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, 2008, 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, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Nonaccelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

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)	3
	Condensed Consolidated Statement of Income for the Three and Six Months Ended June 30, 2008 and 2007	3
	Condensed Consolidated Balance Sheet as of June 30, 2008, and December 31, 2007	4
	Condensed Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2008 and 2007	5
	Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2008 and 2007	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	87
Item 4.	Controls and Procedures	87
Part II — Other Information
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Submission of Matters to a Vote of Security Holders	93
Item 5.	Other Information	94
Item 6.	Exhibits	94
Signatures		95
Index of Exhibits		96
Participation Agreement
Parent Company Agreement
Capital and Liquidity Maintenance Agreement
Long-Term Equity Conpensation Incentive Plan
Long-Term Incentive Plan LLC Form Award Letter
Senior Leadership Severance Plan
Purchase Agreement
Computation of Ratio of Earnings to Fixed Charges
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Section 1350 Certification

PART I — FINANCIAL INFORMATION


Item 1.	Financial Statements (unaudited)

GMAC LLC

CONDENSED CONSOLIDATED STATEMENT OF INCOME (unaudited)


	Three months ended						Six months ended
	June 30,						June 30,
($ in millions)	2008			2007			2008			2007


Revenue
Consumer		$1,764			$2,438			$3,585			$4,966
Commercial		611			754			1,259			1,477
Loans held-for-sale		312			396			672			874
Operating leases		2,135			1,728			4,238			3,296


Total financing revenue		4,822			5,316			9,754			10,613
Interest expense		2,869			3,735			6,048			7,407
Depreciation expense on operating lease assets		1,401			1,173			2,797			2,255
Impairment of investment in operating leases		716			—			716			—


Net financing (loss) revenue		(164	)		408			193			951
Other revenue
Servicing fees		465			556			936			1,116
Servicing asset valuation and hedge activities, net		(185	)		(152	)		225			(454	)
Insurance premiums and service revenue earned		1,123			1,051			2,232			2,092
(Loss) gain on mortgage and automotive loans, net		(1,099	)		399			(1,698	)		363
Investment income (loss)		185			227			(45	)		535
Other income		990			786			1,881			1,651


Total other revenue		1,479			2,867			3,531			5,303
Total net revenue		1,315			3,275			3,724			6,254
Provision for credit losses		771			430			1,244			1,111
Noninterest expense
Compensation and benefits expense		591			647			1,204			1,281
Insurance losses and loss adjustment expenses		714			563			1,344			1,136
Other operating expenses		1,548			1,183			2,811			2,429


Total noninterest expense		2,853			2,393			5,359			4,846
(Loss) income before income tax expense		(2,309	)		452			(2,879	)		297
Income tax expense		173			159			192			309


Net (loss) income		($2,482	)		$293			($3,071	)		($12	)

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)	2008			2007

Assets
Cash and cash equivalents		$14,325			$17,677
Investment securities		11,955			16,740
Loans held-for-sale		12,942			20,559
Finance receivables and loans, net of unearned income
Consumer ($2,658 at fair value at June 30, 2008)		76,707			87,769
Commercial		43,183			39,745
Allowance for credit losses		(2,547	)		(2,755	)


Total finance receivables and loans, net		117,343			124,759
Investment in operating leases, net		32,810			32,348
Notes receivable from General Motors		2,158			1,868
Mortgage servicing rights		5,417			4,703
Premiums and other insurance receivables		2,232			2,030
Other assets		28,510			28,255


Total assets		$227,692			$248,939

Liabilities
Debt
Unsecured		$83,868			$102,339
Secured ($3,002 at fair value at June 30, 2008)		89,621			90,809


Total debt		173,489			193,148
Interest payable		2,243			2,253
Unearned insurance premiums and service revenue		4,936			4,921
Reserves for insurance losses and loss adjustment expenses		3,105			3,089
Deposit liabilities		19,268			15,281
Accrued expenses and other liabilities		10,993			13,432
Deferred income taxes		1,342			1,250


Total liabilities		215,376			233,374
Equity
Members’ interest		8,919			8,912
Preferred interests		1,052			1,052
Retained earnings		1,402			4,649
Accumulated other comprehensive income		943			952


Total equity		12,316			15,565


Total liabilities and equity		$227,692			$248,939

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, 2008 and 2007


								Accumulated
								other
	Members’		Preferred		Retained			comprehensive			Total			Comprehensive
($ in millions)	interest		interests		earnings			income			equity			income (loss)

Balance at January 1, 2007		$6,711				$7,173			$485			$14,369
Net loss						(12	)					(12	)		($12	)
Preferred interests 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

Balance at January 1, 2008, before cumulative effect of adjustments		$8,912		$1,052		$4,649			$952			$15,565
Cumulative effect of a change in accounting principle, net of tax:
Adoption of Statement of Financial Accounting Standards No. 157 (a)						23						23
Adoption of Statement of Financial Accounting Standards No. 159 (a)						(178	)					(178	)
Balance at January 1, 2008, after cumulative effect of adjustments		8,912		1,052		4,494			952			15,410
Capital contributions		7										7
Net loss						(3,071	)					(3,071	)		($3,071	)
Dividends paid to members						(27	)					(27	)
Other						6						6
Other comprehensive loss									(9	)		(9	)		(9	)


Balance at June 30, 2008		$8,919		$1,052		$1,402			$943			$12,316			($3,080	)


(a)	Refer to Note 13 to the Condensed Consolidated Financial Statements for further detail.

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, 2008 and 2007


($ in millions)	2008			2007

Operating activities
Net cash provided by operating activities		$10,309			$6,422


Investing activities
Purchases of available-for-sale securities		(9,665	)		(8,892	)
Proceeds from sales of available-for-sale securities		11,282			3,563
Proceeds from maturities of available-for-sale securities		2,470			3,511
Net increase in finance receivables and loans		(3,427	)		(47,973	)
Proceeds from sales of finance receivables and loans		655			55,742
Purchases of operating lease assets		(7,867	)		(11,579	)
Disposals of operating lease assets		3,483			5,307
Sales of mortgage servicing rights		174			—
Net increase in notes receivable from General Motors		(277	)		(121	)
Acquisitions of subsidiaries, net of cash acquired		—			(287	)
Other, net		12			2,358


Net cash (used in) provided by investing activities		(3,160	)		1,629


Financing activities
Net decrease in short-term debt		(10,222	)		(3,565	)
Net increase (decrease) in bank deposits		3,583			(237	)
Proceeds from issuance of long-term debt		20,740			33,531
Repayments of long-term debt		(24,913	)		(43,029	)
Dividends paid		(62	)		(74	)
Other, net (a)		389			2,134


Net cash used in financing activities		(10,485	)		(11,240	)


Effect of exchange rate changes on cash and cash equivalents		(16	)		(47	)


Net decrease in cash and cash equivalents		(3,352	)		(3,236	)
Cash and cash equivalents at beginning of year		17,677			15,459


Cash and cash equivalents at June 30,		$14,325			$12,223


(a)	Includes $1 billion capital contribution from General Motors during the six months ended June 30, 2007, pursuant to the sale of 51% of 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 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 (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 terms “GMAC,” “the Company,” “we,” “our,” and “us” refer to GMAC LLC and its subsidiaries as a consolidated entity, except where it is clear that the terms mean only GMAC LLC.

The Condensed Consolidated Financial Statements as of June 30, 2008, and for the three and six months ended June 30, 2008 and 2007, 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. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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, 2007, filed with the United States Securities and Exchange Commission (SEC) on February 27, 2008.

Residential Capital, LLC (ResCap), our mortgage subsidiary, actively manages its liquidity and capital position and has developed plans to address its liquidity needs, including debt maturing in the next twelve months, and other identified risks and uncertainties. During the three months ended June 30, 2008, and prior to the filing of this Form 10-Q, ResCap completed several transactions, including the establishment of debt facilities and asset sales with GMAC and other affiliates that support ResCap’s plans to meet its cash and liquidity requirements.

Although ResCap will continue to explore opportunities for funding and/or capital support from GMAC and other affiliates, there can be no assurances that we will undertake any such actions. Accordingly, ResCap’s plans include, but are not limited to, the following: continue to work proactively and maintain an active dialogue with all of ResCap’s key credit providers to optimize all available liquidity options; potential pursuit of strategic alternatives that will improve ResCap’s liquidity including continued strategic reduction of assets and other dispositions; focused production on prime conforming products that currently provide more liquidity options; and explore potential alliances and joint ventures with third parties involving portions of ResCap’s business. As ResCap actively manages its liquidity, asset liquidation initiatives may include, among other things, sale of retained interest in ResCap’s mortgage securitizations, marketing of loans secured by time-share receivables, marketing of ResCap’s United Kingdom and continental Europe mortgage loan portfolios, and whole loan sales.

While successful execution cannot be assured, management believes the plans are sufficient to meet ResCap’s liquidity requirements over the next twelve months. If unanticipated market factors emerge and/or ResCap is unable to successfully execute its plans referenced above, it would have a material adverse effect on our business, results of operations, and financial position.

Recently Adopted Accounting Standards

SFAS No. 157 — On January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a definition of fair value, establishes a framework for measuring fair value under GAAP, 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; therefore, it does not expand the use of fair value in any new circumstance. We adopted SFAS 157 on a prospective basis.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SFAS 157 required retrospective adoption of the rescission of Emerging Issues Task Force issue No. 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities (EITF 02-3), and certain other guidance. The impact of adopting SFAS 157 and the rescission of EITF 02-3 on January 1, 2008, was an increase to beginning retained earnings through a cumulative effect of a change in accounting principle of approximately $23 million, related to the recognition of day-one gains on purchased mortgage servicing rights (MSRs) and certain residential loan commitments. Refer to Note 13 to the Condensed Consolidated Financial Statements for further detail.

SFAS No. 158 — In September 2006, the Financial Accounting Standards Board (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 accumulated other 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. During the year ended December 31, 2007, we adopted the recognition and disclosure elements of SFAS 158, which did not have a material effect on our consolidated financial position, results of operations, or cash flows. In addition, we will adopt the measurement elements of SFAS 158 for the year ending December 31, 2008. We do not expect the adoption of the measurement elements to have a material impact on our consolidated financial condition or results of operations.

SFAS No. 159 — On January 1, 2008, we adopted 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 are 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. We elected to measure at fair value certain financial assets and liabilities, including certain collateralized debt obligations and certain mortgage loans held-for-investment in financing securitization structures. The cumulative effect to beginning retained earnings was a decrease through a cumulative effect of a change in accounting principle of approximately $178 million on January 1, 2008. Refer to Note 13 to the Condensed Consolidated Financial Statements for further detail.

FASB Staff Position (FSP) FIN 39-1 — On January 1, 2008, we adopted FSP FIN 39-1, Amendment of FAS Interpretation No. 39. FSP FIN 39-1 defines “right of setoff” and specifies what conditions must be met 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 requires an entity to make an election related to the 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 without regard to the company’s intent to settle the transactions on a net basis. We have elected to present these items gross. Therefore, upon adoption of FSP FIN 39-1, we increased December 31, 2007, other assets and other liabilities equally by approximately $1.2 billion.

SEC Staff Accounting Bulletin No. 109 — On January 1, 2008, we adopted Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings (SAB 109). SAB 109

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

provides the SEC staff’s views on the accounting for written loan commitments recorded at fair value under GAAP and revises and rescinds portions of SAB 105, Application of Accounting Principles to Loan Commitments (SAB 105). SAB 105 provided the views of the SEC staff regarding derivative loan commitments that are accounted for at fair value through earnings pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SAB 105 states that in measuring the fair value of a derivative loan commitment, the staff believed it would be inappropriate to incorporate the expected net future cash flows related to the associated servicing of the loan. SAB 109 supersedes SAB 105 and expresses the current view of the SEC staff that, consistent with the guidance in SFAS No. 156, Accounting for Servicing of Financial Assets, and SFAS 159, the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. SAB 105 also indicated that the SEC staff believed that internally developed intangible assets (such as customer relationship intangible assets) should not be recorded as part of the fair value of a derivative loan commitment. SAB 109 retains that SEC staff view and broadens its application to all written loan commitments that are accounted for at fair value through earnings. The impact of adopting SAB 109 did not have a material impact on our consolidated financial condition or results of operations.

Recently Issued Accounting Standards

SFAS No. 141(R) — In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)), which replaces SFAS No. 141, Business Combinations. SFAS 141(R) establishes principles and requirements for how an acquiring company recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R), effective for GMAC on January 1, 2009, applies to all transactions or other events in which GMAC obtains control in one or more businesses. Management will assess each transaction on a case-by-case basis as they occur.

SFAS No. 160 — In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (SFAS 160), which requires the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. SFAS 160 will be effective for GMAC on January 1, 2009. SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. Management is currently assessing the retrospective impacts of adoption and will assess new transactions as they occur.

SFAS No. 161 — In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 requires specific disclosures regarding the location and amounts of derivative instruments in the financial statements; how derivative instruments and related hedged items are accounted for; and how derivative instruments and related hedged items affect the financial position, financial performance, and cash flows. SFAS 161 will be effective for GMAC on January 1, 2009. Early adoption is permitted. Because SFAS 161 impacts the disclosure and not the accounting treatment for derivative instruments and related hedged items, the adoption of SFAS 161 will not have an impact on our consolidated financial condition or results of operations.

