contractual residual value is adjusted above our standard residual values. Historically, GM reimbursed us at the time of the vehicle’s disposal if remarketing sales proceeds were less than the customer’s contractual residual value limited to our standard residual value. In addition to residual support programs, GM also participated in a risk sharing arrangement whereby GM shared equally in residual losses to the extent that remarketing proceeds were below our standard residual values (limited to a floor).

In connection with the Sale Transactions, GM settled its estimated liabilities with respect to residual support and risk sharing on a portion of our operating lease portfolio and on the entire U.S. balloon retail receivables portfolio in a series of lump-sum payments. A negotiated amount totaling approximately $1.4 billion was agreed to by GM under these leases and balloon contracts and was paid to us. The payments were recorded as a deferred amount in Accrued expenses and other liabilities in our Condensed Consolidated Balance Sheet. As these contracts terminate and the vehicles are sold at auction, the payments are treated as a component of sales proceeds in recognizing the gain or loss on sale of the underlying assets.

In addition, with regard to U.S. lease originations and all U.S. balloon retail contract originations occurring after April 30, 2006, that remained with us after the consummation of the Sale Transactions, GM agreed to begin payment of the present value of the expected residual support owed to us at the time of contract origination as opposed to after contract termination at the time of sale of the related vehicle. The residual support amount GM actually owes us is finalized as the leases actually terminate. Under the terms of the residual support program, in cases where the estimate was incorrect, GM may be obligated to pay us, or we may be obligated to reimburse GM. For the affected contracts originated during the three months and six months ended June 30, 2007, GM paid or agreed to pay us a total of $327 million and $607 million in 2007, respectively.

Based on the June 30, 2007 outstanding U.S. operating lease portfolio, the additional maximum amount that could be paid by GM under the residual support programs is approximately $662 million and would only be paid in the unlikely event that the proceeds from the entire portfolio of lease assets were lower than both the contractual residual value and our standard residual rates. Based on the June 30, 2007 outstanding U.S. operating lease portfolio, the maximum amount that could be paid under the risk sharing arrangements is approximately $781 million and would only be paid in the unlikely event that the proceeds from all outstanding lease vehicles were lower than our standard residual rates.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Retail and lease contracts acquired by us that included rate and residual subvention from GM, payable directly or indirectly to GM dealers as a percent of total new retail and lease contracts acquired, are noted in the table.


	Six months ended
	June 30,
	2007		2006

GM and affiliates subvented contracts acquired:
North American operations		86%		89	%
International operations (a)		42%		57	%


	(a)	The decrease in 2007 is primarily due to a price repositioning in Mexico, which improved the competitiveness of non-subvented products and increased Mexico’s retail penetration by 4% in comparison with 2006 levels.

As a result of GM-sponsored rate incentive programs, our North American operations recognized $359 million and $351 million in consumer financing revenue as yield adjustments on GM subvented retail loans for the three months ended June 30, 2007 and 2006, respectively, and $727 and $729 for the six months ended June 30, 2007 and 2006, respectively.

Other

We have entered into various services agreements with GM that are designed to document and maintain the current and historical relationship between us. We are required to pay GM fees in connection with certain of these agreements related to our financing of GM consumers and dealers in certain parts of the world.

GM also provides payment guarantees on certain commercial assets we have outstanding with certain third-party customers. As of June 30, 2007, and December 31, 2006, commercial obligations guaranteed by GM were $115 million and $216 million, respectively. In addition, we have a consignment arrangement with GM for commercial inventories in Europe. As of June 30, 2007, and December 31, 2006, commercial inventories related to this arrangement were $105 million and $151 million, respectively, and are reflected in Other assets in the Condensed Consolidated Balance Sheet.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

10. Segment Information

Financial results for our reporting segments are summarized below.


	Automotive Finance
	operations (a)
	North
Three months ended June 30,	American			International						Insurance
($ in millions)	operations (a)			operations (b)			ResCap			operations		Other (c)			Consolidated

2007
Net financing revenue before provision for credit losses		$1,021			$452			$57			$—		$51			$1,581
Provision for credit losses		(67	)		(36	)		(327	)		—		—			(430	)
Other revenue		757			129			788			1,166		27			2,867


Total net financing revenue and other income		1,711			545			518			1,166		78			4,018
Noninterest expense		1,391			434			722			978		41			3,566


Income (loss) before income tax expense		320			111			(204	)		188		37			452
Income tax expense		18			31			50			57		3			159


Net income (loss)		$302			$80			($254	)		$131		$34			$293


Total assets		$130,860			$27,107			$116,890			$13,956		($9,535	)		$279,278


2006
Net financing revenue before provision for credit losses		$972			$400			$263			$—		$108			$1,743
Provision for credit losses		(130	)		(22	)		(123	)		—		7			(268	)
Other revenue		823			131			1,434			1,157		(23	)		3,522


Total net financing revenue and other income		1,665			509			1,574			1,157		92			4,997
Noninterest expense		1,642			408			695			1,040		65			3,850


Income before income tax expense		23			101			879			117		27			1,147
Income tax (benefit) expense		(40	)		27			331			37		5			360


Net income		$63			$74			$548			$80		$22			$787


Total assets		$157,131			$23,827			$124,552			$13,475		($10,640	)		$308,345


(a)	North American operations consists of automotive financing in the United States and Canada, and certain other corporate activities. International operations consists of automotive financing and full service leasing in all other countries and Puerto Rico through March 31, 2006. Beginning April 1, 2006, Puerto Rico has been included in North American operations.
(b)	Amounts include intra-segment eliminations between the North American operations and International operations.
(c)	Represents our Commercial Finance business, equity interest in Capmark, certain corporate activities related to mortgage activities, and reclassifications and eliminations between the reporting segments.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	Automotive Finance
	operations (a)
	North
Six months ended June 30,	American			International						Insurance
($ in millions)	operations (a)			operations (b)			ResCap			operations		Other (c)			Consolidated