SFAS No. 162 — In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities (the Hierarchy). The Hierarchy within

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SFAS 162 is consistent with that previously defined in the AICPA Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (SAS 69). SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS 162 will not have a material effect on our consolidated financial statements because we have utilized the guidance within SAS 69.

FSP FAS No. 140-3 — In February 2008, the FASB issued FSP FAS No. 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, which provides a consistent framework for the evaluation of a transfer of a financial asset and subsequent repurchase agreement entered into with the same counterparty. FSP FAS No. 140-3 provides guidelines that must be met in order for an initial transfer and subsequent repurchase agreement to not be considered linked for evaluation. If the transactions do not meet the specified criteria, they are required to be accounted for as one transaction. This FSP will be effective for GMAC on January 1, 2009, and will be applied prospectively to initial transfers and repurchase financings for which the initial transfer is executed on or after adoption. Management is currently assessing the impacts of adoption.

FSP FAS No. 142-3 — In April 2008, the FASB directed the FASB Staff to issue FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing a renewal or extension assumptions used for purposes of determining the useful life of a recognized intangible asset under SFAS 142, Goodwill and Other Intangible Assets (SFAS 142). FSP FAS 142-3 is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Earlier application is not permitted. We believe the impact of adopting FSP FAS 142-3 will not have a material effect on our consolidated financial condition or results of operations.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

2. Other Income

Details of other income were as follows:


	Three months					Six months
	ended					ended
	June 30,					June 30,
($ in millions)	2008			2007		2008			2007

Gain on retirement of debt		$616			$—		$1,104			$—
Real estate services		19			138		(9	)		269
Interest and service fees on transactions with GM (a)		61			85		123			159
Interest on cash equivalents		61			91		127			209
Other interest revenue		201			157		281			297
Full-service leasing fees		107			80		205			155
Late charges and other administrative fees		41			43		85			87
Mortgage processing fees and other mortgage (loss) income		(258	)		29		(252	)		62
Interest on restricted cash deposits		48			43		76			86
Real estate and other investments		(1	)		20		(38	)		60
Insurance service fees		35			36		77			78
Factoring commissions		12			14		24			27
Specialty lending fees		9			10		22			21
Fair value adjustment on certain derivatives (b)		52			18		97			35
Changes in fair value for SFAS 159 elections, net (c)		(74	)		—		(128	)		—
Other		61			22		87			106


Total other income		$990			$786		$1,881			$1,651


	(a)	Refer to Note 12 for a description of related party transactions.
	(b)	Refer to Note 9 for a description of derivative instruments and hedging activities.
	(c)	Refer to Note 13 for a description of SFAS 159 fair value option elections.

3. Other Operating Expenses

Details of other operating expenses were as follows:


	Three months				Six months
	ended				ended
	June 30,				June 30,
($ in millions)	2008		2007		2008		2007

Insurance commissions		$234		$225		$471		$465
Technology and communications expense		159		156		312		301
Professional services		221		106		330		199
Advertising and marketing		56		83		109		153
Mortgage representation and warranty expense		80		49		101		203
Premises and equipment depreciation		46		48		94		100
Rent and storage		52		60		103		114
Full-service leasing vehicle maintenance costs		96		68		185		137
Lease and loan administration		34		53		79		106
Automotive remarketing and repossession		84		49		156		93
Restructuring expenses		50		—		84		—
Operating lease disposal loss (gain)		87		(18)		124		(6	)
Other		349		304		663		564


Total other operating expenses		$1,548		$1,183		$2,811		$2,429

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4. Impairment of Investment in Operating Leases

We evaluate the carrying value of our operating lease assets and test for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), to the extent necessary, due to events or circumstances that occur. Generally, impairment is determined to exist if the undiscounted expected future cash flows are lower than the carrying value of the asset.

In light of the prevailing market conditions, particularly rising domestic fuel prices and weakness in the economy in the United States and Canada and the associated adverse impact to used vehicle values, we concluded a triggering event had occurred during the quarter, requiring an evaluation of certain of our North American Automotive Finance operations’ operating lease assets for recoverability as of June 30, 2008. We grouped our operating lease assets at the lowest level that we could reasonably estimate the identifiable cash flows. In assessing for recoverability, we compared our estimates of future cash flows related to our lease assets to their corresponding carrying values. We considered all of the expected cash flows, including customer payments, the expected residual value upon remarketing the vehicle at lease termination, and any payments from GM under residual risk sharing agreements. To the extent these undiscounted cash flows were less than their respective carrying values, we discounted the cash flows to arrive at an estimated fair value. As a result of this evaluation, we concluded that $3.6 billion of our North American Automotive Finance operations’ total $30.4 billion net investment in operating leases was impaired by a total of $716 million. We therefore reduced our carrying value to equal the estimated fair value and recorded an impairment charge in the three months ended June 30, 2008, for this amount.

While we believe our estimates of discounted future cash flows used for the impairment analysis were reasonable based on current market conditions, the process required the use of significant estimates and assumptions. In developing these estimates and assumptions, management used all available evidence. However, because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes, actual cash flow could ultimately differ from those estimated as part of the recoverability and impairment analyses.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5. Finance Receivables and Loans, and Loans Held-for-Sale

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

June 30, 2008

December 31, 2007

($ in millions)

Domestic

Foreign

Total

Domestic

Foreign

Total

Consumer

Retail automotive

$18,475

$27,183

$45,658

$20,030

$25,576

$45,606

Residential mortgages (a)

25,190

5,859

31,049

34,839

7,324

42,163

Total consumer

43,665

33,042

76,707

54,869

32,900

87,769

Commercial

Automotive:

Wholesale

17,256

10,149

27,405

14,689

8,272

22,961

Leasing and lease financing

299

890

1,189

296

930

1,226

Term loans to dealers and other

2,586

862

3,448

2,478

857

3,335

Commercial and industrial

6,018

2,020

8,038

6,431

2,313

8,744

Real estate construction and other

2,607

496

3,103

2,943

536

3,479

Total commercial

28,766

14,417

43,183

26,837

12,908

39,745

Total finance receivables and loans (b)

$72,431

$47,459

$119,890

$81,706

$45,808

$127,514


	(a)	Domestic residential mortgages include $2,658 million at fair value as a result of election made under SFAS 159. Refer to Note 13 for additional information.


	(b)	Net of unearned income of $4.0 billion as of June 30, 2008, and December 31, 2007, respectively.

The composition of loans held-for-sale was as follows:


($ in millions)	June 30, 2008		December 31, 2007

Consumer
Retail automotive		$5,343		$8,400
Residential mortgages		7,036		12,078


Total consumer		12,379		20,478
Commercial
Automotive
Wholesale		142		81
Commercial and industrial		421		—


Total commercial		563		81


Total loans held-for-sale		$12,942		$20,559

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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


	Three months ended June 30,
	2008									2007
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total

Allowance at April 1,		$1,760			$532			$2,292			$3,070			$663			$3,733
Provision for credit losses		629			142			771			384			46			430
Charge-offs
Domestic		(513	)		(51	)		(564	)		(417	)		(303	)		(720	)
Foreign		(43	)		1			(42	)		(46	)		(5	)		(51	)


Total charge-offs		(556	)		(50	)		(606	)		(463	)		(308	)		(771	)


Recoveries
Domestic		54			3			57			53			4			57
Foreign		20			2			22			17			1			18


Total recoveries		74			5			79			70			5			75


Net charge-offs		(482	)		(45	)		(527	)		(393	)		(303	)		(696	)
Impacts of foreign currency translation		10			1			11			1			(4	)		(3	)


Allowance at June 30,		$1,917			$630			$2,547			$3,062			$402			$3,464


	Six months ended June 30,
	2008									2007
($ in millions)	Consumer			Commercial			Total			Consumer			Commercial			Total

Allowance at January 1,		$2,141			$614			$2,755			$2,969			$607			$3,576
Provision for credit losses		1,078			166			1,244			884			227			1,111
Charge-offs
Domestic		(800	)		(160	)		(960	)		(843	)		(382	)		(1,225	)
Foreign		(179	)		—			(179	)		(87	)		(56	)		(143	)


Total charge-offs		(979	)		(160	)		(1,139	)		(930	)		(438	)		(1,368	)


Recoveries
Domestic		107			4			111			110			5			115
Foreign		35			3			38			28			1			29


Total recoveries		142			7			149			138			6			144


Net charge-offs		(837	)		(153	)		(990	)		(792	)		(432	)		(1,224	)
Reduction of allowance due to fair value option election (a)		(489	)		—			(489	)		—			—			—
Impacts of foreign currency translation		24			3			27			1			—			1


Allowance at June 30,		$1,917			$630			$2,547			$3,062			$402			$3,464


	(a)	Represents the reduction of allowance as a result of fair value option election made under SFAS 159. Refer to Note 13 for additional information.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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)	2008			2007

Estimated fair value at January 1,		$4,703			$4,930
Additions obtained from sales of financial assets		800			928
Subtractions from sales of servicing assets		(174	)		—
Changes in fair value:
Due to changes in valuation inputs or assumptions used in the valuation model		524			506
Recognized day-one gains on previously purchased MSRs upon adoption of SFAS 157 (a)		11			—
Other changes in fair value		(466	)		(322	)
Other changes that affect the balance		19			(1	)


Estimated fair value at June 30,		$5,417			$6,041


	(a)	Refer to Note 13 for additional information.

As of June 30, 2008, we pledged MSRs of $3.5 billion as collateral for borrowings, compared to $2.7 billion as of December 31, 2007. For a description of MSRs and the related hedging strategy, refer to Notes 9 and 16 to our 2007 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 reevaluation by a model or by a benchmarking analysis. 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 runoff of the portfolio, foreign currency translation adjustments, and the extinguishment of MSRs related to clean-up calls of securitization transactions.

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


	June 30,
	2008	2007

Range of prepayment speeds	0.7–47.6%		0.0–39.7%
Range of discount rates	5.3–31.8%		8.0–13.0%

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. Historically, we have economically hedged the income statement impact of these risks with both derivative and nonderivative 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, 2008, the fair value of derivative financial instruments used to mitigate these risks amounted to $594 million. There were no nonderivative instruments used to mitigate these risks at June 30, 2008. The change in fair value of the derivative financial instruments amounted to a gain of $167 million and a loss of $638 million for the six months ended June 30, 2008 and 2007, respectively, and is included in servicing asset valuation and hedge activities, net in the Condensed Consolidated Statement of Income.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The components of servicing fees on MSRs were as follows:


	Six months ended
	June 30,
($ in millions)	2008		2007

Contractual servicing fees, net of guarantee fees and including subservicing		$652		$764
Late fees		67		74
Ancillary fees		65		61


Total		$784		$899

7. Other Assets

Other assets consisted of:


	June 30,			December 31,
($ in millions)	2008			2007

Property and equipment at cost		$1,746			$1,759
Accumulated depreciation		(1,248	)		(1,200	)


Net property and equipment		498			559
Cash reserve deposits held-for-securitization trusts (a)		3,723			3,350
Fair value of derivative contracts in receivable position		5,024			5,677
Real estate and other investments (b)		1,554			2,237
Restricted cash collections for securitization trusts (c)		3,245			2,397
Goodwill		1,496			1,496
Deferred policy acquisition cost		1,701			1,702
Accrued interest and rent receivable		666			881
Repossessed and foreclosed assets, net, at lower of cost or fair value		1,310			1,347
Debt issuance costs		823			601
Servicer advances		2,089			1,847
Securities lending (d)		—			856
Investment in used vehicles held-for-sale, at lower of cost or fair value		935			792
Subordinated note receivable		250			250
Intangible assets, net of accumulated amortization		88			93
Other assets		5,108			4,170


Total other assets		$28,510			$28,255


	(a)	Represents credit enhancement in the form of cash reserves for various securitization transactions we have executed.
	(b)	Includes residential real estate investments of $556 million and $1.1 billion and related accumulated depreciation of $8 million and $16 million at June 30, 2008, and December 31, 2007, respectively.
	(c)	Represents cash collections from customer payments on securitized receivables. These funds are distributed to investors as payments on the related secured debt.
	(d)	During the three months ended June 30, 2008, our Insurance operations ceased securities-lending activities within its investment portfolio.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

8. Debt


	June 30, 2008						December 31, 2007
($ in millions)	Unsecured		Secured		Total		Unsecured		Secured		Total

Short-term debt
Commercial paper		$1,064		$—		$1,064		$1,439		$—		$1,439
Demand notes		5,652		—		5,652		6,584		—		6,584
Bank loans and overdrafts		6,583		—		6,583		7,182		—		7,182
Repurchase agreements and other (a)		2,132		9,890		12,022		678		17,923		18,601


Total short-term debt		15,431		9,890		25,321		15,883		17,923		33,806
Long-term debt
Due within one year		15,735		22,755		38,490		17,661		19,868		37,529
Due after one year		52,359		56,976		109,335		68,224		53,018		121,242


Total long-term debt (b)		68,094		79,731		147,825		85,885		72,886		158,771
Fair value adjustment (c)		343		—		343		571		—		571


Total debt		$83,868		$89,621		$173,489		$102,339		$90,809		$193,148


	(a)	Repurchase agreements consist of secured financing arrangements with third parties at ResCap. Other primarily includes nonbank secured borrowings and notes payable to GM. Refer to Note 12 for additional information.
	(b)	Secured long-term debt includes $3,002 million at fair value as a result of election made under SFAS 159. Refer to Note 13 for additional information.
	(c)	To adjust designated fixed-rate debt to fair value in accordance with SFAS 133.

The following table presents the scheduled maturity of long-term debt at June 30, 2008, assuming that no early redemptions occur. The actual payment of secured debt may vary based on the payment activity of the related pledged assets.


Year ended December 31, ($ in millions)	Unsecured		Secured		Total


2008	$	9,183	$	16,561	$	25,744
2009		13,023		18,549		31,572
2010		7,721		22,112		29,833
2011		12,495		6,552		19,047
2012		6,119		3,938		10,057
2013 and thereafter		19,553		4,119		23,672


Long-term debt		68,094		71,831		139,925
Collateralized borrowings in securitization trusts (a)		—		7,900		7,900


Total long-term debt	$	68,094	$	79,731	$	147,825


	(a)	Collateralized borrowings in securitization trusts represents mortgage lending related debt that is repaid upon the principal payments of the underlying assets.

Under a new revolving credit facility, we are subject to a leverage ratio covenant under which adjusted consolidated debt should not exceed 11 times adjusted consolidated net worth. As of June 30, 2008, our leverage ratio calculated under the terms of this facility was 10.1. Refer to the Funding and Liquidity section of the accompanying MD&A for further discussion.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following summarizes assets restricted as collateral for the payment of the related debt obligations.

June 30, 2008

December 31, 2007

Related

secured

secured

($ in millions)

Assets (a)

debt (b)

Assets

debt (a)

Loans held-for-sale

$6,590

$3,826

$10,437

$6,765

Mortgage assets held-for-investment and lending receivables

45,360

26,560

45,534

33,911

Retail automotive finance receivables

24,735

20,453

23,079

19,094

Commercial automotive finance receivables

14,519

11,732

10,092

7,709

Investment securities

1,315

823

880

788

Investment in operating leases, net

26,450

20,896

20,107

17,926

Real estate investments and other assets

20,351

5,331

14,429

4,616

Total

$139,320

$89,621

$124,558

$90,809


	(a)	GMAC has a senior position on certain assets pledged by ResCap with subordinate positions held by GM, affiliates of Cerberus, and ultimately some third-parties.
	(b)	Included as part of secured debt are repurchase agreements of $1.1 billion and $3.6 billion through which we have pledged assets as collateral at June 30, 2008, and December 31, 2007, 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 these facilities. The following table summarizes the liquidity facilities that we maintain.


	Total capacity				Unused capacity				Outstanding
	June 30,		Dec 31,		June 30,		Dec 31,		June 30,		Dec 31,
($ in billions)	2008		2007		2008		2007		2008		2007

Committed unsecured:
Global Automotive Finance operations		$2.8		$8.9		$0.4		$7.0		$2.4		$1.9
ResCap		—		3.6		—		1.8		—		1.8
Other		—		0.1		—		0.1		—		—
Committed secured:
Global Automotive Finance operations		85.0		88.7		50.3		57.8		34.7		30.9
ResCap		13.0		29.7		6.2		15.0		6.8		14.7
Other		22.6		22.9		8.9		11.6		13.7		11.3


Total committed facilities		123.4		153.9		65.8		93.3		57.6		60.6


Uncommitted unsecured:
Global Automotive Finance operations		7.5		9.7		1.0		1.4		6.5		8.3
ResCap		0.5		0.6		0.2		0.2		0.3		0.4
Other		0.1		0.2		—		—		0.1		0.2
Uncommitted secured:
Global Automotive Finance operations		0.2		—		—		—		0.2		—
ResCap		15.1		21.6		4.3		9.5		10.8		12.1


Total uncommitted facilities		23.4		32.1		5.5		11.1		17.9		21.0


Total		$146.8		$186.0		$71.3		$104.4		$75.5		$81.6

9. 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. Accounting for changes in fair value depends on the use of the derivative financial instrument and whether it is part of a qualifying hedge accounting relationship.

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 Finance operations. Prior to May 1, 2007, these swaps were deemed to be 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 pretax earnings effect for each type of hedge classification, segregated by the asset or liability being hedged.


	Three months ended						Six months ended
	June 30,						June 30,
($ in millions)	2008			2007			2008			2007			Income statement classification

Fair value hedge ineffectiveness (loss) gain:
Debt obligations		($22	)		($78	)		$12			($78	)	Interest expense
Loans held-for-sale		—			—			—			(1	)	(Loss) gain on mortgage and automotive loans, net
Economic hedge change in fair value:
Off-balance sheet securitization activities:
Global Automotive Finance operations		(101	)		19			15			30		Other income
Foreign-currency debt (a)		(1	)		(6	)		(4	)		—		Interest expense
Loans held-for-sale or investment		(160	)		214			14			179		Loss on mortgage and automotive loans, net
Mortgage servicing rights		(873	)		(596	)		167			(638	)	Servicing asset valuation and hedge activities, net
Mortgage-related securities		8			(54	)		4			(68	)	Investment income (loss)
Callable debt obligations		(31	)		(12	)		(7	)		35		Interest expense
Other		212			(11	)		126			(13	)	Other income, Interest expense, Other operating expenses


Net (losses) gains		($968	)		($524	)		$327			($554	)


	(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.

10. Income Taxes

Effective November 28, 2006, GMAC along with certain U.S. subsidiaries, became pass-through entities for U.S. federal income tax purposes (pass-through entities). Subsequent to November 28, 2006, U.S. federal, state, and local income tax expense has generally not been incurred by these entities as they ceased to be taxable entities in all but a few local tax jurisdictions that continue to tax LLCs or partnerships. Our banking, insurance, and foreign subsidiaries are generally taxable corporations and continue to be subject to U.S. federal, state, local, and foreign income taxes (taxable entities). The income tax expense or benefit related to the taxable entities along with other miscellaneous state, local, and franchise taxes are included in our income tax expense in the Condensed Consolidated Statement of Income.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

A reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is shown in the following table.


	Three months ended						Six months ended
	June 30,						June 30,
	2008			2007			2008			2007

Statutory U.S. federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%
Change in tax rate resulting from:
Effect of valuation allowance change		(19.9	)		—			(23.6	)		—
LLC (loss) income not subject to federal or state income taxes		(18.6	)		3.7			(12.9	)		82.6
Foreign income tax rate differential		(2.9	)		(3.5	)		(5.1	)		(7.5	)
Other		(1.3	)		(3.9	)		(0.4	)		(5.0	)
State and local income taxes, net of federal income tax benefit		0.1			1.1			0.1			0.7
Tax-exempt income		0.1			2.7			0.2			(1.9	)


Effective tax rate		(7.5	)%		35.1	%		(6.7	)%		103.9	%

Our results segregated by tax status are provided below.


	Three months ended June 30,
	2008									2007
	Pass-									Pass-
	through			Taxable						through			Taxable
($ in millions)	entities			entities			Consolidated			entities			entities			Consolidated

Pretax (loss) income		($1,226	)		($1,083	)		($2,309	)		($3	)		$455			$452
Tax (benefit) expense		(4	)		177			173			—			159			159


Net (loss) income		($1,222	)		($1,260	)		($2,482	)		($3	)		$296			$293


Effective tax rate		0.3	%		(16.3	)%		(7.5	)%		10.6	%		34.9	%		35.1	%


	Six months ended June 30,
	2008									2007
	Pass-									Pass-
	through			Taxable						through			Taxable
($ in millions)	entities			entities			Consolidated			entities			entities			Consolidated

Pretax (loss) income		($1,103	)		($1,776	)		($2,879	)		($606	)		$903			$297
Tax (benefit) expense		(7	)		199			192			(2	)		311			309


Net (loss) income		($1,096	)		($1,975	)		($3,071	)		($604	)		$592			($12	)


Effective tax rate		0.6	%		(11.2	)%		(6.7	)%		0.3	%		34.5	%		103.9	%

The effective rate of our taxable entities was significantly higher for the three months and six months ended June 30, 2008, compared to the same periods in 2007. Our consolidated tax expense increased 9% and decreased 38% for the three months and six months ended June 30, 2008, compared to the same periods in 2007. This was primarily due to higher current period losses in ResCap’s international operations for which no tax benefit was recorded and new valuation allowances that were established during the quarter for prior year losses totaling $465 million and $665 million for the three and six months ended June 30, 2008, respectively.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gross unrecognized tax benefits totaled $188 million and $155 million as of June 30, 2008, and December 31, 2007, respectively.

11. Share-based Compensation Plans

In 2007, the Compensation Committee approved the Long-Term Phantom Interest Plan (LTIP) and the Management Profits Interest Plan (MPI), which are share-based compensation plans accounted for under Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (SFAS 123(R)). These compensation plans provide our executives with an opportunity to share in the future growth in value of GMAC, which is necessary to attract and retain key executives. Initial grants of both plans were made in the first quarter of 2007. The Compensation Committee authorized additional LTIP and MPI awards during the first quarter of 2008.

The LTIP is an incentive plan for executives based on the appreciation of GMAC’s value in excess of 10% 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 participants to equity-ownership interests in GMAC. At June 30, 2008, 300 units were issued and outstanding for the 2007–2009 performance period, and 504 units were issued and outstanding for the 2008–2010 performance period. 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 service periods, which are the vesting periods ending December 31, 2009 and 2010, for the respective awards. We utilize a Black-Scholes model to estimate the fair value of the LTIP awards, which considers expected volatility, expected term of the awards, and changes in our performance, market, and industry. 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 outstanding awards have an estimated fair value of $1 million at June 30, 2008. We recognized a reduction of compensation expense of $12 million for the six months ended June 30, 2008, compared to compensation expense of $6 million for the six months ended June 30, 2007. We recognized a reduction of compensation expense for the six months ended June 30, 2008, due to a decline in the estimated fair value of the liability mainly as a result of changes in assumptions due to updated market information obtained during the period, as well as award forfeitures.

The MPI is an incentive plan whereby Class C Membership interests in GMAC held by a management company are granted to senior executives. Series C-1 (C-1) awards were granted beginning in the first quarter of 2007; Series C-2 (C-2) and Series C-2A (C-2A) awards were granted beginning in the first quarter of 2008. The number of Class C Membership Interests available to be issued was also increased from 5,820 to 8,330. The total Class C Membership interests outstanding at June 30, 2008, were approximately 6,296, comprised of 3,053 C-1, 2,413 C-2, and 830 C-2A awards. 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 November 30, 2007, for C-1 and C-2A awards and November 30, 2008, for C-2 awards, and on each of the next four anniversaries thereafter. The performance portion of the awards vests based on five separate annual targets beginning in 2007 for C-1 and C-2A awards and in 2008 for C-2 awards. 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 awards that do not vest during the five one-year performance periods will be forfeited. Under SFAS 123(R), the awards require equity treatment and the fair value is calculated as of the grant date. We utilize a Black-Scholes model to determine the grant date fair value of the MPI awards, which considers expected volatility, expected term of the awards, and changes in our performance, market, and industry. Compensation expense for the MPI awards 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. During the third quarter of 2007, the performance vesting for 2007 was not deemed probable. Accordingly, a portion of the expense for the 2007 performance vesting portion of the awards will be recognized throughout 2008. Based on their grant date estimated fair value, the

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value of the awards outstanding at June 30, 2008, was approximately $31 million. Compensation expense of $2 million was recognized during both the six months ended June 30, 2008 and 2007.

In July 2008, the Compensation Committee approved the Long-Term Equity Compensation Incentive Plan, which provides for future grants of Restricted Share Units (RSUs) and Share Appreciation Rights (SARs) to certain of our executives. No awards were granted during the three months ended June 30, 2008. Both types of awards meet the definition of share-based compensation as governed by SFAS 123(R) and will require liability treatment once granted. The RSU and SAR awards will be settled in cash and will have individual vesting requirements as defined in the award agreements.

12. 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)	2008		2007

Assets
Available-for-sale investment in asset-backed security (a)		$35		$35
Finance receivables and loans, net of unearned income:
Wholesale auto financing (b)		631		717
Term loans to dealers (b)		97		166
Lending receivables (c)		186		145
Investment in operating leases, net (d)		354		330
Notes receivable from GM (e)		2,158		1,868
Other assets:
Subvention receivables (rate and residual support)		343		365
Lease pull-ahead receivable		50		22
Other		47		60
Liabilities
Unsecured debt:
Notes payable to GM		953		585
Secured debt:
Subordinated participation in ResCap Facility — GM		368		—
Subordinated participation in ResCap Facility — Cerberus Fund		382		—
Cerberus model home term loan		222		—
Accrued expenses and other liabilities:
Wholesale payable		773		466
Other payables		59		55


	(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)	Represents wholesale financing we provide 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.