2007
Net financing revenue before provision for credit losses		$1,965			$899			$230			$—		$112			$3,206
Provision for credit losses		(165	)		(73	)		(869	)		—		(4	)		(1,111	)
Other revenue		1,525			250			1,116			2,338		74			5,303


Total net financing revenue and other income		3,325			1,076			477			2,338		182			7,398
Noninterest expense		2,692			841			1,532			1,959		77			7,101


Income (loss) before income tax expense		633			235			(1,055	)		379		105			297
Income tax expense		25			63			110			105		6			309


Net income (loss)		$608			$172			($1,165	)		$274		$99			($12	)


2006
Net financing revenue before provision for credit losses		$2,003			$803			$527			$—		$300			$3,633
Provision for credit losses		(144	)		(15	)		(245	)		—		(30	)		(434	)
Other revenue		1,564			296			2,234			2,298		30			6,422


Total net financing revenue and other income		3,423			1,084			2,516			2,298		300			9,621
Noninterest expense		3,315			798			1,297			1,995		351			7,756


Income (loss) before income tax expense		108			286			1,219			303		(51	)		1,865
Income tax expense (benefit)		(12	)		83			469			94		(52	)		582


Net income		$120			$203			$750			$209		$1			$1,283


(a)	North American operations consists of automotive financing in the United States and Canada, and certain other corporate activities. International operations consists of automotive financing and full service leasing in all other countries and Puerto Rico through March 31, 2006. Beginning April 1, 2006, Puerto Rico has been included in North American operations.
(b)	Amounts include intra-segment eliminations between the North American operations and International operations.
(c)	Represents our Commercial Finance business, equity interest in Capmark, certain corporate activities related to mortgage activities, and reclassifications and eliminations between the reporting segments.


Item 2.	Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Overview

GMAC is a leading, independent, globally diversified, financial services firm with approximately $279 billion of assets and operations in approximately 40 countries. Founded in 1919 as a wholly owned subsidiary of General Motors Corporation (General Motors or GM), GMAC was originally established to provide GM dealers with the automotive financing necessary for the dealers to acquire and maintain vehicle inventories and to provide retail customers the means by which to finance vehicle purchases through GM dealers. On November 30, 2006, GM sold a 51% interest in us for approximately $7.4 billion (the Sale Transactions) to FIM Holdings LLC (FIM Holdings), an investment consortium led by Cerberus FIM Investors LLC, the sole managing member. The consortium also includes Citigroup Inc., Aozora Bank Ltd., and a subsidiary of The PNC Financial Services Group, Inc.

Our products and services have expanded beyond automotive financing as we currently operate in the following lines of business — Automotive Finance, Mortgage (Residential Capital, LLC or ResCap), and Insurance. The following table summarizes the operating results of each line of business for the three months and six months ended June 30, 2007 and 2006. Operating results for each of the lines of business are more fully described in the MD&A sections that follow.


	Three months ended								Six months ended
	June 30,								June 30,
						2007-2006								2007-2006
($ in millions)	2007			2006		% Change			2007			2006		% Change

Net financing revenue and other income
Automotive Finance	$	2,256			$2,174		4			$4,401		$	4,507		(2	)
ResCap		518			1,574		(67	)		477			2,516		(81	)
Insurance		1,166			1,157		1			2,338			2,298		2
Other		78			92		(15	)		182			300		(39	)
Net income (loss)
Automotive Finance	$	382			$137		179			$780		$	323		141
ResCap		(254	)		548		(146	)		(1,165	)		750		(255	)
Insurance		131			80		64			274			209		31
Other		34			22		55			99			1		n/m


	n/m =	not meaningful


•	Our Automotive Finance operations offer a wide range of financial services and products (directly and indirectly) to retail automotive consumers, automotive dealerships, and other commercial businesses. Our Automotive Finance operations consist of two separate reporting segments — North American Automotive Finance operations and International Automotive Finance operations. The products and services offered by our Automotive Finance operations include the purchase of retail installment sales contracts and leases, offering of term loans, dealer floor plan financing and other lines of credit to dealers, fleet leasing, and vehicle remarketing services. While most of our operations focus on prime automotive financing to and through GM or GM-affiliated dealers, our Nuvell operation, which is part of our North American Automotive Finance operations, focuses on nonprime automotive financing to GM-affiliated and non-GM dealers. Our Nuvell operation also provides private-label automotive financing. In addition, our Automotive Financing operations utilize asset securitization and whole-loan sales as a critical component of our diversified funding strategy.

•	Our ResCap operations engage in the origination, purchase, servicing, sale, and securitization of consumer (i.e., residential) and mortgage loans and mortgage-related products (e.g., real estate services). Typically, mortgage loans are originated and sold to investors in the secondary market, including securitization transactions in which the assets are legally sold but are accounted for as secured financings. In March 2005, we transferred ownership of GMAC Residential and GMAC-RFC to a newly formed, wholly owned,

subsidiary holding company, ResCap. As part of this transfer of ownership, certain agreements were put in place between ResCap and us that restrict ResCap’s ability to declare dividends or prepay subordinated indebtedness owed to us. While we believe the restructuring of these operations and the agreements between ResCap and us allow ResCap to access more attractive sources of capital, the agreements inhibit our ability to return funds for dividends and debt payments. For additional information, please refer to ResCap’s Annual Report on Form 10-K for the period ended December 31, 2006, filed separately with the SEC, which is not deemed incorporated into any of our filings under the Securities Act or the Exchange Act.