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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)	2008			2007			2008			2007

Net financing revenue:
GM and affiliates lease residual value support (a)		$460			$233			$823			$450
GM and affiliates rate support		245			359			524			727
Wholesale subvention and service fees from GM		82			66			159			131
Interest paid on loans with GM		(10	)		(5	)		(20	)		(4	)
Interest on loans with FIM Holdings affiliates		5			4			8			11
Consumer lease payments from GM (b)		4			5			24			12
Other revenue:
Insurance premiums earned from GM		60			63			110			129
Interest on notes receivable from GM and affiliates		32			33			62			65
Interest on wholesale settlements (c)		25			49			54			87
Revenues from GM leased properties, net		4			3			8			6
Derivatives (d)		—			5			10			8
Other		2			—			4			12
Service fee income:
U.S. Automotive operating leases (e)		2			9			8			13
Expense:
Off-lease vehicle selling expense reimbursement (f)		(12	)		(9	)		(20	)		(17	)
Payments to GM for services, rent, and marketing expenses (g)		39			35			84			76


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


	(f)	An agreement with GM provides for the reimbursement of certain selling expenses incurred by us on off-lease vehicles sold by GM at auction.


	(g)	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, as well as exclusivity and royalty fees.

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CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Statement of Changes in Equity

A summary of the changes to the statement of changes in equity related to transactions with GM, FIM Holdings, and affiliated companies follows:


	Six months ended		Year ended
	June 30,		December 31,
($ in millions)	2008		2007

Equity
Dividends paid to members (a)		$27		$—
Preferred interests (b)		—		1,052
Conversion of preferred membership interests (b)		—		1,121
Capital contributions received (c)		8		1,080
Preferred interest dividends		—		192


	(a)	Primarily represents remittances to GM for tax settlements and refunds received related to tax periods prior to the Sale Transactions as required per the terms of the Purchase and Sale Agreement between GM and FIM Holdings.
	(b)	During the fourth quarter of 2007, GM and FIM Holdings converted $1.1 billion of preferred membership interest into common equity interests. Refer to Note 1 to our 2007 Annual Report on Form 10-K for further discussion.
	(c)	During the first quarter of 2007, under the terms of the Sale Transactions, GM made a capital contribution of $1 billion to GMAC.

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, they pay 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 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. Prior to the Sale Transactions, 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, under risk-sharing programs, GM shares equally in residual losses to the extent that remarketing proceeds are 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 in 2006. The payments were recorded as a deferred amount in accrued expenses and other liabilities on our Condensed Consolidated Balance Sheet. As these contracts terminate and the vehicles are sold at auction, any remaining payments are treated as a component of sales proceeds in recognizing the gain or loss on sale of the underlying assets. As of June 30, 2008, the remaining deferred amount is $309 million.

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

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CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

months ended June 30, 2008, GM paid or agreed to pay us a total of $191 million and $436 million, respectively.

Based on the June 30, 2008, outstanding U.S. operating lease portfolio, the additional maximum amount that could be paid by GM under the residual support programs is approximately $1.4 billion 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. In determining the impairment recognized during the three months ended June 30, 2008, we estimated future cash flows of approximately $818 million (undiscounted) will be remitted to us in connection with residual support programs in the U.S. and Canada upon remarketing of off-lease vehicles in our lease portfolio as of June 30, 2008.

Based on the June 30, 2008, outstanding U.S. operating lease portfolio, the maximum amount that could be paid under the risk-sharing arrangements is approximately $1.4 billion and would only be paid in the unlikely event that the proceeds from all outstanding lease vehicles were lower than our standard residual rates. In determining the impairment recognized during the three months ended June 30, 2008, we estimated future cash flows of approximately $754 million (undiscounted) will be remitted to us in connection with risk sharing arrangements in the U.S. and Canada upon remarketing of off-lease vehicles in our lease portfolio as of June 30, 2008.

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, were as follows:


	Six months ended
	June 30,
	2008	2007

GM and affiliates subvented contracts acquired:
North American operations	79%		86%
International operations	41%		42%

Other

We have entered into various services agreements with GM that are designed to document and maintain our current and historical relationship. 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, 2008, and December 31, 2007, commercial obligations guaranteed by GM were $95 million and $107 million, respectively. In addition, we have a consignment arrangement with GM for commercial inventories in Europe. As of June 30, 2008, and December 31, 2007, commercial inventories related to this arrangement were $154 million and $90 million, respectively, and are reflected in other assets on our Condensed Consolidated Balance Sheet.

On June 4, 2008, GMAC entered into a Loan Agreement (ResCap Facility) with Residential Funding Company, LLC (RFC) and GMAC Mortgage, LLC (GMAC Mortgage) (guaranteed by ResCap and certain of its subsidiaries), pursuant to which GMAC provides a senior secured credit facility with a capacity of up to $3.5 billion. In connection with this, GMAC entered into a Participation Agreement (Participation Agreement) with GM and Cerberus ResCap Financing LLC (Cerberus Fund), pursuant to which GMAC sold GM and Cerberus Fund $750 million in subordinated participations (Participations) in the loans made pursuant to the ResCap Facility. GM and Cerberus Fund acquired 49% and 51% of the Participations, respectively.

In June 2008, Cerberus Capital Management, L.P., or its designee(s) (Cerberus) purchased certain assets of ResCap with a carrying value of approximately $479 million for consideration consisting of $230 million in

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

cash and Series B junior preferred membership interests in a newly formed entity, CMH Holdings, LLC (CMH), which is not a subsidiary of ResCap and the managing member of which is an affiliate of Cerberus. CMH purchased model home and lot option assets from ResCap. CMH is consolidated into ResCap, and thus GMAC, under FIN 46(R), Consolidation of Variable Interest Entities, as ResCap remains the primary beneficiary. In conjunction with this agreement, Cerberus has entered into both term and revolving loans with CMH. The term loan principal amount is equal to $230 million and the revolving loan maximum amount is $10 million. The loans will mature on June 30, 2013, and are secured by a pledge of all of the assets of CMH. At June 30, 2008, the outstanding balance of the term loan was $222 million and interest expense for the three months ended June 30, 2008, was $2 million.

Cerberus has committed to purchase certain assets of ResCap at ResCap’s option consisting of performing and nonperforming mortgage loans, mortgage-backed securities, and other assets for net cash proceeds of $300 million. ResCap has commenced identifying the assets proposed to be sold to Cerberus. In addition, ResCap intends, but is not obligated, to undertake an orderly sale of certain assets consisting of performing and nonperforming mortgage loans, mortgage-backed securities, and other assets in arms-length transactions through the retention of nationally recognized brokers in an auction process. Cerberus has committed to make firm bids to purchase the auctioned assets for net cash proceeds of $650 million.

13. Fair Value

Fair Value Measurements (SFAS 157)

We adopted SFAS 157 on January 1, 2008, 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; therefore, it does not expand the use of fair value in any new circumstance.

SFAS 157 nullified guidance in EITF 02-3. EITF 02-3 required the deferral of day-one gains on derivative contracts, unless the fair value of the derivative contracts were supported by quoted market prices or similar current market transactions. In accordance with EITF 02-3, we previously deferred day-one gains on purchased MSRs and certain residential loan commitments. When SFAS 157 was adopted on January 1, 2008, the day-one gains previously deferred under EITF 02-3 were recognized as a cumulative effect adjustment that increased beginning retained earnings by $23 million.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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 (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). Additionally, SFAS 157 requires an entity to consider all aspects of nonperformance risk, including the entity’s own credit standing, when measuring fair value of a liability. We consider our credit risk and the credit risk of our counterparties on the valuation of derivative instruments through a credit valuation adjustment (CVA). The CVA calculation utilizes our credit default swap spreads and the spreads of the counterparty. In situations where our net position with a counterparty is a liability, our credit default spread is used to calculate the required adjustment. In net asset positions, the counterparty’s credit default spread is used.

SFAS 157 establishes a three-level hierarchy to be used when measuring and disclosing fair value. An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. Following is a description of the three hierarchy levels:


	Level 1	Inputs are quoted prices in active markets for identical asset or liabilities as of the measurement date. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity.

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	Level 2	Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

	Level 3	Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models, and significant assumptions utilized.

Available-for-sale securities — Available-for-sale securities are carried at fair value, which is primarily based on observable market prices. If observable market prices are not available, our valuations are based on internally developed discounted cash flow models that use a market-based discount rate and consider recent market transactions, experience with similar securities, current business conditions, and analysis of the underlying collateral, as available. In order to estimate cash flows, we are required to utilize various significant assumptions including market observable inputs (e.g., forward interest rates) and internally developed inputs (including prepayment speeds, delinquency levels, and credit losses). We classified 10% of the available-for-sale securities reported at fair value as Level 3. Available-for-sale securities account for 23% of all assets reported at fair value at June 30, 2008.

Trading securities — Trading securities are recorded at fair value and include retained interests in assets sold through off-balance sheet securitizations and purchased securities. The securities may be asset-backed or asset-related, asset-backed securities (including senior and subordinated interests), interest-only, principal-only, or residual interests and may be investment grade, noninvestment grade, or unrated securities. We base our valuation of trading securities on observable market prices when available; however, observable market prices are not available for a significant portion of these assets due to illiquidity in the markets. When observable market prices are not available, valuations are primarily based on internally developed discounted cash flow models that use a market-based discount rate. The valuation considers recent market transactions, experience with similar securities, current business conditions, and analysis of the underlying collateral, as available. In order to estimate cash flows, we utilize various significant assumptions including market observable inputs (e.g., forward interest rates) and internally developed inputs (e.g., prepayment speeds, delinquency levels, and credit losses). We classified 89% of the trading securities reported at fair value as Level 3. Trading securities account for 6% of all assets reported at fair value at June 30, 2008.

Loans held-for-sale — The entire loans held-for-sale portfolio is accounted for at the lower of cost or fair value, as required under GAAP. Only loans that are currently being carried at fair value are included within the accompanying nonrecurring fair value measurement tables. We classified 64% of the loans held-for-sale reported at fair value as Level 3. Loans held-for-sale account for 24% of all assets reported at fair value at June 30, 2008.

Approximately 54% of the total loans held-for-sale and carried at fair value are automotive loans. We based our valuation of automotive loans held-for-sale on internally developed discounted cash flow models and have classified all such loans as Level 3. These valuation models estimate the exit price we expect to receive in the loan’s principal market, which depending upon characteristics of the loans may be the whole-loan or securitization market. Although we utilize and give priority to market observable inputs, such as interest rates and market spreads within these models, we are typically required to utilize internal inputs, such as prepayment speeds, credit losses, and discount rates. While numerous controls

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

exist to calibrate, corroborate, and validate these internal inputs, these internal inputs require the use of judgment and can have a significant impact on the determination of the loan’s value. Accordingly, we classified all automotive loans held-for-sale as Level 3.

Approximately 42% of the total loans carried at fair value are mortgage loans. We originate or purchase mortgage loans in the United States that we intend to sell to Fannie Mae, Freddie Mac, and Ginnie Mae (collectively, the Agencies). Additionally, we originate or purchase mortgage loans both domestically and internationally that we intend to sell into the secondary markets via whole-loan sales or securitizations.

Mortgage loans held-for-sale are typically pooled together and sold into certain exit markets, depending upon underlying attributes of the loan, such as agency eligibility (domestic only), product type, interest rate, and credit quality. Two valuation methodologies are used to determine the fair value of loans held-for-sale. The methodology used depends on the exit market as described below.

Loans valued using observable market prices for identical or similar assets — This includes all domestic loans that can be sold to the Agencies, which are valued predominantly by published forward agency prices. This will also include all nonagency domestic loans or international loans where recently negotiated market prices for the loan pool exist with a counterparty (which approximates fair value) or quoted market prices for similar loans are available. As these valuations are derived from quoted market prices, we classify these valuations as Level 2 in the fair value disclosures. As of June 30, 2008, 86% of the mortgage loans held-for-sale that are currently being carried at fair value are classified as Level 2.

Loans valued using internal models — To the extent observable market prices are not available, we will determine the fair value of loans held-for-sale using internally developed valuation models. These valuation models estimate the exit price we expect to receive in the loan’s principal market, which depending upon characteristics of the loan, may be the whole-loan or securitization market. Although we utilize and give priority to market observable inputs such as interest rates and market spreads within these models, we are typically required to utilize internal inputs, such as prepayment speeds, credit losses, and discount rates. While numerous controls to calibrate, corroborate, and validate these internal inputs, these internal inputs require the use of judgment and can have a significant impact on the determination of the loan’s value. Accordingly, we classify these valuations as Level 3 in the fair value disclosures. As of June 30, 2008, 14% of the mortgage loans held-for-sale that are currently being carried at fair value are classified as Level 3.

Due to limited sales activity and periodically unobservable prices in certain markets, certain loans held-for-sale may transfer between Level 2 and Level 3 in future periods.

Consumer finance receivables and loans, net of unearned income — Under SFAS 159, we elected the fair value option for certain mortgage loans held-for-investment. The elected loans collateralized on-balance sheet securitization debt in which we estimated credit reserves pertaining to securitized assets that could have, or already had, exceeded our economic exposure. The elected loans represent a portion of the consumer finance receivable and loans on the Condensed Consolidated Balance Sheet. The balance that was not elected under SFAS 159 was reported on the balance sheet at the principal amount outstanding, net of charge-offs, allowance for loan losses, and net deferred loan fees.

The mortgage loans held-for-investment that collateralized securitization debt were legally isolated from us and are beyond the reach of our creditors. The loans are measured at fair value using a portfolio approach or an in-use premise. The objective in fair valuing the loans and related securitization debt is to properly account for our retained economic interest in the securitizations. As a result of reduced liquidity in capital markets, values of both these loans and the securitized bonds are expected to be volatile.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Since this approach involves the use of significant unobservable inputs, we classified all the mortgage loans held-for-investment elected under SFAS 159 as Level 3. As of June 30, 2008, 64% of all consumer finance receivables and loans reported at fair value are classified as Level 3. Consumer finance receivables and loans account for 11% of all assets reported at fair value at June 30, 2008. Refer to the section within this note titled Fair Value Option of Financial Assets and Financial Liabilities (SFAS 159) for additional information.

Investment in operating leases, net — In light of the prevailing market conditions, particularly rising domestic fuel prices and weakness in the economy in the United States and Canada, and the associated adverse impact to used vehicle values, we concluded a triggering event occurred during the three months ended June 30, 2008, requiring an evaluation of certain operating leases held by our North American operations in accordance with SFAS 144. Only impaired operating leases were included within the nonrecurring fair value measurement tables. We determined a lease was impaired when the undiscounted expected cash flows was lower than the carrying value of the asset. The fair value of these impaired leases was then measured based upon discounted cash flows. We considered all the discounted expected cash flows when determining the fair value, including customer payments, the expected residual value upon remarketing the vehicle at lease termination, and future payments from GM under residual risk-sharing agreements. Based upon the use of internally developed discounted cash flow models, we classified all the impaired leases as Level 3. Our investment in operating leases accounts for 7% of all assets reported at fair value at June 30, 2008. For further details with respect to impaired operating leases, refer to Note 4 — Impairment of Investment in Operating Leases.

Mortgage servicing rights — We typically retain MSRs when we sell assets into the secondary market. MSRs do not trade in an active market with observable prices. Therefore, we use internally developed discounted cash flow models to estimate the fair value of MSRs and have classified all MSRs as Level 3. These internal valuation models estimate net cash flows based on internal operating assumptions that we believe would be used by market participants, combined with market-based assumptions for loan prepayment rates, interest rates, and discount rates that we believe approximate yields required by investors in this asset. Cash flows primarily include servicing fees, float income, and late fees, in each case less operating costs to service the loans. The estimated cash flows are discounted using an option-adjusted spread derived discount rate. All MSRs are classified as Level 3 at June 30, 2008. MSRs account for 13% of all assets reported at fair value at June 30, 2008.

Derivative instruments — We enter into a variety of derivative financial instruments as part of our hedging strategies. Certain of these derivatives are exchange traded, such as Eurodollar futures, or traded within highly active dealer markets, such as agency to-be-announced securities. In order to fair value these instruments, we utilize the exchange price or dealer market price for the particular derivative contract; therefore, these contracts are classified as Level 1. We classified 2% of the derivative assets and 3% of the derivative liabilities reported at fair value as Level 1 at June 30, 2008.

We also execute over-the-counter derivative contracts, such as interest rate swaps, floors, caps, corridors, and swaptions. We utilize third-party-developed valuation models that are widely accepted in the market to value these over-the-counter derivative contracts. The specific terms of the contract are entered into the model, as well as market observable inputs such as interest rate forward curves and interpolated volatility assumptions. As all significant inputs into these models are market observable, these over-the-counter derivative contracts are classified as Level 2 at June 30, 2008. We classified 85% of the derivative assets and 58% of the derivative liabilities reported at fair value as Level 2 at June 30, 2008.

We also hold certain derivative contracts that are structured specifically to meet a particular hedging objective. These derivative contracts often are utilized to hedge risks inherent within certain on-balance sheet securitizations. In order to hedge risks on particular bond classes or securitization collateral, the derivative’s notional amount is often indexed to the hedged item. As a result, we typically are required to use internally developed prepayment assumptions as an input into the model, in order to forecast future

GMAC LLC

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CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

notional amounts on these structured derivative contracts. Accordingly, these derivative contracts were classified as Level 3. We classified 13% of the derivative assets and 39% of the derivative liabilities reported at fair value as Level 3 at June 30, 2008.

Derivative assets account for 12% of all assets reported at fair value at June 30, 2008. Derivative liabilities account for 36% of all liabilities reported at fair value at June 30, 2008.

Repossessed and foreclosed assets — Foreclosed upon or repossessed assets resulting from loan defaults are carried at the lower of either cost or fair value less costs to sell and are included in other assets on the Condensed Consolidated Balance Sheet. Only assets that are being carried at fair value less costs to sell are included in the fair value disclosures.

The majority of assets acquired due to default are foreclosed assets. We revalue foreclosed assets on a periodic basis. Properties that are valued based upon independent third-party appraisals less costs to sell are classified as Level 2. When third-party appraisals are not obtained, valuations are typically obtained from third-party broker price opinion; however, depending on the circumstances, the property list price or other sales price information may be used in lieu of a broker price opinion. Based on historical experience, these values are adjusted downward to take into account damage and other factors that typically cause the actual liquidation value of foreclosed properties to be less than broker price opinion or other price sources. This valuation adjustment is necessary to ensure the valuation ascribed to these assets considers unique factors and circumstances surrounding the foreclosed asset. As a result of applying internally developed adjustments to the third-party-provided valuation of the foreclosed property, these assets are classified as Level 3 in the fair value disclosures. As of June 30, 2008, 36% and 64% of foreclosed and repossessed properties carried at fair value less costs to sell are classified as Level 2 and Level 3, respectively. Repossessed and foreclosed assets account for 2% of all assets reported at fair value at June 30, 2008.

Investment in used vehicles held-for-sale — Our investment in used vehicles is carried at the lower of either cost or fair value less costs to sell and are included in other assets on the Condensed Consolidated Balance Sheet. Only assets that are being carried at fair value less costs to sell are included in the nonrecurring fair value tables. The prevailing market conditions, primarily rising domestic fuel prices and weakness in the economy of the United States and Canada, have created a decline in used vehicle prices, which lowered the fair value of certain vehicles below cost, primarily sport-utility vehicles and to a lesser extent trucks. The fair value was determined based on our recent remarketing experience related to our investment in used vehicles held-for-sale. We classified all these assets as Level 3. Our investment in used vehicles held-for-sale accounts for 2% of all assets reported at fair value at June 30, 2008.

On-balance sheet securitization debt — Under SFAS 159, we elected the fair value option for certain mortgage loans held-for-investment and on-balance sheet securitization debt. In particular, we elected the fair value option on securitized debt issued by domestic on-balance sheet securitization vehicles as of January 1, 2008, in which we estimated credit reserves pertaining to securitized assets could have, or already had, exceeded our economic exposure. The objective in measuring the loans and related securitization debt at fair value was to approximate our retained economic interest and economic exposure to the collateral securing the securitization debt. The remaining on-balance sheet securitization debt that was not elected under SFAS 159 is reported on the balance sheet at cost, net of premiums or discounts and issuance costs.

We value securitization debt that was elected pursuant to the fair value option and any economically retained positions using market observables prices whenever possible. The securitization debt is principally in the form of asset- and mortgage-backed securities collateralized by the underlying mortgage loans held-for-investment. Due to the attributes of the underlying collateral and current market conditions, observable prices for these instruments are typically not available in active markets. In these situations, we consider observed transactions as Level 2 inputs in our discounted cash flow models. Additionally, the discounted cash flow models utilize other market observable inputs such as prepayment speeds, credit losses, and discount rates. Fair value option elected financing securitization debt is classified as Level 3

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

as a result of the reliance on significant assumptions and estimates for model inputs. On-balance sheet securitization debt accounts for 59% of all liabilities reported at fair value at June 30, 2008. As a result of reduced liquidity in capital markets, values of both the elected loans and the securitized debt are expected to be volatile. Refer to the section within this note Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159) for a complete description of these securitizations.

Collateralized Debt Obligations — We elected the fair value option for all collateralized debt obligations (CDOs). CDOs are collateralized by trading securities, which are carried at fair value. Due to the availability of market information on the CDO collateral, we derive the fair value of CDO debt using the CDO collateral fair value and adjust accordingly for any retained economic positions. While a portion of the CDO collateral may utilize market observable prices for valuation purposes, the majority of the CDO collateral is valued using valuation models that utilize significant internal inputs. Further, the retained economic positions also use valuation models that utilize significant internal inputs. As a result, CDO debt is classified as Level 3. CDOs account for 5% of all liabilities reported at fair value at June 30, 2008. Refer to the section within this note titled Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159) for a complete description of the CDOs.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Recurring Fair Value

The following table displays the assets and liabilities measured at fair value on a recurring basis, including financial instruments elected for the fair value option under SFAS 159. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The table below displays the hedges separately from the hedged items and, therefore, does not directly display the impact of our risk management activities.


	Recurring fair value measures
June 30, 2008 ($ in millions)	Level 1			Level 2		Level 3			Total

Assets
Investment securities:
Available-for-sale securities		$1,880			$6,534		$936			$9,350
Trading securities		1			287		2,314			2,602
Consumer finance receivables and loans, net of unearned income (a)		—			—		2,658			2,658
Mortgage servicing rights		—			—		5,417			5,417
Other assets:
Cash reserve deposits held-for-securitization trusts		—			—		51			51
Derivative assets (liabilities), net (b)		56			3,156		(19	)		3,193
Restricted cash collections for securitization trusts		—			—		92			92


Total assets		$1,937			$9,977		$11,449			$23,363


Liabilities
Secured debt:
On-balance sheet securitization debt (a)		$—			$—		($2,754	)		($2,754	)
Collateralized debt obligations (a)		—			—		(248	)		(248	)
Other liabilities		(6	)		—		—			(6	)


Total liabilities		($6	)		$—		($3,002	)		($3,008	)


	(a)	Carried at fair value due to fair value option election under SFAS 159.
	(b)	At June 30, 2008, derivative assets within Level 1, Level 2, and Level 3 were $103 million, $4,134 million, and $650 million, respectively. Additionally, derivative liabilities within Level 1, Level 2, and Level 3 were $47 million, $978 million, and $669 million, respectively.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables present a reconciliation for all Level 3 assets and liabilities measured at fair value on a recurring basis. We often economically hedge the fair value change of our assets or liabilities with derivatives and other financial instruments. The Level 3 items presented below may be hedged by derivatives and other financial instruments that are classified as Level 1 or Level 2. Thus, the following tables do not fully reflect the impact of our risk management activities.

Level 3 recurring fair value measurements

Net unrealized

Net realized/

gains (losses)

unrealized gains (losses)

included in

Fair value

Included

Purchases,

Fair value

earnings still

as of

Included

in other

issuances,

as of

held as of

March 31,

comprehensive

and

June 30,

($ in millions)

2008

earnings

income

settlements

2008

Assets

Investment securities

Available-for-sale securities

$1,195

($5

) (b)

$—

($254

)

$936

($12

) (b)

Trading securities

2,148

(78

) (c)

243

2,314

(c)

Consumer finance receivables and loans, net of unearned income (a)

3,915

(585

) (d)

—

(672

)

2,658

(992

) (d)

Mortgage servicing rights

4,278

687

(e)

—

452

5,417

688

(e)

Other assets

Cash reserve deposits held-for-securitization trusts

—

(c)

—

(90

) (c)

Fair value of derivative contracts in receivable (liability) position, net

172

(62

) (f)

(135

)

(19

)

) (f)

Restricted cash collections for securitization trusts

100

) (g)

—

) (g)

Total assets

$11,849

($52

)

($356

)

$11,449

($370

)

Liabilities

Secured debt

On-balance sheet securitization debt (a)

($3,996

)

$598

(h)

$—

$644

($2,754

)

$717

(h)

Collateralized debt obligations (a)

(303

)

(c)

—

(248

)

102

(c)

Total liabilities

($4,299

)

$612

$—

$685

($3,002

)

$819


(a)		Carried at fair value due to fair value option election under SFAS 159.
(b)		Reported as investment income (loss) in the Condensed Consolidated Statement of Income, except securitization trust interests, which are reported as other income in the Condensed Consolidated Statement of Income.
(c)		Reported as investment income (loss) in the Condensed Consolidated Statement of Income.
(d)		The fair value adjustment is reported as other income, and the related interest is reported as consumer financing revenue in the Condensed Consolidated Statement of Income.
(e)		Reported as servicing asset valuation and hedge activities, net in the Condensed Consolidated Statement of Income.
(f)		Derivative instruments relating to risks associated with debt are reported as interest expense in the Condensed Consolidated Statement of Income, while derivatives relating to risks associated with mortgage loans held-for-sale are reported as investment income (loss). The remaining derivative earnings are reported as other income in the Condensed Consolidated Statement of Income.
(g)		Reported as other operating expenses in the Condensed Consolidated Statement of Income.
(h)		The fair value adjustment is reported as other income, and the related interest is reported as interest expense in the Condensed Consolidated Statement of Income.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Level 3 recurring fair value measurements

Net unrealized

Net realized/

gains (losses)

unrealized gains (losses)

included in

Fair value

Included

Purchases,

Fair value

earnings still

as of

Included

in other

issuances,

as of

held as of

January 1,

comprehensive

and

June 30,

($ in millions)

2008

earnings

income

settlements

2008

Assets

Investment securities

Available-for-sale securities

$1,249

($38

) (b)