•	Our Insurance operations offer vehicle service contracts and underwrite personal automobile insurance coverage (ranging from preferred to non-standard risks) and selected commercial insurance and reinsurance coverage. We are a leading provider of vehicle service contracts with mechanical breakdown and maintenance coverages. Our vehicle service contracts offer vehicle owners and lessees mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer’s new vehicle warranty. We underwrite and market non-standard, standard, and preferred-risk physical damage and liability insurance coverages for passenger automobiles, motorcycles, recreational vehicles, and commercial automobiles through independent agency, direct response, and internet channels. Additionally, we market private-label insurance through a long-term agency relationship with Homesite Insurance, a national provider of home insurance products. We provide commercial insurance, primarily covering dealers’ wholesale vehicle inventory, and reinsurance products. Internationally, ABA Seguros provides certain commercial business insurance exclusively in Mexico.

•	Other operations consist of our Commercial Finance Group, an equity investment in Capmark (our former commercial mortgage operations), certain corporate activities, and reclassifications and eliminations between the reporting segments.

Restatement of Condensed Consolidated Financial Statements

The accompanying MD&A considers the effects of the restatement described in Notes 1 and 2 to our Condensed Consolidated Financial Statements.

Consolidated Results of Operations

The following table summarizes our consolidated operating results for the periods shown. Refer to the following operating results by line of business for a more complete discussion.


	Three months ended									Six months ended
	June 30,									June 30,
							2007-2006									2007-2006
($ in millions)	2007			2006			% change			2007			2006			% change

Revenue
Total financing revenue		$5,316			$5,766			(8	)		$10,613			$11,469			(7	)
Interest expense		(3,735	)		(4,023	)		(7	)		(7,407	)		(7,836	)		(5	)
Provision for credit losses		(430	)		(268	)		60			(1,111	)		(434	)		156
Net financing revenue		1,151			1,475			(22	)		2,095			3,199			(35	)
Net loan servicing income		404			275			47			662			539			23
Insurance premiums and service revenue earned		1,051			1,052			—			2,092			2,062			1
Gain on sale of mortgage and automotive loans, net		399			504			(21	)		363			869			(58	)
Investment income		227			297			(24	)		535			555			(4	)
Gain on sale of equity method investments, net		—			411			(100	)		—			411			(100	)
Other income		786			983			(20	)		1,651			1,986			(17	)
Total net financing revenue and other income		4,018			4,997			(20	)		7,398			9,621			(23	)
Depreciation expense on operating lease assets		(1,173	)		(1,346	)		(13	)		(2,255	)		(2,786	)		(19	)
Insurance losses and loss adjustment expenses		(563	)		(653	)		(14	)		(1,136	)		(1,250	)		(9	)
Other expense		(1,830	)		(1,851	)		(1	)		(3,710	)		(3,720	)		—
Income before income tax expense		452			1,147			(61	)		297			1,865			(84	)
Income tax expense		(159	)		(360	)		(56	)		(309	)		(582	)		(47	)
Net income (loss)		$293			$787			(63	)		($12	)		$1,283			(101	)

We reported net income of $293 million for the three months ended June 30, 2007, compared to $787 million for the same period in 2006, and a net loss of $12 million for the six months ended June 30, 2007, compared to net income of $1.3 billion for the same period in 2006. This reflects strong earnings in the global automotive finance and insurance businesses which offset losses in our ResCap business, which continued to be adversely affected by a decline in the residential housing market and deterioration in the nonprime securitization market in the United States.

Total financing revenue decreased by 8% and 7% in the three months and six months ended June 30, 2007, compared to the same periods in 2006, primarily due to decreases in operating lease income. Operating lease income declined 15% in the three months ended June 30, 2007, and 17% in the first six months of 2007, as compared to 2006, due to a reduction in our operating lease portfolio, which was primarily driven by the transfer of operating lease assets to GM during November 2006, as part of the Sale Transactions. Similarly, depreciation expense decreased 13% in the three months ended June 30, 2007, and 19% in the first six months of 2007, compared to the same periods in 2006, as a result of this reduction.

Interest expense decreased 7% and 5% in the three months and six months ended June 30, 2007, compared to the same periods in 2006. For both periods this reduction was primarily due to lower levels of outstanding debt and the reduction in the level of the unfavorable impact of mark-to-market adjustments on certain cancelable swaps, which economically hedge callable debt. This decrease was partially offset by an increase in market interest rates.

The provision for credit losses increased 60% and 156% in the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The increases were driven by higher delinquencies at ResCap, primarily due to the continued deterioration in the domestic housing market and the market for nonprime loans.

Net loan servicing income increased 47% and 23% in the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. These increases were attributable to higher average primary and master servicing portfolios at ResCap as well as increased asset securitization activity and whole-loan sales by our automotive finance business in comparison with 2006 levels.

The gain on sale of mortgage and automotive loans decreased 21% and 58% in the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The decreases are primarily attributable to declines in fair value of ResCap’s nonprime and prime second-lien delinquent loans held for sale stemming from lower investor demand and lack of market liquidity. As a result, the pricing for various loan product types continued to deteriorate in the first six months of 2007, as investor uncertainty remained high concerning the performance of these loans. These trends were partially offset by higher gains realized by our automotive finance business on the sale of retail installment contracts for both periods.

The decrease in gain on sale of equity method investments, net, relates entirely to a gain on sale of ResCap’s equity investment in a regional homebuilder in the three months ended June 30, 2006. We have realized no similar gains in 2007.

Other income for both the three and six months ended June 30, 2007, has decreased from 2006 levels due to a decrease in interest income commensurate with decreases in cash and cash equivalents and decreased interest and service fees from lending activity with GM.

Insurance losses and loss adjustment expenses decreased 14% and 9% in the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The decrease is primarily due to favorable weather conditions in 2007 in our U.S. commercial and personal lines businesses, as well as favorable loss trends experienced in our vehicle service contract product line.