($282

)

$936

($37

) (b)

Trading securities

2,726

(502

) (c)

)

2,314

(475

) (c)

Consumer finance receivables and loans, net of unearned income (a)

6,684

(2,588

) (d)

—

(1,438

)

2,658

(3,266

) (d)

Mortgage servicing rights

4,713

(e)

—

663

5,417

(e)

Other assets

Cash reserve deposits held-for-securitization trusts

(c)

—

(82

) (c)

Fair value of derivative contracts in receivable (liability)position, net

(46

)

117

(f)

(107

)

(19

)

196

(f)

Restricted cash collections for securitization trusts

111

(12

) (g)

)

(12

) (g)

Total assets

$15,467

($2,974

)

$21

($1,065

)

$11,449

($3,618

)

Liabilities

Secured Debt

On-balance sheet securitization debt (a)

($6,734

)

$2,631

(h)

$—

$1,349

($2,754

)

$2,866

(h)

Collateralized debt obligations (a)

(351

)

(c)

—

(248

)

(c)

Total liabilities

($7,085

)

$2,666

$—

$1,417

($3,002

)

$2,909


(a)		Carried at fair value due to fair value option election under SFAS 159.
(b)		Reported as investment income in the Condensed Consolidated Statement of Income, except securitization trust interests, which are reported as other income in the Condensed Consolidated Statement of Income.
(c)		Reported as investment income in the Condensed Consolidated Statement of Income.
(d)		The fair value adjustment is reported as other income, and the related interest is reported as consumer financing revenue in the Condensed Consolidated Statement of Income.
(e)		Reported as servicing asset valuation and hedge activities, net in the Condensed Consolidated Statement of Income.
(f)		Derivative instruments relating to risks associated with debt are reported as interest expense in the Condensed Consolidated Statement of Income, while derivatives relating to risks associated with mortgage loans held-for-sale are reported as investment income. The remaining derivative earnings are reported as other income in the Condensed Consolidated Statement of Income.
(g)		Reported as other operating expenses in the Condensed Consolidated Statement of Income.
(h)		The fair value adjustment is reported as other income, and the related interest is reported as interest expense in the Condensed Consolidated Statement of Income.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Nonrecurring Fair Value

We may be required to measure certain assets and liabilities at fair value from time to time. These periodic fair value measures typically result from the application of lower of cost or fair value accounting or certain impairment measures under GAAP. These items would constitute nonrecurring fair value measures under SFAS 157.

The following table displays the assets and liabilities measured at fair value on a nonrecurring basis.

Lower of

Total gains

cost or

(losses) included

fair value

in earnings

June 30, 2008

Nonrecurring fair value measures

or credit

for the three

for the six

($ in millions)

Level 1

Level 2

Level 3

Total

allowance

months ended

Assets

Loans held-for-sale (a)

$—

$3,520

$6,358

$9,878

($1,166

)

n/m

(g)

n/m

(g)

Consumer finance receivables and loans, net of unearned income (b)

1,210

369

155

1,734

(607

)

n/m

(g)

n/m

(g)

Commercial finance receivables and loans, net of unearned income (c)

—

(14

)

n/m

(g)

n/m

(g)

Investment in operating leases, net (d)

—

2,884

n/m

(f)

($716

)

($716

)

Other assets:

Real estate and other investments (d)

—

218

—

218

n/m

(f)

(18

)

(21

)

Repossessed and foreclosed assets, net (e)

—

322

565

887

(255

)

n/m

(g)

n/m

(g)

Investment in used vehicles held-for-sale (a)

—

818

(47

)

n/m

(g)

n/m

(g)

Total assets

$1,210

$4,429

$10,796

$16,435

($2,089

)

($734

)

($737

)

n/m = not meaningful


(a)		Represents assets held-for-sale that are required to be measured at lower of cost or fair value in accordance with SFAS No. 65, Accounting for Certain Mortgage Banking Activities or (SOP 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others. Only assets with fair values below cost are included in the table above. The related valuation allowance represents the cumulative adjustment to fair value of those specific loans.
(b)		Includes only receivables with a specific reserve established using the fair value of the underlying collateral. The related credit allowance represents the cumulative adjustment to fair value of those specific receivables.
(c)		Represents the portion of the commercial portfolio impaired as of June 30, 2008, under SFAS No. 114, Accounting by Creditors for Impairment of a Loan. The related credit allowance represents the cumulative adjustment to fair value of those specific receivables.
(d)		Represents assets impaired under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Asset. The total loss included in earnings for the three months ended June 30, 2008, represents the fair market value adjustments on the portfolio.
(e)		The allowance provided for repossessed and foreclosed assets represents any cumulative valuation adjustment recognized to adjust the assets to fair value less costs to sell.
(f)		The total loss included in earnings is the most relevant indicator of the impact on earnings.
(g)		We consider the applicable valuation or credit loss allowance to be the most relevant indicator of the impact on earnings caused by the fair value measurement. The carrying values are inclusive of the respective valuation or credit loss allowance.

Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159)

Effective January 1, 2008, we adopted SFAS 159, which 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 are 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.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

We elected to measure at fair value certain financial assets and liabilities held by our ResCap operations including certain collateralized debt obligations and certain mortgage loans held-for-investment and related debt held in financing securitization structures that existed as of adoption. Our intent in electing fair value for these items was to mitigate a divergence between accounting losses and economic exposure for certain assets and liabilities as described in the paragraphs following the table below. The cumulative effect to retained earnings for these fair value elections was a decrease of $178 million on January 1, 2008.

The following table represents the carrying value of the affected instruments before and after the changes in accounting related to the adoption of SFAS 159.

Cumulative effect

adjustment to

December 31, 2007

January 1, 2008

carrying value

retained earnings

carrying value

($ in millions)

before adoption

gain (loss)

after adoption

Assets

Consumer finance receivables and loans, net of unearned income (a)

$10,531

($3,847

)

$6,684

Liabilities

Secured debt:

On-balance sheet securitization debt

($10,367

)

$3,633

($6,734

)

Collateralized debt obligations

(386

)

(351

)

Pretax cumulative effect of adopting SFAS 159

($179

)

After-tax cumulative effect of adopting SFAS 159

($178

)


	(a)	Includes the removal from the balance sheet of the $489 million of allowance for loan losses.

On-balance Sheet Securitizations

In prior years, ResCap executed certain domestic securitizations that did not meet sale criteria under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities (SFAS 140). As part of these domestic on-balance sheet securitizations, we typically retained the economic residual interest in the securitization. The economic residual entitles us to excess cash flows that remain at each distribution date after absorbing any credit losses in the securitization. Because sale treatment was not achieved under SFAS 140, the mortgage loan collateral remained on the balance sheet and was classified as consumer finance receivable and loans, the securitization’s debt was classified as secured debt, and the economic residuals were not carried on the balance sheet. After execution of the securitizations, we were required under GAAP to continue recording an allowance for credit losses on these held-for-investment loans.

As a result of market conditions and deteriorating credit performance during 2007, economic exposure on certain of these domestic on-balance sheet securitizations were reduced to zero or approximating zero, thus indicating we expected minimal to no future cash flows to be received on the economic residual. While we no longer were economically exposed to credit losses in the securitizations, we were required to continue recording additional allowance for credit losses on the securitization collateral as credit performance deteriorated. Further, in accordance with GAAP, we did not record any offsetting reduction in the securitization’s debt balances, even though any nonperformance of the assets will ultimately pass through as a reduction of the amount owed to the debt holders, once they are

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

contractually extinguished. As a result, we were required to record accounting losses beyond our economic exposure.

In order to mitigate the divergence between accounting losses and economic exposure, we elected the fair value option for a portion of the domestic on-balance sheet securitizations on January 1, 2008. In particular, we elected the fair value option for domestic on-balance sheet securitization vehicles in which we estimated that the credit reserves pertaining to securitized assets could, or already had, exceeded our economic exposure. The fair value option election was made at a securitization level; thus the election was made for both the mortgage loans held-for-investment and the related portion of on-balance sheet securitized debt for these particular securitizations.

As part of the cumulative effect of adopting SFAS 159, we removed various items that were previously included in the carrying value of the respective consumer loans and on-balance sheet securitization debt. We removed $489 million of allowance for credit losses and other net deferred and upfront costs included in the carrying value of the fair value-elected loans and debt. The removal of these items, as well as the adjustment required in order to have the item’s carrying value equal fair value at January 1, 2008, resulted in a $3.8 billion decrease recorded to beginning retained earnings for the fair value-elected loans held-for-investment, offset by a $3.6 billion gain related to the elected on-balance sheet securitization debt. These fair value option elections did not have a material impact on our deferred tax balances.

Subsequent to the fair value election for loans held-for-investment, we continued to carry the fair value-elected loans within consumer finance receivable and loans, net of unearned income, on the Condensed Consolidated Balance Sheet. We no longer record allowance for credit losses on these fair value-elected loans, and amortization of net deferred costs/fees no longer occurs because the deferred amounts were removed as part of the cumulative effect of adopting SFAS 159. Our policy is to separately record interest income on the fair value-elected loans unless the loans are placed on nonaccrual status when they are 60 days past due; these amounts continue be classified within consumer financing revenue in the Condensed Consolidated Statement of Income. The fair value adjustment recorded for the loans is classified as other income in the Condensed Consolidated Statement of Income.

Subsequent to the fair value election for the respective on-balance sheet securitization debt, we no longer amortize upfront transaction costs on the fair value-elected securitization debt since these deferred amounts were removed as part of the cumulative effect of adopting SFAS 159. The fair value-elected debt balances continue to be recorded as secured debt on the Condensed Consolidated Balance Sheet. Our policy is to separately record interest expense on the fair value-elected securitization debt, which continues to be classified within interest expense in the Condensed Consolidated Statement of Income. The fair value adjustment recorded for this fair value-elected debt is classified within other income in the Condensed Consolidated Statement of Income.

Collateralized Debt Obligations

Our ResCap operations executed two collateralized debt obligation securitizations in 2004 and 2005 named CDO I and CDO II. Similar to the on-balance sheet securitizations discussed above, we retained certain economic interests in the CDOs that entitled us to the excess cash flows at each distribution date, after absorbing any credit losses in the CDOs. These CDOs were required to be consolidated under FIN 46(R), thus the CDO collateral remained on the Condensed Consolidated Balance Sheet as investment securities. Under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the collateral is recorded at fair value on the Condensed Consolidated Balance Sheet, with revaluation adjustments recorded through current period earnings. The CDO debt issued to third parties, which was required to be carried at amortized cost, was classified as secured debt on the Condensed Consolidated Balance Sheet. Our retained economic interests are not carried on the Condensed Consolidated Balance Sheet.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Similar to the on-balance sheet securitizations discussed above, we experienced significant devaluation in our retained economic interests in the on-balance sheet CDO transactions during 2007. The devaluation of our retained economic interests was primarily the result of cash flows being contractually diverted away from our retained interest to build cash reserves as a direct result of certain failed securitization triggers and significant illiquidity in the CDO market. While our economic exposure was reduced to approximately zero, as evidenced by our retained economic interest values, we continued writing down the CDO collateral with no offsetting reduction in the associated CDO debt balances. Thus, prior to fair value option election, we were recording accounting losses beyond our economic exposure. In order to eliminate the accounting mismatch, we elected the fair value option for the debt balances recorded for CDO I and CDO II on January 1, 2008.

As part of the cumulative effect of adopting SFAS 159, we removed deferred upfront securitization costs related to CDO I and CDO II. The removal of the deferred deal costs, as well as the adjustment required to have the item’s carrying value equal fair value at January 1, 2008, resulted in a net cumulative-effect adjustment recorded to beginning retained earnings of $35 million. These fair value option elections did not have a material impact on our deferred tax balances.

Subsequent to the fair value option election for the CDO debt, we no longer amortize upfront securitization costs for these transactions, as these amounts were removed as part of the cumulative effect of adopting SFAS 159. The fair value-elected CDO debt balances continue to be carried within secured debt on the Condensed Consolidated Balance Sheet. Our policy is to separately record interest expense on the CDO debt, which continues to be classified within interest expense in the Condensed Consolidated Income Statement. The fair value adjustment recorded for the CDO debt is classified within investment income in the Condensed Consolidated Income Statement.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following summarizes the fair value option elections and information regarding the amounts recorded within earnings for each fair value option elected item.