Our consolidated tax expense for the three months and six months ended June 30, 2007, is $159 million and $309 million, respectively, a decrease of 56% from the three months ended June 30, 2006, and 47% from the six months ended June 30, 2006, primarily due to the mix of earnings in limited liability company (LLC) and non-LLC entities. Results for the first six months of 2007 reflect a change in tax status for certain of our subsidiaries due to the conversion of a number of our unregulated U.S. subsidiaries to flow-through LLCs in conjunction with the Sale Transactions. These domestic subsidiaries are generally not taxed at the entity level and, therefore, our effective tax rate on a consolidated basis is significantly higher for both the second quarter and first six months of 2007 in comparison with the same periods in 2006. The primary reason is that the majority of the net loss experienced at ResCap in the first six months of 2007 is attributable to its LLCs and no tax benefits for these losses are recorded. Excluding ResCap, the consolidated effective tax rate is approximately 15%, which represents the provision for taxes at our non-LLC subsidiaries combined with taxable income that is not subject to tax at our LLC subsidiaries. The effective tax rates applicable to our non-LLC subsidiaries remain comparable with 2006.

Automotive Finance Operations

Results of Operations

The following table summarizes the operating results of our Automotive Finance operations for the periods shown. The amounts presented are before the elimination of balances and transactions with our other reporting segments.


	Three months ended									Six months ended
	June 30,									June 30,
							2007-2006									2007-2006
($ in millions)	2007			2006			% change			2007			2006			% change

Revenue
Consumer		$1,399			$1,367			2			$2,785			$2,796			—
Commercial		443			419			6			825			788			5
Operating leases		1,729			2,023			(15	)		3,297			3,949			(17	)
Total financing revenue		3,571			3,809			(6	)		6,907			7,533			(8	)
Interest expense		(2,098	)		(2,437	)		(14	)		(4,043	)		(4,727	)		(14	)
Provision for credit losses		(103	)		(152	)		(32	)		(238	)		(159	)		50
Net financing revenue		1,370			1,220			12			2,626			2,647			(1	)
Servicing fees		104			59			76			217			117			85
Net gains on the sale of loans		226			129			75			424			184			130
Investment income		105			147			(29	)		201			235			(14	)
Other income		451			619			(27	)		933			1,324			(30	)
Total net automotive financing revenue and other income		2,256			2,174			4			4,401			4,507			(2	)
Depreciation expense on operating leases		(1,173	)		(1,344	)		(13	)		(2,254	)		(2,782	)		(19	)
Noninterest expense		(652	)		(706	)		(8	)		(1,279	)		(1,331	)		(4	)
Income tax (expense) benefit		(49	)		13			477			(88	)		(71	)		24
Net income		$382			$137			179			$780			$323			141
Total assets		$157,967			$180,958			(13	)

Automotive Finance operations net income increased to $382 million and $780 million for the three months and six months ended June 30, 2007, respectively, as compared to $137 million and $323 million, respectively, for the same periods in 2006. These results reflect both improved margins in North America and continued margin pressure overseas. North America also benefited from strong lease residuals, stable credit performance, and increases in servicing income. Also contributing to the increase in North America was a reduction in the level of unfavorable mark-to-market adjustments related to certain derivative activities.

Total financing revenue decreased 6% and 8% for the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. Consumer revenue for the periods was consistent with 2006 and reflects a modest change in consumer asset levels as a result of continued whole-loan sale activity. Consumer finance receivables declined by $3.4 billion, or approximately 5%, since June 30, 2006. Operating lease revenue (along with the related depreciation expense) decreased for the three months and six months ended June 30, 2007, compared to the same periods in 2006, consistent with the decrease in the size of the operating lease portfolio (approximately 16% since June 2006), as a result of the dividend of certain operating lease assets to GM pursuant to the terms and conditions of the Sale Transactions. The decrease in total financing revenue was partially offset by the growth of our international operations during the six months ended June 30, 2007.

Interest expense decreased 14% for the three months and six months ended June 30, 2007, as compared to the same periods in 2006. For both periods this reduction was primarily due to lower levels of outstanding

debt and the reduction in the level of unfavorable impact of mark-to-market adjustments on certain cancelable swaps which economically hedge callable debt.

Our provision for credit losses decreased 32% during the three months ended June 30, 2007, compared to the same period during 2006, while increasing 50% for the six months ended June 30, 2007, compared to the same period during 2006. The decrease during the three months ended June 30, 2007, was primarily related to lower on-balance sheet consumer finance receivables in our North American operations, which was partially offset by increases in the provision for credit losses of our International operations. In addition, delinquency trends were favorable during the three months ended June 30, 2007, compared to the three months ended March 31, 2007, whereas delinquency trends were unfavorable in the three months ended June 30, 2006, compared to the three months ended March 31, 2006. Overall, however, delinquency trends in our North American operations for the first six months of 2007 have deteriorated compared to the same period in 2006, and this trend has been magnified by increases in the frequency of loss in 2007 compared to 2006. This also reflects a higher loss provision expense in our International operations driven by increases in the size of our loan portfolio as well as increased loss frequency and loss severity in Latin America. These trends were partially offset by lower levels of on-balance sheet consumer finance receivables in our North American operations.

Net gains on the sale of loans increased 75% and 130% for the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The increase was primarily the result of higher gains on the sale of retail installment contracts for both periods. Automotive Finance operations continue to utilize asset securitization and whole-loan sales as a critical component of our diversified funding strategy. As a result of the growth in the whole-loan serviced portfolio, servicing fees increased 76% and 85% during the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006.

Investment income decreased 29% and 14% for the three and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The decrease during both periods was largely a result of a decrease in the average size of the investment securities portfolio. Other income decreased 27% and 30% for the three and six months ended June 30, 2007, respectively, as compared to the same periods in 2006, due to lower revenue on GM loans and intercompany loans due to lower lending levels for both periods, in addition to lower interest income as a result of a decrease in the average balance of cash and cash equivalents.

Total income tax expense increased by $62 million and $17 million for the three and six months ended June 30, 2007, respectively, as compared to the same periods in 2006, primarily due to changes in Canadian corporate and provincial tax rates and the elimination of the large corporation tax in Canada during the three months ended June 30, 2006. This was partially offset by our election to be treated as a disregarded or pass-through entity in connection with our conversion to an LLC in November 2006. As a result of the conversion, a federal tax provision is no longer required for the majority of the U.S. Automotive Finance operations.

Automotive Financing Volume

The following table summarizes our new and used vehicle consumer and wholesale financing volume and our share of GM consumer and wholesale volume.


	Three months ended										Six months ended
	June 30,										June 30,
	GMAC				Share of						GMAC				Share of
	volume				GM sales						volume				GM sales
(units in thousands)	2007		2006		2007			2006			2007		2006		2007			2006

Consumer automotive financing
GM new vehicles
North America
Retail contracts		214		218		25	%		25	%		415		406		26	%		25	%
Leases		164		168		20	%		19	%		299		333		19	%		21	%
Total North America		378		386		45	%		44	%		714		739		45	%		46	%
International (retail contracts and leases)		139		129		24	%		23	%		280		264		24	%		24	%
Total GM new units financed		517		515		36	%		36	%		994		1,003		36	%		37	%
Non-GM new units financed		29		17								51		34
Used units refinanced		130		95								254		194
Total consumer automotive financing volume		676		627								1,299		1,231
Wholesale financing of new vehicles
GM vehicles
North America		868		921		77	%		75	%		1,626		1,841		75	%		75	%
International		729		694		88	%		85	%		1,428		1,354		88	%		88	%
Total GM units financed		1,597		1,615		82	%		79	%		3,054		3,195		81	%		80	%
Non-GM units financed		51		35								95		73
Total wholesale volume		1,648		1,650								3,149		3,268

Our consumer automotive financing volume and penetration levels are significantly influenced by the nature, timing, and extent of GM’s use of rate, residual, and other financing incentives for marketing purposes on consumer retail automotive contracts and leases. Our penetration levels during the three and six months ended June 30, 2007, were consistent with what was experienced in 2006, mainly due to continued use of incentive programs by GM and increased dealer incentives offered by GMAC. The consumer penetration levels of our International operations were relatively flat in 2007 compared to 2006.

Allowance for Credit Losses

The following table summarizes activity related to the allowance for credit losses for our Automotive Finance operations.


Three months ended June 30,	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total


Balance at April 1,		$1,410			$71			$1,481			$1,463			$65			$1,528
Provision for credit losses		100			3			103			148			4			152
Charge-offs		(199	)		(3	)		(202	)		(200	)		(1	)		(201	)
Recoveries		55			2			57			51			—			51
Other		—			(7	)		(7	)		5			2			7


Balance at June 30,		$1,366			$66			$1,432			$1,467			$70			$1,537


Allowance coverage (a)		2.28	%		0.23	%		1.62	%		2.35	%		0.26	%		1.71	%

(a) Represents the related allowance for credit losses as a percentage of total on-balance sheet automotive contracts.


Six months ended June 30,	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total


Balance at January 1,		$1,460			$69			$1,529			$1,618			$86			$1,704
Provision for credit losses		235			3			238			176			(17	)		159
Charge-offs		(437	)		(4	)		(441	)		(437	)		(1	)		(438	)
Recoveries		108			2			110			102			—			102
Other		—			(4	)		(4	)		8			2			10


Balance at June 30,		$1,366			$66			$1,432			$1,467			$70			$1,537


Allowance coverage (a)		2.28	%		0.23	%		1.62	%		2.35	%		0.26	%		1.71	%

(a) Represents the related allowance for credit losses as a percentage of total on-balance sheet automotive contracts.

The allowance for credit losses as a percentage of the total on-balance sheet consumer portfolio experienced a slight decrease in comparison with 2006. The comparison is favorable in 2007 due to the impact of Hurricane Katrina, which caused a significant increase in our allowance in late 2005 and into 2006.

The consumer allowance for credit losses was $1,366 million and $1,467 million as of June 30, 2007 and 2006, respectively. Decreases in the level of allowance from 2006 levels are reflective of proportional decreases in the on-balance sheet consumer portfolio over the same period. The consumer portfolio incurred net charge offs for the three months ended June 30, 2007 and 2006, of $144 million and $149 million, respectively. Net charge-offs for the six months ended June 30, 2007 and 2006, were $329 million and $335 million, respectively.

Consumer Credit

The following tables summarize pertinent loss experience in the consumer managed and on-balance sheet automotive retail contract portfolios. The managed portfolio includes retail receivables held on-balance sheet for investment and off-balance sheet receivables. The off-balance sheet portion of the managed portfolio includes receivables securitized and sold that we continue to service and in which we retain an interest or risk of loss but excludes securitized and sold finance receivables that we continue to service but in which we retain no interest or risk of loss. The process of creating a pool of retail finance receivables for securitization or sale typically excludes accounts that are greater than 30 days delinquent at that time. In addition, the process involves selecting from a pool of receivables that are currently outstanding and, therefore, represent seasoned accounts. A seasoned portfolio that excludes delinquent accounts historically results in better credit performance in the managed portfolio than in the on-balance sheet portfolio of retail finance receivables. In addition, the current off-balance sheet transactions mainly consist of subvented-rate retail finance receivables,

which generally attract customers with higher credit quality (or otherwise cash purchasers) than customers typically associated with non-subvented receivables.