Changes included in the Condensed Consolidated Income Statement

for the three months ended June 30, 2008

Consumer

Total

Change in

financing

Interest

Investment

Other

included in

fair value

($ in millions)

revenue

expense

income

earnings

due to credit risk

Assets

Consumer finance receivables and loans, net of unearned income

$182

$—

($767

)

($585

)

($70

)(a)

Liabilities

Secured debt:

On-balance sheet securitization debt

$—

($95

)

$—

$693

$598

$48

(b)

Collateralized debt obligations

—

)

—

(c)

Total

$32


	(a)	The credit impact for consumer finance receivables and loans were quantified by applying internal credit loss assumptions to cash flow models.
	(b)	The credit impact for on-balance sheet securitization debt is assumed to be zero until our economic interests in a particular securitization is reduced to zero, at which point the losses on the underlying collateral will be expected to be passed through to third-party bondholders. Losses allocated to third-party bondholders, including changes in the amount of losses allocated, will result in fair value changes due to credit. We also monitor credit ratings and will make credit adjustments to the extent any bond classes are downgraded by rating agencies.
	(c)	The credit impact for collateralized debt obligations is assumed to be zero until our economic interests in the securitization is reduced to zero, at which point the losses projected on the underlying collateral will be expected to be passed through to the securitization’s bonds. We also monitor credit ratings and will make credit adjustments to the extent any bond classes are downgraded by rating agencies.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Changes included in the Condensed Consolidated Income Statement

for the six months ended June 30, 2008

Consumer

Total

Change in

financing

Interest

Investment

Other

included in

fair value

($ in millions)

revenue

expense

income

earnings

due to credit risk

Assets

Consumer finance receivables and loans, net of unearned income

$380

$—

($2,968

)

($2,588

)

($88

) (a)

Liabilities

Secured debt:

On-balance sheet securitization debt

$—

($209

)

$—

$2,840

$2,631

$70

(b)

Collateralized debt obligations

—

)

—

(c)

Total

$78


(a)	The credit impact for consumer finance receivables and loans were quantified by applying internal credit loss assumptions to cash flow models.
(b)	The credit impact for on-balance sheet securitization debt is assumed to be zero until our economic interests in a particular securitization is reduced to zero, at which point the losses on the underlying collateral will be expected to be passed through to third-party bondholders. Losses allocated to third-party bondholders, including changes in the amount of losses allocated, will result in fair value changes due to credit. We also monitor credit ratings and will make credit adjustments to the extent any bond classes are downgraded by rating agencies.
(c)	The credit impact for collateralized debt obligations is assumed to be zero until our economic interests in the securitization is reduced to zero, at which point the losses projected on the underlying collateral will be expected to be passed through to the securitization’s bonds. We also monitor credit ratings and will make credit adjustments to the extent any bond classes are downgraded by rating agencies.

Interest income on mortgage loans held-for-investment is measured by multiplying the unpaid principal balance on the loans by the coupon rate and the days interest due. Interest expense on the on-balance sheet securitizations is measured by multiplying bond principal by the coupon rate and days interest due to the investor.

The following table provides the aggregate fair value and the aggregate unpaid principal balance for the fair value option-elected loans and long-term debt instruments.

Difference between

Unpaid

fair value and unpaid

June 30, 2008 ($ in millions)

Fair value

principal balance

Assets

Consumer finance receivables and loans, net of unearned income:

Total loans

$2,658

$9,737

($7,079

)

Loans 90+ days past due (a)

(b)

1,361

(b)

Nonaccrual loans

(b)

1,786

(b)

Liabilities

Secured debt:

On-balance sheet securitization debt

(2,754

)

(9,243

)

6,489

Collateralized debt obligations

(248

)

(327

)


(a)	Loans 90+ days past due are also presented within the nonaccrual loan balance.
(b)	The fair value of loans held-for-sale is calculated on a pooled basis, which does not allow us to reliably estimate the fair value of loans 90+ days past due or nonaccrual loans. As a result, the fair value of these loans is not included in the table above. For further discussion regarding the pooled basis, refer to the previous section of this note titled, Consumer finance receivables, net of unearned income.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

14. Segment Information

Financial results for our reportable segments are summarized below.


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

2008
Net financing (loss) revenue		($648	)		$233		$1			$—		$250			($164	)
Other revenue		569			390		(557	)		1,245		(168	)		1,479


Total net (loss) revenue		(79	)		623		(556	)		1,245		82			1,315
Provision for credit losses		249			48		463			—		11			771
Total noninterest expense		542			414		712			1,052		133			2,853


(Loss) income before income tax (benefit) expense		(870	)		161		(1,731	)		193		(62	)		(2,309	)
Income tax (benefit) expense		(16	)		24		129			58		(22	)		173


Net (loss) income		($854	)		$137		($1,860	)		$135		($40	)		($2,482	)


Total assets		$129,312			$39,213		$64,771			$12,924		($18,528	)		$227,692


2007
Net financing revenue		$33			$210		$57			$—		$108			$408
Other revenue (loss)		735			208		788			1,166		(30	)		2,867


Total net revenue		768			418		845			1,166		78			3,275
Provision for credit losses		66			37		327			—		—			430
Total noninterest expense		364			270		722			978		59			2,393


Income (loss) before income tax expense (benefit)		338			111		(204	)		188		19			452
Income tax expense (benefit)		23			31		50			57		(2	)		159


Net income (loss)		$315			$80		($254	)		$131		$21			$293


Total assets		$117,261			$31,800		$120,545			$13,956		($630	)		$282,932


(a)		North American operations consists of automotive financing in the United States, Canada, and Puerto Rico. International operations consists of automotive financing and full-service leasing in all other countries.
(b)		Amounts include intrasegment eliminations between the North American operations and International operations.
(c)		Represents our Commercial Finance business, equity interest in Capmark, certain corporate activities, and reclassifications and eliminations between the reportable operating segments.

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


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

2008
Net financing (loss) revenue		($601	)		$452		($102	)		$—		$444			$193
Other revenue (loss)		1,279			648		(475	)		2,492		(413	)		3,531


Total net revenue (loss)		678			1,100		(577	)		2,492		31			3,724
Provision for credit losses		366			103		762			—		13			1,244
Total noninterest expense		1,022			700		1,297			2,132		208			5,359


(Loss) income before income tax (benefit) expense		(710	)		297		(2,636	)		360		(190	)		(2,879	)
Income tax (benefit) expense		(10	)		56		83			93		(30	)		192


Net (loss) income		($700	)		$241		($2,719	)		$267		($160	)		($3,071	)


Total assets		$129,312			$39,213		$64,771			$12,924		($18,528	)		$227,692


2007
Net financing revenue		$64			$422		$230			$—		$235			$951
Other revenue (loss)		1,485			409		1,116			2,338		(45	)		5,303


Total net revenue		1,549			831		1,346			2,338		190			6,254
Provision for credit losses		165			73		869			—		4			1,111
Total noninterest expense		728			522		1,532			1,959		105			4,846


Income (loss) before income tax expense (benefit)		656			236		(1,055	)		379		81			297
Income tax expense (benefit)		36			63		110			105		(5	)		309


Net income (loss)		$620			$173		($1,165	)		$274		$86			($12	)


Total assets		$117,261			$31,800		$120,545			$13,956		($630	)		$282,932


(a)	North American operations consists of automotive financing in the United States, Canada, and Puerto Rico. International operations consists of automotive financing and full-service leasing in all other countries.
(b)	Amounts include intrasegment eliminations between the North American operations and International operations.
(c)	Represents our Commercial Finance business, equity interest in Capmark, certain corporate activities, and reclassifications and eliminations between the reportable operating segments.

15. Restructuring Charges

On October 17, 2007, ResCap announced a restructuring plan that would reduce its workforce, streamline its operations, and revise its cost structure to enhance its flexibility. The announced restructuring plan included reducing the ResCap worldwide workforce by approximately 25%, or approximately 3,000 associates, with the majority of these reductions occurring in the fourth quarter of 2007. This reduction in workforce was in addition to measures undertaken in the first half of 2007 when 2,000 positions were eliminated. During the three months and six months ended June 30, 2008, ResCap incurred additional restructuring costs of $18 million and $38 million, respectively, related to severance and related costs associated with the continuation of the workforce reduction plans in the United Kingdom and continental Europe.

On February 20, 2008, we announced a restructuring of our North American Automotive Finance operations to reduce costs, streamline operations, and position the business for scalable growth. The restructuring includes merging a number of separate business offices into five regional business centers located in the areas of Atlanta, Chicago, Dallas, Pittsburgh, and Toronto. The plan includes reducing the North American Automotive Finance operations workforce by approximately 930 employees, which represents about 15% of the 6,275 employees of these operations. These actions are planned to occur largely by the end of

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

2008. During the three months and six months ended June 30, 2008, our North American Automotive Finance operations incurred restructuring costs related to severance and related costs of $21 million and $32 million, respectively.

In addition to the announced restructuring plans described above, our International Automotive Finance operations and Insurance operations incurred additional restructuring charges of $11 million and $14 million during the three months and six months ended June 30, 2008, respectively.

The restructuring charges primarily include severance pay, the buyout of employee agreements, and lease terminations. The following table summarizes by category, restructuring charge activity for the six months ended June 30, 2008:

Cash paid

Liability

Restructuring

or otherwise

Liability

balance at

charges through

settled through

balance at

($ in millions)

December 31, 2007

June 30, 2008

Restructuring charges:

Employee severance

$32

$76

$45

$63

Lease termination

Total restructuring charges

$77

$84

$61

$100

16. Subsequent Events

GMAC Bank Matters

On February 1, 2008, Cerberus FIM, LLC; Cerberus FIM Investors, LLC; and FIM Holdings LLC (collectively, the FIM Entities), submitted a letter to the Federal Deposit Insurance Corporation (FDIC) requesting that the FDIC waive certain of the requirements contained in a two-year disposition agreement among each of the FIM Entities and the FDIC that was entered into in connection with the Sale Transactions. The Sale Transactions resulted in a change of control of GMAC Bank, an industrial bank, which required the approval of the FDIC. Prior to the Sale Transactions, the FDIC had imposed a moratorium on the approval of any applications for change in bank control notices submitted to the FDIC with respect to any industrial bank. As a condition to granting the application in connection with the change of control of GMAC Bank during the moratorium, the FDIC required each of the FIM Entities to enter into a two-year disposition agreement. That agreement required, among other things, that by no later than November 30, 2008, the FIM Entities complete one of the following actions: (1) become registered with the appropriate federal banking agency as a depository institution holding company pursuant to the Bank Holding Act or the Home Owners’ Loan Act; (2) divest control of GMAC Bank to one or more persons or entities other than prohibited transferees; (3) terminate GMAC Bank’s status as an FDIC-insured depository institution; or (4) obtain from the FDIC a waiver of the requirements set forth in this sentence on the ground that applicable law and FDIC policy permit similarly situated companies to acquire control of FDIC-insured industrial banks.

On July 15, 2008, the FDIC determined to address the FIM Entities’ waiver request through execution of a ten-year extension of the existing two-year disposition requirement. Pursuant to the extension, the FIM Entities have until November 30, 2018, to complete one of the four actions enumerated above. Certain agreements as described below were entered into in connection with this extension.

•

On July 21, 2008, each of GMAC, the FIM Entities, IB Finance Holding Company, LLC (Holdings), GMAC Bank and the FDIC (collectively, the Contracting Parties) entered into a Parent Company Agreement (the PA). The PA requires GMAC to maintain its capital at a level such that the ratio of its total equity to total assets is at least 5%. The PA defines “total equity” and “total assets” as total equity

GMAC LLC

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

and total assets, respectively, as reported on GMAC’s consolidated balance sheet in its quarterly and annual reports filed with the SEC. The PA further requires GMAC, beginning December 31, 2008, to maintain its capital at a level such that the ratio of its tangible equity to tangible assets is at least 5%. For this purpose, “tangible equity” means “total equity” minus goodwill and other intangible assets, net of accumulated amortization (other than mortgage servicing assets), and “tangible assets” means “total assets” less all goodwill and other intangible assets (other than mortgage servicing assets). Further, the PA requires GMAC Bank to obtain FDIC approval prior to engaging in certain affiliate transactions, and for any major deviation or material change from its business plan for a seven-year period. The PA also requires GMAC and Holdings to submit certain periodic reports to the FDIC and to consent to examinations by the FDIC to monitor compliance with the PA, any other agreements executed in conjunction with the ten-year extension of the existing two-year disposition requirement, and applicable law.

•

On July 21, 2008, the Contracting Parties entered into a Capital and Liquidity Maintenance Agreement (the CLMA). The CLMA requires capital at GMAC Bank to be maintained at a level such that GMAC Bank’s leverage ratio is at least 11% for a three-year period. The CLMA defines “leverage ratio” as the ratio of Tier 1 capital to total assets, as those amounts are determined pursuant to FDIC regulations related to capital requirements in 12 C.F.R., Section 325.2. Following the initial three-year period, GMAC Bank must continue to be “well capitalized” as defined in 12 C.F.R. Part 325. The CLMA further requires GMAC (and such additional Contracting Parties acceptable to the FDIC) to extend a $3 billion unsecured revolving line of credit to GMAC Bank.

Dividend of Voting Interest of GMACI

On April 8, 2008, we announced that we were implementing a plan related to GMACI Holdings LLC (GMACI), the holding company for our Insurance operations, in the interest of maintaining the current financial strength rating for the GMAC Insurance Group of companies, including Motors Insurance Corporation. The plan was developed in response to action by A.M. Best Co. on February 27, 2008, placing GMACI’s A- (Excellent) rating under review with negative implications. Accordingly, on July 22, 2008, we effectuated the plan by providing a dividend of 100% of the voting interest of GMACI to the current holders of our common membership equity, which include FIM Holdings and subsidiaries of GM. The dividend was made pro rata in accordance with the current common equity ownership percentages held by these entities. We continue to hold 100% of the economic interests in GMACI. On July 25, 2008, A.M. Best Co. removed GMACI from under review with negative implications, affirmed the A- rating, and assigned a negative outlook. There can be no assurance that the current A.M. Best Co. ratings will remain unchanged.