We believe that the disclosure of the credit experience of the managed portfolio presents a more complete presentation of our risk of loss in the underlying assets (typically in the form of a subordinated retained interest). Consistent with the presentation in the Condensed Consolidated Balance Sheet, retail contracts presented in the table represent the principal balance of the finance receivables discounted for any unearned interest income and rate support received from GM.

Average

Charge-offs,

retail

net of

Annualized net

Three months ended June 30,

contracts

recoveries (a)

charge-off rate

($ in millions)

2007

2006

2007

2006

Managed

North America (b)

$49,603

$128

$120

1.03%

1.07

International

16,979

0.52%

0.61

Total managed

$66,582

$150

$143

0.90%

0.97

On-balance sheet

North America

$42,660

$123

$118

1.15%

1.17

International

16,979

0.52%

0.61

Total on-balance sheet

$59,639

$145

$141

0.97%

1.04


	(a)	Net charge-offs exclude amounts related to the lump-sum payments on balloon finance contracts. The amount totaled ($1) and $7 for the three months ended June 30, 2007 and 2006.
	(b)	North America 2006 annualized charge-offs, net of recoveries, includes $25 of certain expenses related to repossessed vehicles, which are included in other operating expenses on the Condensed Consolidated Statement of Income.

Average

Charge-offs,

retail

net of

Annualized net

Six months ended June 30,

contracts

recoveries (a)

charge-off rate

($ in millions)

2007

2006

2007

2006

Managed

North America (b)

$49,868

$289

$281

1.16%

1.13

International

16,649

0.58%

0.67

Total managed

$66,517

$337

$331

1.01%

1.03

On-balance sheet

North America

$43,353

$279

$277

1.29%

1.23

International

16,649

0.58%

0.67

Total on-balance sheet

$60,002

$327

$327

1.09%

1.11


	(a)	Net charge-offs exclude amounts related to the lump-sum payments on balloon finance contracts. The amount totaled $2 and $7 for the six months ended June 30, 2007 and 2006.
	(b)	North America 2006 annualized charge-offs, net of recoveries, includes $40 of certain expenses related to repossessed vehicles, which are included in other operating expenses on the Condensed Consolidated Statement of Income.

The following table summarizes pertinent delinquency experience in the consumer automotive retail contract portfolio.


	Percent of retail contracts
	30 days or more past due (a)
	Managed				On-balance sheet
June 30,	2007		2006		2007		2006

North America		2.44%		2.35%		2.72%		2.57	%
International		2.58%		2.64%		2.58%		2.64	%


Total		2.49%		2.52%		2.67%		2.63	%


	(a)	Past due contracts are calculated on the basis of the average number of contracts delinquent during a month and exclude accounts in bankruptcy.

Credit fundamentals in our North American consumer automotive portfolio have deteriorated in recent quarters, with delinquencies in the North American portfolio increasing as compared to 2006. The increase in delinquency trends is the result of the shrinking and aging of the asset base due to an increase in whole-loan sales activity as compared to the prior year. International consumer credit portfolio performance remains stable as both delinquencies and charge-offs have declined modestly compared to prior year levels.

In addition to the preceding loss and delinquency data, the following table summarizes bankruptcies and repossession information for the United States consumer automotive retail contract portfolio (which represents approximately 46% and 58% of our on-balance sheet consumer automotive retail contract portfolio as of June 30, 2007 and 2006, respectively).


	Managed						On-balance sheet
Three months ended June 30,	2007			2006			2007			2006

Average retail contracts in bankruptcy (in units) (a)		61,530			92,961			60,105			91,952
Bankruptcies as a percent of average number of contracts outstanding		2.11	%		2.74	%		2.43	%		2.92	%
Retail contract repossessions (in units)		16,757			21,432			15,757			21,081
Annualized repossessions as a percent of average number of contracts outstanding		2.28	%		2.51	%		2.53	%		2.66	%


	(a)	Includes those accounts where the customer has filed for bankruptcy and is not yet discharged, the customer was discharged from bankruptcy but did not reaffirm their loan with GMAC, and other special situations where the customer is protected by applicable law with respect to GMAC’s normal collection policies and procedures.


	Managed						On-balance sheet
Six months ended June 30,	2007			2006			2007			2006

Average retail contracts in bankruptcy (in units) (a)		64,419			98,598			63,211			97,265
Bankruptcies as a percent of average number of contracts outstanding		2.19	%		2.80	%		2.50	%		2.93	%
Retail contract repossessions (in units)		35,693			46,565			33,912			45,964
Annualized repossessions as a percent of average number of contracts outstanding		2.42	%		2.62	%		2.68	%		2.75	%


	(a)	Includes those accounts where the customer has filed for bankruptcy and is not yet discharged, the customer was discharged from bankruptcy but did not reaffirm their loan with GMAC, and other special situations where the customer is protected by applicable law with respect to GMAC’s normal collection policies and procedures.

New bankruptcy filings in the United States increased dramatically in October 2005, before the change in bankruptcy laws that made it more difficult for some consumers to qualify for certain protections under prior bankruptcy laws. After this change in bankruptcy laws, we experienced a decrease in bankruptcy filings during 2006, as well as the three months and six months ended June 30, 2007. Similarly, repossession experience has also improved since the three months and six months ended June 30, 2006.

Commercial Credit

Our credit risk on the commercial portfolio is considerably different from that of our consumer portfolio. Whereas the consumer portfolio represents a homogenous pool of retail contracts that exhibit fairly predictable and stable loss patterns, the commercial portfolio exposures are less predictable. In general, the credit risk of the commercial portfolio is tied to overall economic conditions in the countries in which we operate, as well as the particular circumstances of individual borrowers.