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 $228 billion of assets at June 30, 2008, and operations in approximately 40 countries. Founded in 1919 as a wholly owned subsidiary of General Motors Corporation (General Motors or GM), GMAC was established to provide GM dealers with the automotive financing necessary 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 — Global 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, 2008 and 2007. Operating results for each of the lines of business are more fully described in the Management’s Discussion and Analysis (MD&A) sections that follow.


	Three months ended									Six months ended
	June 30,									June 30,
							Favorable/									Favorable/
							(unfavorable)									(unfavorable)
($ in millions)	2008			2007			% change			2008			2007			% change

Total net revenue (loss)
Global Automotive Finance		$544			$1,186			(54	)		$1,778			$2,380			(25	)
ResCap		(556	)		845			(166	)		(577	)		1,346			(143	)
Insurance		1,245			1,166			7			2,492			2,338			7
Other		82			78			5			31			190			(84	)

Net (loss) income
Global Automotive Finance		($717	)		$395			n/m			($459	)		$793			(158	)
ResCap		(1,860	)		(254	)		n/m			(2,719	)		(1,165	)		(133	)
Insurance		135			131			3			267			274			(3	)
Other		(40	)		21			n/m			(160	)		86			n/m


	n/m =	not meaningful


•	Our Global 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 Global Automotive Finance operations consist of two separate reportable segments — North American Automotive Finance operations and International Automotive Finance operations. The products and services offered by our Global 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. Whereas most of our operations focus on prime automotive financing to and through GM or GM-affiliated dealers, our Nuvell operations, which is part of our North American Automotive Finance operations, focuses on nonprime automotive financing to GM-affiliated dealers. Our Nuvell operations also provides private-label automotive financing. Our National operations, which is also part of our North American Automotive Finance operations, focuses on prime and nonprime financing to non-GM dealers. In addition, our Global Automotive Finance 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) 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 response to market conditions, ResCap has significantly reduced its production of loans that do not conform to the

underwriting guidelines of Fannie Mae and Freddie Mac. ResCap has further curtailed activities related to both its business capital group, which provides financing and equity capital to residential land developers and homebuilders and financing to resort developers, and its international business group, which includes substantially all of its operations outside of the United States. Certain agreements are in place between ResCap and us that restrict ResCap’s ability to declare dividends or prepay subordinated indebtedness owed to us and inhibit our ability to return funds for dividend and debt payments.


•	Our Insurance operations offer vehicle service contracts and underwrite personal automobile insurance coverages (ranging from preferred to nonstandard risks), homeowners’ insurance coverage, and selected commercial insurance and reinsurance coverages. 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 nonstandard, 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), corporate activities, and reclassifications and eliminations between the reportable segments.

Consolidated Results of Operations

The following table summarizes our consolidated operating results for the periods shown.


	Three months ended								Six months ended
	June 30,								June 30,
						Favorable/									Favorable/
						(unfavorable)									(unfavorable)
($ in millions)	2008			2007		% change			2008			2007			% change

Revenue
Total financing revenue		$4,822			$5,316		(9	)		$9,754			$10,613			(8	)
Interest expense		2,869			3,735		23			6,048			7,407			18
Depreciation expense on operating lease assets		1,401			1,173		(19	)		2,797			2,255			(24	)
Impairment of investment in operating leases		716			—		n/m			716			—			n/m

Net financing (loss) revenue		(164	)		408		(140	)		193			951			(80	)
Other revenue
Net loan servicing income		280			404		(31	)		1,161			662			75
Insurance premiums and service revenue earned		1,123			1,051		7			2,232			2,092			7
(Loss) gain on mortgage and automotive loans, net		(1,099	)		399		n/m			(1,698	)		363			n/m
Investment income (loss)		185			227		(19	)		(45	)		535			(108	)
Other income		990			786		26			1,881			1,651			14

Total other revenue		1,479			2,867		(48	)		3,531			5,303			(33	)
Total net revenue		1,315			3,275		(60	)		3,724			6,254			(40	)
Provision for credit losses		771			430		(79	)		1,244			1,111			(12	)
Noninterest expense
Insurance losses and loss adjustment expenses		714			563		(27	)		1,344			1,136			(18	)
Other operating expenses		2,139			1,830		(17	)		4,015			3,710			(8	)

Total noninterest expense		2,853			2,393		(19	)		5,359			4,846			(11	)
(Loss) income before income tax expense		(2,309	)		452		n/m			(2,879	)		297			n/m
Income tax expense		173			159		(9	)		192			309			38

Net (loss) income		($2,482	)		$293		n/m			($3,071	)		$(12	)		n/m

n/m = not meaningful

We reported a net loss of $2.5 billion for the three months ended June 30, 2008, compared to net income of $293 million for the three months ended June 30, 2007, and a net loss of $3.1 billion for the six months ended June 30, 2008, compared to a net loss of $12 million for the same period in 2007. The 2008 results reflect a $716 million impairment of vehicle operating lease assets in our North American operations as a result of declining vehicle sales and lower used vehicle prices for certain segments. Results also reflect significant losses recognized by ResCap, related to asset sales, unfavorable valuation adjustments, and higher loan loss provisions, due to continued deterioration in the mortgage market. The losses were partially offset by a gain on the extinguishment of debt of $616 million and $1.1 billion during the three months and six months ended June 30, 2008, respectively.

Total financing revenue decreased by 9% and 8% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007, primarily due to decreases experienced by ResCap as a result of a decrease in the size of the loan portfolio, due to lower levels of loan production as the

operations focused on prime conforming originations, continued portfolio runoff, and reductions caused by the deconsolidation of $27.4 billion in securitization trusts during the second half of 2007. In addition, our North American Automotive Finance operations experienced decreases in consumer finance revenue due to lower interest rates and a lower asset base, as a result of increased securitization and whole-loan sale activity throughout 2007 as the business moved to an originate-to-distribute model during the second half of 2007. Partially offsetting this decrease was an increase in operating lease income of 24% and 29% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. The operating lease portfolio was lower as of June 30, 2007, due to approximately $12.6 billion of net operating assets being transferred to GM during November 2006 as part of the Sale Transactions. Subsequent to the transfer, the operating lease portfolio and the associated revenue gradually increased through June 30, 2008, because of new originations following this transfer. Similarly, depreciation expense on operating lease assets increased 19% in the three months ended June 30, 2008, and 24% in the first six months of 2008, compared to the same periods in 2007, as a result of the larger portfolio.

Interest expense decreased 23% and 18% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. The decrease during both periods was primarily due to lower average borrowings at ResCap due to a $52.9 billion reduction in the asset base during the same period, which was partially offset by higher funding rates due to unfavorable market conditions resulting in lower advance rates, increases in cost of funds on unsecured debt due to the step-up in coupon resulting from ratings downgrades, and higher coupon rates on our new secured debt.

The $716 million impairment of vehicle operating lease assets recognized by our North American operations was the result of declining vehicle sales and lower used vehicle prices for certain vehicle segments. No such impairment was recognized during 2007.

Net loan servicing income decreased 31% during the three months June 30, 2008, compared to the same period in 2007, but increased 75% during the six months ended June 30, 2008, compared to the same periods in 2007. The decrease during the three month period was primarily attributable to fewer servicing assets at ResCap, due to certain servicing assets being sold in the last half of 2007 and the first half of 2008, and unfavorable mortgage servicing valuations. During both the three and six months ended June 30, 2008, our Global Automotive Finance operations experienced a decrease driven by a decrease in servicing fees collected from GM, as certain operating leases transferred during the Sale Transactions reached the end of their lease term. The increase during the six month period was primarily driven by favorable hedge valuations experienced by ResCap during the three months ended March 31, 2008.

Insurance premiums and service revenue earned increased 7% in both the three months and six months ended June 30, 2008, compared to the same periods in 2007. The increase was primarily due to growth internationally, both organically and through the second quarter 2007 acquisition of Provident Insurance. The increases were partially offset by challenging domestic pricing conditions.

The net loss on mortgage and automotive loans was $1.1 billion for the three months ended June 30, 2008, compared to net income of $399 million for the same period in 2007, and was a net loss of $1.7 billion for the six months ended June 30, 2008, compared to net income of $363 million for the same period in 2007. The losses during both 2008 periods were primarily the result of the sale of certain mortgage loans to enhance liquidity, at significantly lower prices due to the absence of traditional investor demand. Additionally, unfavorable pricing on automotive loans and unfavorable valuations on the loans held-for-sale portfolio impacted our North American Automotive Finance operations.

Our investment income decreased 19% and 108% during the three months and six months ended June 30, 2008, compared to same periods in 2007. The decreases primarily related to declines in the fair value of retained interests held by ResCap as a result of increased credit losses, rating agency downgrades, declines in the value of underlying collateral, market illiquidity, and changes in discount rate assumptions in certain foreign markets. Additionally, certain investment securities were sold at a loss by our North American Automotive Finance operations due to current market conditions.

Other income increased 26% and 14% during the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. Results for the three months ended June 30, 2008, included a $647 million gain recognized by ResCap related to debt extinguishments, offset by a $31 million loss recognized by our Other operations related to the repurchase and retirement of ResCap debt. Debt extinguishment gains were also recognized during the first quarter of 2008; therefore, results for the six months ended June 30, 2008, include debt extinguishment gains of $1.1 billion. The gains on extinguishment of debt were partially offset by decreases in real estate related revenue, due to the continued stress in the mortgage and capital markets and its affect on homebuilders.

The provision for credit losses unfavorably increased 79% and 12% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. Although average delinquency levels and frequency of loss are trending down overall, severity increases experienced by our North American Automotive Finance operations and ResCap was the primary driver for the increase during both periods. Additionally, our North American Automotive Finance operations recognized a provision of $109 million for retail balloon contract residuals, as the demand for used vehicles has decreased during these deteriorating economic conditions, resulting in higher defaults when the balloon payment comes due. The balloon loan portfolio, net of the allowance for credit losses, was $4.6 billion at June 30, 2008, compared to $6.6 billion at June 30, 2007. The provision increased less dramatically during the six month period because various financing deals were deconsolidated during the second half of 2007, which resulted in a lower provision expense during the three months ended March 31, 2008, due to a smaller held-for-investment portfolio.

Insurance losses and loss adjustment expenses increased 27% and 18% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. Losses and loss adjustment expenses increased primarily due to growth in our international operations, both organically and through the Provident acquisition, and less favorable spring and summer weather events in 2008, which adversely affected our dealer inventory insurance and reinsurance operations. The increase was partially offset by lower loss experience in our U.S. vehicle service contract business and our consumer products business, both driven by lower volumes.

Other operating expense increased 17% and 8% in the three months and six months ended June 30, 2008, respectively, compared to the same periods in 2007. Expenses increased in both periods primarily due to greater losses on operating lease disposals, as a result of less favorable remarketing results. Additionally, remarketing, collection, and repossession costs increased due to an increase in vehicle volume.

Our consolidated tax expense increased 9% during the three months ended June 30, 2008, compared to the same periods in 2007, but decreased 38% during the six months ended June 30, 2008, compared to the same period in 2007. The decrease during the six-month period was primarily due to higher current period losses in ResCap’s international operations for which no tax benefit was recorded and new valuation allowances that were established for prior year losses.

Effective November 28, 2006, GMAC and certain U.S. subsidiaries became pass-through entities for U.S. federal income tax purposes. Subsequent to November 28, 2006, U.S. federal, state, and local income tax expense is generally not incurred by these entities as they ceased to be taxable entities in all but a few local tax jurisdictions that continue to tax LLCs or partnerships. Our banking, insurance, and foreign subsidiaries are generally taxable corporations and continue to be subject to U.S. federal, state, local, and foreign income taxes.

Global Automotive Finance Operations

Results of Operations

The following table summarizes the operating results of our Global Automotive Finance operations for the periods shown. The amounts presented are before the elimination of balances and transactions with our other reportable segments and include eliminations of balances and transactions among our North American and International reportable segments.


	Three months ended								Six months ended
	June 30,								June 30,
						Favorable/								Favorable/
						(unfavorable)								(unfavorable)
($ in millions)	2008			2007		% change			2008			2007		% change

Revenue
Consumer		$1,128			$1,399		(19	)		$2,267			$2,785		(19	)
Commercial		430			443		(3	)		871			825		6
Loans held-for-sale		127			—		n/m			283			—		n/m
Operating leases		2,135			1,729		23			4,238			3,297		29

Total financing revenue		3,820			3,571		7			7,659			6,907		11
Interest expense		2,119			2,155		2			4,296			4,167		(3	)
Depreciation expense on operating leases		1,400			1,173		(19	)		2,796			2,254		(24	)
Impairment of investment in operating leases		716			—		n/m			716			—		n/m

Net financing (loss) revenue		(415	)		243		n/m			(149	)		486		(131	)
Other revenue
Servicing fees		73			104		(30	)		152			217		(30	)
(Loss) gain on automotive loans, net		(37	)		226		(116	)		111			424		(74	)
Investment income		120			89		35			175			170		3
Other income		803			524		53			1,489			1,083		37

Total other revenue		959			943		2			1,927			1,894		2
Total net revenue		544			1,186		(54	)		1,778			2,380		(25	)
Provision for credit losses		297			103		(188	)		469			238		(97	)