At June 30, 2007, the only commercial receivables that had been securitized and accounted for as off-balance sheet transactions represent wholesale lines of credit extended to automotive dealerships, which historically experience low charge-offs. As a result, the amount of charge-offs on our managed portfolio is similar to the on-balance sheet portfolio, and only the on-balance sheet commercial portfolio credit experience is presented in the following table.


	Total
	loans		Impaired loans (a)
	June 30,		June 30,			Dec 31,			June 30,
($ in millions)	2007		2007			2006			2006

Wholesale		$24,608		$254			$338			$286
				1.03	%		1.64	%		1.22	%
Other commercial financing		4,037		29			52			43
				0.72	%		1.35	%		1.08	%


Total on-balance sheet		$28,645		$283			$390			$329
				0.99	%		1.60	%		1.20	%


	(a)	Includes loans where it is probable that we will be unable to collect all amounts due according to the terms of the loan.

Charge-offs on the wholesale portfolio remained at traditionally low levels in the three months and six months ended June 30, 2007, as these receivables are generally secured by vehicles, real estate, and other forms of collateral, which help mitigate losses on such loans in the event of default.

ResCap Operations

Results of Operations

The following table summarizes the operating results for ResCap for the periods shown. The amounts presented are before the elimination of balances and transactions with our other reporting segments.


	Three months ended									Six months ended
	June 30,									June 30,
							2007-2006									2007-2006
($ in millions)	2007			2006			% change			2007			2006			% change

Revenue
Total financing revenue		$1,667			$1,821			(8	)		$3,541			$3,521			1
Interest expense		(1,610	)		(1,558	)		3			(3,311	)		(2,994	)		11
Provision for credit losses		(327	)		(123	)		166			(869	)		(245	)		255
Net financing (loss) revenue		(270	)		140			(293	)		(639	)		282			(327	)
Mortgage servicing fees		452			387			17			899			762			18
Servicing asset valuation and hedge activities, net		(152	)		(171	)		(11	)		(454	)		(356	)		28
Net loan servicing income		300			216			39			445			406			10
Net gain (loss) on sale of loans		173			375			(54	)		(61	)		642			(110	)
Other income		315			843			(63	)		732			1,186			(38	)
Noninterest expense		(722	)		(695	)		4			(1,532	)		(1,297	)		18
Income tax expense		(50	)		(331	)		(85	)		(110	)		(469	)		(77	)
Net income (loss)		($254	)		$548			(146	)		($1,165	)		$750			(255	)
Total assets		$116,890			$124,552			(6	)

ResCap experienced a net loss of $254 million for the three months ended June 30, 2007, compared to net income of $548 million for the same period in 2006, and a net loss of $1.2 billion for the six months ended June 30, 2007, compared to net income of $750 million for the same period in 2006. The 2007 results continue to be adversely affected by domestic economic conditions, which include increases in nonprime delinquencies, a significant deterioration in the nonprime securitization market, and instability in the residential housing market.

A net financing loss of $270 million and $639 million was incurred in the three months and six months ended June 30, 2007, respectively, as compared to net financing revenue of $140 million and $282 million for the same periods in 2006. Total financing revenue decreased for the three months ended June 30, 2007, compared to 2006, due primarily to a decline in nonprime asset balances, lower warehouse lending balances, and an increase in non-accrual loans due to unfavorable market conditions. The modest increase in total financing revenue the six months ended June 30, 2007, compared to the same period in 2006, is primarily due to longer holding periods on held for sale assets due to lower investor demand, which more than offset the decline in interest income due to higher nonaccrual loans and lower warehouse lending balances. The increase in interest expense during the three months and six months ended June 30, 2007, compared to the same periods in 2006, was primarily driven by an increase in the cost of funds due to an increase in market rates.

The provision for credit losses increased to $327 million and $869 million in the three and six months ended June 30, 2007, respectively, compared to the same periods in 2006. The increases for both periods were driven by the continued deterioration in the domestic housing market, which resulted in higher loss severity, an increased number of delinquent loans, and home price stagnation. The increase in the provision for loan losses for the six months ended June 30, 2007, also related to adjustable rate mortgage reset risk and financial stress experienced by certain warehouse lending customers; both primarily affecting the first quarter of 2007. Mortgage loans held for investment past due 60 days or more increased to 16% of the total unpaid principal balance as of June 30, 2007, from 14% at March 31, 2007, and 10% at June 30, 2006.

Net loan servicing income increased 39% and 10% for the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006, due to an increase in the size and value of the mortgage servicing rights portfolio during both periods. The domestic servicing portfolio was approximately $425 billion as of June 30, 2007, representing an increase of approximately $43 billion from June 30, 2006. The value of the mortgage servicing rights increased during the three months ended June 30, 2007, primarily due to the positive impacts of rising interest rates and lower market volatility on the valuation of servicing assets. The positive valuation adjustments were largely offset by results of derivative hedging activity. The increase in servicing asset valuation and hedge activities for the first six months of 2007 was primarily driven by negative servicing valuations including derivative hedging activity and unfavorable assumption updates.

The net gain (loss) on sales of loans decreased 54% and 110% for the three months and six months ended June 30, 20007, respectively, as compared to the same periods in 2006. These decreases were primarily due to the decline in fair value of the nonprime and second-lien delinquent loans held for sale, lower investor demand, and lack of market liquidity. As a result, the pricing for various loan product types continued to deteriorate in the first six months of 2007, as investor uncertainty remained high regarding the performance of these loans.

Other income decreased 63% and 38% during the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006, due to the gain on the sale of an equity interest in a regional homebuilder that was realized during the three months ended June 30, 2006.

Noninterest expense increased 4% and 18% during the three months and six months ended June 30, 2007, respectively, as compared to the same periods in 2006. The increase for both periods is primarily due to increases in the expense associated with the provision for losses for assets sold with recourse and an increase in expenses related to properties acquired through foreclosure due to higher inventory levels. During the three months ended June 30, 2007, the increase in noninterest expense was partially offset by reduced compensation and benefit costs as a result of cost cutting initiatives as well as lower incentive compensation.

Income tax expense decreased 85% and 77% during the three months and six months ended of 2007, respectively, as compared to the same periods in 2006. Nearly all significant domestic legal entities were converted to LLCs during the fourth quarter of 2006. As a result, the converted entities are no longer subject to federal and most state income taxes.

Mortgage Loan Production, Sales and Servicing

ResCap’s mortgage loan production for the three months ended June 30, 2007, was $35 billion, a decrease of 26% compared to $47 billion in the same period in 2006, and $72 billion for the six months ended June 30, 2007, a decrease of 18% compared to $89 billion in the same period in 2006. ResCap’s domestic loan production decreased 33% in the three months ended June 30, 2007, and 24% in the six months ended June 30, 2007, while international loan production increased 15% and 16% respectively, compared to the same periods in 2006. ResCap’s domestic loan production decreased due to a decline in nonprime, prime-nonconforming and prime second-lien products as a result of unfavorable market conditions. Nonprime loan production totaled $1 billion and $4 billion for the three months and six months ended June 30, 2007, respectively, compared to $6 billion and $15 billion for the same periods in 2006. ResCap’s international production increased primarily due to growth in Continental Europe.

The following summarizes mortgage loan production for the periods shown.

Three months ended

Six months ended

June 30,

($ in millions)

2007

2006

2007

2006

Consumer:

Principal amount by product type:

Prime conforming

$12,682

$11,965

$22,251

$20,534

Prime nonconforming

9,849

14,638

22,166

26,365

Government

828

1,081

1,412

1,942

Nonprime

685

6,060

3,944

15,156

Prime second-lien

3,107

6,585

8,420

12,400

Total U.S. production

27,151

40,329

58,193

76,397

International

7,718

6,693

14,190

12,205

Total

$34,869

$47,022

$72,383

$88,602

Principal amount by origination channel:

Retail and direct channels

$7,007

$7,424

$13,038

$14,102

Correspondent and broker channels

20,144

32,905

45,155

62,295

Total U.S. production

$27,151

$40,329

$58,193

$76,397

Number of loans (in units):

Retail and direct channels

54,053

65,011

101,691

125,899

Correspondent and broker channels

99,511

208,747

262,950

399,599

Total U.S. production

153,564

273,758

364,641

525,498

The following table summarizes the primary domestic mortgage loan servicing portfolio for which we hold the corresponding mortgage servicing rights.

U.S. mortgage loan servicing portfolio

June 30, 2007

December 31, 2006

Number

Dollar amount

Number

Dollar amount

($ in millions)

of loans

of loans

Principal conforming

1,485,416

$211,463

1,456,344

$203,927

Prime nonconforming

348,653

112,562

319,255

101,138

Government

175,588

18,166

181,563

18,843

Nonprime

352,752

48,040

409,516

55,750

Prime second-lien

806,617

34,377

784,170

32,726

Total primary servicing portfolio (a)

3,169,026

$424,608

3,150,848

$412,384


	(a)	Excludes loans for which we acted as a subservicer. Subserviced loans totaled 291,917 with an unpaid principal balance of $62 billion at June 30, 2007, and 290,992 with an unpaid balance of $55 billion at December 31, 2006.

Our international servicing portfolio included $35.9 billion and $36.2 billion of mortgage loans as of June 30, 2007, and December 31, 2006, respectively.

Allowance for Credit Losses

The following table summarizes the activity related to the allowance for loan losses.


Three months ended June 30,	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total


Balance at April 1,		$1,660			$525			$2,185			$1,079			$182			$1,261
Provision for credit losses		284			43			327			111			12			123
Charge-offs		(263	)		(294	)		(557	)		(158	)		(6	)		(164	)
Recoveries		15			—			15			10			—			10


Balance at June 30,		$1,696			$274			$1,970			$1,042			$188			$1,230


Allowance as a percentage of total (a)		2.71	%		2.47	%		2.67	%		1.44	%		1.32	%		1.42	%


	(a)	Represents the related allowance for credit losses as a percentage of total on-balance sheet residential mortgage loans.


Six months ended June 30,	2007									2006
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total


Balance at January 1,		$1,508			$397			$1,905			$1,066			$187			$1,253
Provision for credit losses		649			220			869			239			6			245
Charge-offs		(491	)		(343	)		(834	)		(288	)		(6	)		(294	)
Recoveries		30			—			30			25			1			26


Balance at June 30,		$1,696			$274			$1,970			$1,042			$188			$1,230


Allowance as a percentage of total (a)		2.71	%		2.47	%		2.67	%		1.44	%		1.32	%		1.42	%


	(a)	Represents the related allowance for credit losses as a percentage of total on-balance sheet residential mortgage loans.

Nonperforming Assets

The following table summarizes the nonperforming assets in the on-balance sheet held for sale and held for investment residential mortgage loan portfolios. Nonperforming assets are nonaccrual loans, foreclosed assets, and restructured loans. Mortgage loans and lending receivables are generally placed on nonaccrual status when they are 60 and 90 days past due, respectively, or when the timely collection of the principal of the loan, in whole or in part, is doubtful.

June 30,

December 31,

June 30,

($ in millions)

2007

2006

Nonaccrual loans:

Mortgage loans:

Prime conforming

$14

$11

Prime nonconforming

558

419

328

Prime second-lien

161

142

Nonprime (a)

8,066

6,736

5,587

Lending receivables: