##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549-1004


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, 2006, 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:
0-51438


RESIDENTIAL CAPITAL CORPORATION


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 20-1770738                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

8400 Normandale Lake Boulevard


Minneapolis, MN


55437


(Address of principal executive offices)


(Zip Code)


(952) 857-8700


(Registrants telephone number, including area code)


þ o


12b-2


o o þ


o þ




Reduced Disclosure Format












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##### 










RESIDENTIAL CAPITAL CORPORATION


INDEX


|                                                                             |  |                                                                                                                             |    |      |    | 
|---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                                             |  |                                                                                                                             |    | Page |   
|                                                                             |  |                                                                                                                             |    |      |   
|Part I  Financial
    Information                                           |  |                                                                                                                             |    |     
|Item 1.                                                                      |  | Financial Statements (unaudited)                                                                                            |    |      |    | 
|                                                                             |  | Condensed Consolidated Balance Sheet as of
    June 30, 2006 and December 31, 2005                                          |    |      | 3  | 
|                                                                             |  | Condensed Consolidated Statement of Income
    for the Three and Six Months Ended June 30, 2006 and
    2005                |    |      | 4  | 
|                                                                             |  | Condensed Consolidated Statement of Changes
    in Stockholders Equity for the Six Months Ended
    June 30, 2006 and 2005 |    |      | 5  | 
|                                                                             |  | Condensed Consolidated Statement of Cash
    Flows for the Six Months Ended June 30, 2006 and 2005                          |    |      | 6  | 
|                                                                             |  | Notes to Condensed Consolidated Financial
    Statements                                                                    |    |      | 8  | 
|Item 2.                                                                      |  | Managements Discussion and Analysis of Financial Condition
    and Results of
    Operations                               |    |      | 30 | 
|Item 3.                                                                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |    |      | 45 | 
|Item 4.                                                                      |  | Controls and Procedures                                                                                                     |    |      | 47 | 
|Part II  Other
    Information                                              |  |                                                                                                                             |    |     
|Item 1.                                                                      |  | Legal Proceedings                                                                                                           |    |      | 48 | 
|Item 1A.                                                                     |  | Risk Factors                                                                                                                |    |      | 48 | 
|Item 2.                                                                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |    |      | 52 | 
|Item 3.                                                                      |  | Defaults Upon Senior Securities                                                                                             |    |      | 52 | 
|Item 4.                                                                      |  | Submission of Matters to a Vote of Security Holders                                                                         |    |      | 52 | 
|Item 5.                                                                      |  | Other Information                                                                                                           |    |      | 52 | 
|Item 6.                                                                      |  | Exhibits                                                                                                                    |    |      | 52 | 
|Signatures                                                                   |  |                                                                                                                             | 53 |     
|Index of Exhibits                                                            |  |                                                                                                                             | 54 |     
|Computation of Ratio of Earnings to Fixed Charges                           
|Certification of Principal Executive Officer                                
|Certification of Principal Financial Officer                                
|Certification of Principal Executive Officer and Principal Financial Officer







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##### Table of Contents






PART I  FINANCIAL INFORMATION





Item 1.  Financial Statements.


RESIDENTIAL CAPITAL CORPORATION





CONDENSED CONSOLIDATED BALANCE SHEET


|                                                                                                        |                                                    |                        |             |            |              |   |             |            |             | 
|------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------- | ----------- | ---------- | ------------ | - | ----------- | ---------- | ----------- | 
|                                                                                                        |                                                    | June 30,               |             |            | December 31, |  
|                                                                                                        |                                                    | 2006                   |             |            | 2005         |  
|                                                                                                        |                                                    |                        |             |            |              |  
|                                                                                                        |                                                    | (Unaudited)            |            
|                                                                                                        |                                                    | (Dollars in thousands) |            
|ASSETS                                                                                                 
|Cash and cash equivalents                                                                               |                                                    | $                      | 1,885,504   |            |              | $ | 2,266,753   |           
|Mortgage loans held for sale                                                                            |                                                    |                        | 20,438,913  |            |              |   | 19,521,566  |           
|Trading securities                                                                                      |                                                    |                        | 4,245,623   |            |              |   | 3,896,008   |           
|Available for sale securities                                                                           |                                                    |                        | 163,080     |            |              |   | 1,068,937   |           
|Mortgage loans held for investment, net                                                                 |                                                    |                        | 71,391,876  |            |              |   | 67,892,660  |           
|Lending receivables, net                                                                                |                                                    |                        | 14,069,392  |            |              |   | 13,401,047  |           
|Mortgage servicing rights                                                                               |                                                    |                        | 5,093,603   |            |              |   | 4,015,015   |           
|Accounts receivable                                                                                     |                                                    |                        | 2,044,985   |            |              |   | 1,951,210   |           
|Investments in real estate and other                                                                    |                                                    |                        | 2,127,769   |            |              |   | 1,855,298   |           
|Goodwill                                                                                                |                                                    |                        | 464,194     |            |              |   | 459,768     |           
|Other assets                                                                                            |                                                    |                        | 2,627,545   |            |              |   | 2,556,830   |           
|                                                                                                        |                                                    |                        |             |            |              |  
|Total assets                                                                                            |                                                    | $                      | 124,552,484 |            |              | $ | 118,885,092 |           
|                                                                                                        |                                                    |                        |             |            |              |  
|                                                                                                       
|LIABILITIES                                                                                            
|Borrowings:                                                                                             |                                                    |                        |             |            |              |   |             |           
|                                                                                                        | Affiliate borrowings                               |                        | $           |           |              |   | $           | 5,177,462  |            
|                                                                                                        | Collateralized borrowings in securitization trusts |                        |             | 57,597,386 |              |   |             | 56,097,801 |            
|                                                                                                        | Other borrowings                                   |                        |             | 48,120,450 |              |   |             | 42,300,507 |            
|                                                                                                        |                                                    |                        |             |            |              |  
|                                                                                                        |                                                    | Total borrowings       |             |            | 105,717,836  |   |             |            | 103,575,770 | 
|Deposit liabilities                                                                                     |                                                    |                        | 6,308,574   |            |              |   | 4,123,304   |           
|Other liabilities                                                                                       |                                                    |                        | 4,121,813   |            |              |   | 3,722,048   |           
|                                                                                                        |                                                    |                        |             |            |              |  
|Total liabilities                                                                                       |                                                    |                        | 116,148,223 |            |              |   | 111,421,122 |           
|STOCKHOLDERS EQUITY                                                                                   
|Common stock, $0.01 par value (1,000 shares
    authorized, issued and outstanding) and paid-in capital |                                                    |                        | 3,412,220   |            |              |   | 3,367,677   |           
|Retained earnings                                                                                       |                                                    |                        | 4,717,362   |            |              |   | 3,980,587   |           
|Accumulated other comprehensive income                                                                  |                                                    |                        | 274,679     |            |              |   | 115,706     |           
|                                                                                                        |                                                    |                        |             |            |              |  
|Total stockholders equity                                                                              |                                                    |                        | 8,404,261   |            |              |   | 7,463,970   |           
|                                                                                                        |                                                    |                        |             |            |              |  
|Total liabilities and stockholders equity                                                              |                                                    | $                      | 124,552,484 |            |              | $ | 118,885,092 |           
|                                                                                                        |                                                    |                        |             |            |              |  



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION





CONDENSED CONSOLIDATED STATEMENT OF INCOME


|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |   |  |   |           |  
|--------------------------------------------------- |  | ---------------------- | --------- | - | ---------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                    |  | Three Months Ended     |           |   | Six Months Ended |  
|                                                    |  | June 30,               |           |   | June 30,         |  
|                                                    |  |                        |           |   |                  |  
|                                                    |  | 2006                   |           |   | 2005             |   |           | 2006 |  |   | 2005      |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|                                                    |  | (Unaudited)            |          
|                                                    |  | (Dollars in thousands) |          
|Revenue                                             |  |                        |           |   |                  |   |           |      |  |   |           |   |  |   |           |  
|Interest income                                     |  | $                      | 2,009,922 |   |                  | $ | 1,355,130 |      |  | $ | 3,873,287 |   |  | $ | 2,671,737 |  
|Interest expense                                    |  |                        | 1,557,894 |   |                  |   | 850,061   |      |  |   | 2,993,263 |   |  |   | 1,615,971 |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Net interest income                                 |  |                        | 452,028   |   |                  |   | 505,069   |      |  |   | 880,024   |   |  |   | 1,055,766 |  
|Provision for loan losses                           |  |                        | 122,604   |   |                  |   | 142,094   |      |  |   | 245,337   |   |  |   | 297,926   |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Net interest income after provision for loan losses |  |                        | 329,424   |   |                  |   | 362,975   |      |  |   | 634,687   |   |  |   | 757,840   |  
|Gain on sale of mortgage loans, net                 |  |                        | 374,969   |   |                  |   | 150,604   |      |  |   | 642,033   |   |  |   | 480,247   |  
|Servicing fees                                      |  |                        | 386,484   |   |                  |   | 345,256   |      |  |   | 761,168   |   |  |   | 686,023   |  
|Amortization and impairment of servicing rights     |  |                        |          |   |                  |   | (306,929  | )    |  |   |          |   |  |   | (446,709  | )
|Servicing asset valuation and hedge activities, net |  |                        | (170,760  | ) |                  |   | 161,128   |      |  |   | (356,273  | ) |  |   | 93,267    |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Net servicing fees                                  |  |                        | 215,724   |   |                  |   | 199,455   |      |  |   | 404,895   |   |  |   | 332,581   |  
|Gain (loss) on investment securities, net           |  |                        | 1,468     |   |                  |   | 103,469   |      |  |   | (16,961   | ) |  |   | 175,584   |  
|Real estate related revenues                        |  |                        | 187,035   |   |                  |   | 193,685   |      |  |   | 331,230   |   |  |   | 325,059   |  
|Gain on sale of equity investments                  |  |                        | 414,508   |   |                  |   |          |      |  |   | 414,508   |   |  |   |          |  
|Other income                                        |  |                        | 50,704    |   |                  |   | 88,217    |      |  |   | 105,316   |   |  |   | 154,671   |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Total net revenue                                   |  |                        | 1,573,832 |   |                  |   | 1,098,405 |      |  |   | 2,515,708 |   |  |   | 2,225,982 |  
|                                                   
|Expenses                                            |  |                        |           |   |                  |   |           |      |  |   |           |   |  |   |           |  
|Compensation and benefits                           |  |                        | 375,657   |   |                  |   | 364,875   |      |  |   | 682,461   |   |  |   | 684,806   |  
|Professional fees                                   |  |                        | 62,011    |   |                  |   | 46,085    |      |  |   | 118,811   |   |  |   | 96,383    |  
|Data processing and telecommunications              |  |                        | 47,571    |   |                  |   | 47,628    |      |  |   | 92,490    |   |  |   | 97,073    |  
|Advertising                                         |  |                        | 43,404    |   |                  |   | 46,613    |      |  |   | 85,152    |   |  |   | 85,918    |  
|Occupancy                                           |  |                        | 33,854    |   |                  |   | 30,837    |      |  |   | 66,679    |   |  |   | 60,404    |  
|Other                                               |  |                        | 132,569   |   |                  |   | 103,320   |      |  |   | 251,882   |   |  |   | 213,501   |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Total expenses                                      |  |                        | 695,066   |   |                  |   | 639,358   |      |  |   | 1,297,475 |   |  |   | 1,238,085 |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Income before income tax expense                    |  |                        | 878,766   |   |                  |   | 459,047   |      |  |   | 1,218,233 |   |  |   | 987,897   |  
|Income tax expense                                  |  |                        | 330,618   |   |                  |   | 158,621   |      |  |   | 468,591   |   |  |   | 365,676   |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  
|Net Income                                          |  | $                      | 548,148   |   |                  | $ | 300,426   |      |  | $ | 749,642   |   |  | $ | 622,221   |  
|                                                    |  |                        |           |   |                  |   |           |      |  |   |           |  



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION





CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS EQUITY


Six Months Ended June 30, 2006 and 2005


|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |         |         |   |   |           |           |         |  
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ------------------------------------------------ | --------- | --------- | -------- | - | --------- | ------------- | ----------- | - | ------------- | ------- | ------- | ------------- | ------- | ------- | - | - | --------- | --------- | ------- | -
|                                                                                           |                                                                                                 | Common                                           |           |           |          |   |           |               | Accumulated |   |               |        
|                                                                                           |                                                                                                 | Stock and                                        |           |           |          |   |           |               | Other       |   |               | Total   |        
|                                                                                           |                                                                                                 | Paid-in                                          |           |           | Retained |   |           | Comprehensive |             |   | Comprehensive |         |         | Stockholders |        
|                                                                                           |                                                                                                 | Capital                                          |           |           | Earnings |   |           | Income        |             |   | Income        |         |         | Equity        |        
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|                                                                                           |                                                                                                 | (Unaudited)                                      |          
|                                                                                           |                                                                                                 | (Dollars in thousands)                           |          
|Balance at January 1, 2006                                                                 |                                                                                                 | $                                                | 3,367,677 |           |          | $ | 3,980,587 |               |             |   |               |         |         | $             | 115,706 |         |   | $ | 7,463,970 |          
|Cumulative effect of change in accounting principle as of
    January 1, 2006, net of tax: |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |         |         |   |   |           |          
|                                                                                           | Transfer of unrealized loss for certain available for sale
    securities to trading securities |                                                  |           |          |          |   |           | (16,717       | )           |   | $             |        |         |               |         | 16,717  |   |   |           |          |        
|                                                                                           | Recognize mortgage servicing rights at fair value                                               |                                                  |           |          |          |   |           | 3,850         |             |   |               | 3,850   |         |               |         |        |   |   |           | 3,850     |        
|Net income                                                                                 |                                                                                                 |                                                  |          |           |          |   | 749,642   |               |             |   | 749,642       |         |         |               |         |         |   |   | 749,642   |          
|Capital contributions                                                                      |                                                                                                 |                                                  | 44,543    |           |          |   |          |               |             |   |              |         |         |               |        |         |   |   | 44,543    |          
|Other comprehensive income, net of tax:                                                    |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |         |         |   |   |           |          
|                                                                                           | Unrealized loss on available for sale securities                                                |                                                  |           |          |          |   |           |              |             |   |               | (365    | )       |               |         |        |   |   |           | (365      | )      
|                                                                                           | Foreign currency translation adjustment                                                         |                                                  |           |          |          |   |           |              |             |   |               | 11,497  |         |               |         |        |   |   |           | 11,497    |        
|                                                                                           | Unrealized gain on cash flow hedges                                                             |                                                  |           |          |          |   |           |              |             |   |               | 131,124 |         |               |         |        |   |   |           | 131,124   |        
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|Other comprehensive income                                                                 |                                                                                                 |                                                  |          |           |          |   |          |               |             |   | 142,256       |         |         |               | 142,256 |         |   |   |          |          
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|Comprehensive income                                                                       |                                                                                                 |                                                  |          |           |          |   |          |               |             | $ | 895,748       |         |         |               |        |         |   |   |          |          
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|Balance at June 30, 2006                                                                   |                                                                                                 | $                                                | 3,412,220 |           |          | $ | 4,717,362 |               |             |   |               |         |         | $             | 274,679 |         |   | $ | 8,404,261 |          
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|Balance at January 1, 2005                                                                 |                                                                                                 | $                                                | 1,246,778 |           |          | $ | 2,959,961 |               |             |   |               |         |         | $             | 159,006 |         |   | $ | 4,365,745 |          
|                                                                                           | Net income                                                                                      |                                                  |           |          |          |   |           | 622,221       |             |   | $             | 622,221 |         |               |         |        |   |   |           | 622,221   |        
|                                                                                           | Capital contributions                                                                           |                                                  |           | 2,103,681 |          |   |           |              |             |   |               |        |         |               |         |        |   |   |           | 2,103,681 |        
|                                                                                           | Other comprehensive income, net of tax:                                                         |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |         |         |   |   |           |           |        
|                                                                                           |                                                                                                 | Unrealized loss on available for sale securities |           |           |         |   |           |               |            |   |               |         | (7,337  | )             |         |         |  |   |           |           | (7,337  | )
|                                                                                           |                                                                                                 | Foreign currency translation adjustment          |           |           |         |   |           |               |            |   |               |         | (17,696 | )             |         |         |  |   |           |           | (17,696 | )
|                                                                                           |                                                                                                 | Unrealized loss on cash flow hedges              |           |           |         |   |           |               |            |   |               |         | (5,932  | )             |         |         |  |   |           |           | (5,932  | )
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|                                                                                           | Other comprehensive income                                                                      |                                                  |           |          |          |   |           |              |             |   |               | (30,965 | )       |               |         | (30,965 | ) |   |           |          |        
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|                                                                                           | Comprehensive income                                                                            |                                                  |           |          |          |   |           |              |             |   | $             | 591,256 |         |               |         |        |   |   |           |          |        
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        
|Balance at June 30, 2005                                                                   |                                                                                                 | $                                                | 3,350,459 |           |          | $ | 3,582,182 |               |             |   |               |         |         | $             | 128,041 |         |   | $ | 7,060,682 |          
|                                                                                           |                                                                                                 |                                                  |           |           |          |   |           |               |             |   |               |         |         |               |        



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION





CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


Six Months Ended June 30, 2006 and 2005


|                                                                               |                                                          |                        |             |            |      |   |             |            |  
|------------------------------------------------------------------------------ | -------------------------------------------------------- | ---------------------- | ----------- | ---------- | ---- | - | ----------- | ---------- | -
|                                                                               |                                                          | 2006                   |             |            | 2005 |  
|                                                                               |                                                          |                        |             |            |      |  
|                                                                               |                                                          | (Unaudited)            |            
|                                                                               |                                                          | (Dollars in thousands) |            
|CASH FLOWS FROM OPERATING ACTIVITIES:                                          |                                                          |                        |             |            |      |   |             |           
|Net income                                                                     |                                                          | $                      | 749,642     |            |      | $ | 622,221     |           
|Reconciliation of net income to net cash used in operating
    activities:     |                                                          |                        |             |            |      |   |             |           
|                                                                               | Amortization and impairment of mortgage servicing rights |                        |             |           |      |   |             | 446,709    |  
|                                                                               | Depreciation and amortization                            |                        |             | 156,789    |      |   |             | 358,177    |  
|                                                                               | Provision for loan losses                                |                        |             | 245,337    |      |   |             | 297,926    |  
|                                                                               | Gain on sale of mortgage loans, net                      |                        |             | (642,033   | )    |   |             | (480,247   | )
|                                                                               | Gain on sale of equity investments                       |                        |             | (414,508   | )    |   |             |           |  
|                                                                               | Net gain on sale of other assets                         |                        |             | (24,040    | )    |   |             | (26,177    | )
|(Gain) loss on valuation of derivatives                                        |                                                          |                        | 666,472     |            |      |   | (304,942    | )         
|(Gain) loss on investment securities, net                                      |                                                          |                        | 16,961      |            |      |   | (73,494     | )         
|Equity in earnings of investees in excess of cash received                     |                                                          |                        | (65,340     | )          |      |   | (66,227     | )         
|Loss (gain) on valuation of mortgage servicing rights                          |                                                          |                        | (299,269    | )          |      |   | 338,004     |           
|Originations and purchases of mortgage loans held for sale                     |                                                          |                        | (80,126,904 | )          |      |   | (71,219,250 | )         
|Proceeds from sales and repayments of mortgage loans held for
    sale         |                                                          |                        | 71,994,595  |            |      |   | 66,180,438  |           
|Deferred income tax                                                            |                                                          |                        | 358,699     |            |      |   | (36,917     | )         
|Net change in:                                                                 |                                                          |                        |             |            |      |   |             |           
|                                                                               | Trading securities                                       |                        |             | 670,871    |      |   |             | (952,148   | )
|                                                                               | Accounts receivable                                      |                        |             | (128,641   | )    |   |             | 214,267    |  
|                                                                               | Other assets                                             |                        |             | 304,996    |      |   |             | 373,805    |  
|                                                                               | Other liabilities                                        |                        |             | (684,154   | )    |   |             | (467,655   | )
|                                                                               |                                                          |                        |             |            |      |  
|                                                                               | Net cash used in operating activities                    |                        |             | (7,220,527 | )    |   |             | (4,795,510 | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                          |                                                          |                        |             |            |      |   |             |           
|Net increase in lending receivables                                            |                                                          |                        | (667,631    | )          |      |   | (1,100,635  | )         
|Originations and purchases of mortgage loans held for
    investment           |                                                          |                        | (9,687,376  | )          |      |   | (10,011,203 | )         
|Proceeds from sales and repayments of mortgage loans held for
    investment   |                                                          |                        | 12,618,987  |            |      |   | 14,279,948  |           
|Purchases of available for sale securities                                     |                                                          |                        | (32,958     | )          |      |   | (562,741    | )         
|Proceeds from sales and repayments of available for sale
    securities        |                                                          |                        | 11,113      |            |      |   | 444,958     |           
|Additions to mortgage servicing rights                                         |                                                          |                        | (5,520      | )          |      |   | (66,424     | )         
|Purchase of and advances to investments in real estate and
    other           |                                                          |                        | (768,548    | )          |      |   | (428,821    | )         
|Proceeds from sales of and returns of investments in real estate
    and other |                                                          |                        | 962,618     |            |      |   | 373,444     |           
|Acquisitions, net of cash acquired                                             |                                                          |                        | (2,219      | )          |      |   |            |           
|Other, net                                                                     |                                                          |                        | 323,767     |            |      |   | 118,152     |           
|                                                                               |                                                          |                        |             |            |      |  
|                                                                               | Net cash provided by investing activities                |                        |             | 2,752,233  |      |   |             | 3,046,678  |  



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RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


Six Months Ended June 30, 2006 and
2005  (Continued)


|                                                                                       |                                           |                        |             |           |      |   |             |           | 
|-------------------------------------------------------------------------------------- | ----------------------------------------- | ---------------------- | ----------- | --------- | ---- | - | ----------- | --------- | 
|                                                                                       |                                           | 2006                   |             |           | 2005 |  
|                                                                                       |                                           |                        |             |           |      |  
|                                                                                       |                                           | (Unaudited)            |            
|                                                                                       |                                           | (Dollars in thousands) |            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                   |                                           |                        |             |           |      |   |             |          
|Net increase (decrease) in affiliate borrowings                                        |                                           | $                      | (5,177,462  | )         |      | $ | 212,325     |          
|Net increase (decrease) in other short-term borrowings                                 |                                           |                        | (4,080,309  | )         |      |   | 739,923     |          
|Proceeds from issuance of collateralized borrowings in
    securitization trusts       |                                           |                        | 12,173,129  |           |      |   | 6,829,583   |          
|Repayments of collateralized borrowings in securitization trusts                       |                                           |                        | (10,989,930 | )         |      |   | (10,817,845 | )        
|Proceeds from secured aggregation facilities, long-term                                |                                           |                        | 10,930,165  |           |      |   |            |          
|Repayments of secured aggregation facilities, long-term                                |                                           |                        | (10,761,175 | )         |      |   |            |          
|Proceeds from other long-term borrowings                                               |                                           |                        | 10,147,212  |           |      |   | 4,825,963   |          
|Repayments of other long-term borrowings                                               |                                           |                        | (273,695    | )         |      |   | (40,000     | )        
|Payment of debt issuance costs                                                         |                                           |                        | (82,392     | )         |      |   | (24,268     | )        
|Increase in deposit liabilities                                                        |                                           |                        | 2,185,270   |           |      |   | 1,326,026   |          
|                                                                                       |                                           |                        |             |           |      |  
|                                                                                       | Net cash provided by financing activities |                        |             | 4,070,813 |      |   |             | 3,051,707 | 
|Effect of foreign exchange rates on cash and cash equivalents                          |                                           |                        | 16,232      |           |      |   | (12,569     | )        
|                                                                                       |                                           |                        |             |           |      |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   |                                           |                        | (381,249    | )         |      |   | 1,290,306   |          
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                       |                                           |                        | 2,266,753   |           |      |   | 899,083     |          
|                                                                                       |                                           |                        |             |           |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             |                                           | $                      | 1,885,504   |           |      | $ | 2,189,389   |          
|                                                                                       |                                           |                        |             |           |      |  
|SUPPLEMENTAL DISCLOSURES FOR NON-CASH TRANSACTIONS:                                    |                                           |                        |             |           |      |   |             |          
|Available for sale securities transferred to trading securities                        |                                           | $                      | 927,141     |           |      | $ |            |          
|Mortgage loans held for sale transferred to mortgage loans held
    for
    investment |                                           |                        | 8,174,047   |           |      |   | 2,973,908   |          
|Mortgage loans held for investment transferred to mortgage loans
    held
    for sale |                                           |                        | 2,038,365   |           |      |   | 2,311,808   |          
|Mortgage loans held for investment transferred to other assets                         |                                           |                        | 738,597     |           |      |   | 314,931     |          
|Originations of mortgage servicing rights from sold loans                              |                                           |                        | 770,175     |           |      |   | 603,333     |          
|Capital contributions of lending receivables                                           |                                           |                        | 44,544      |           |      |   | 103,681     |          



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RESIDENTIAL CAPITAL CORPORATION





NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|   |                      
|-- | ---------------------
|1. | Basis of Presentation







10-K


Change in Accounting Principle


Accounting for
Servicing of Financial Assets




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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)






Recently Issued Accounting Standards


Statement of Financial Accounting Standards
No. 154 Accounting Changes and
Error Corrections


Financial Accounting Standards Board Staff Position
Nos. 115-1 and
124-1 115-1 124-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to
Certain Investments The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments 03-1). 115-1 124-1 115-1 124-1


Statement of Financial Accounting Standards
No. 155 Accounting for Certain Hybrid Financial Instruments


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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)




Financial Accounting Standards Board Staff
Position  FIN 46(R)-6 Determining the
Variability to Be Considered in Applying FASB Interpretation
No. 46(R)


Financial Accounting Standards Board Interpretation
No. 48 Accounting for Uncertainty in
Income Taxes




|   |                                          
|-- | -----------------------------------------
|2. | Pending Sale of Majority Interest in GMAC





| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | GMAC and most of its U.S. direct and indirect subsidiaries
    (other than GMAC Insurance Holdings Inc. and its subsidiaries),
    including the Company and most of its U.S. direct and
    indirect subsidiaries, will convert into limited liability
    companies (whether by statutory conversion or merger);
|
| |  | The Company will dispose of its interests in GMAC Bank and is
    exploring options to preserve some of the benefits the Company
    obtains from GMAC Bank, which may include the creation or
    acquisition (in whole or in part) of, or the development of a
    relationship with, an industrial bank; and   
|
| |  | GM will sell to FIM Holdings common limited liability company
    interests of GMAC representing 51% of the common limited
    liability company interests of GMAC.                                                                                                                                               

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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)












|   |                   
|-- | ------------------
|3. | Trading Securities



|                                     |  |                |           |   |              |   |           | 
|------------------------------------ |  | -------------- | --------- | - | ------------ | - | --------- | 
|                                     |  | June 30,       |           |   | December 31, |  
|                                     |  | 2006           |           |   | 2005         |  
|                                     |  |                |           |   |              |  
|                                     |  | (In thousands) |          
|Mortgage and asset-backed securities |  | $              | 1,030,472 |   |              | $ | 1,042,548 | 
|U.S. Treasury securities             |  |                | 1,054,773 |   |              |   | 1,173,792 | 
|Principal-only securities            |  |                | 872,566   |   |              |   | 651,309   | 
|Residual interests                   |  |                | 862,371   |   |              |   | 763,713   | 
|Interest-only securities             |  |                | 423,790   |   |              |   | 264,646   | 
|Other                                |  |                | 1,651     |   |              |   |          | 
|                                     |  |                |           |   |              |  
|Total                                |  | $              | 4,245,623 |   |              | $ | 3,896,008 | 
|                                     |  |                |           |   |              |  
|Net unrealized gains (losses)        |  | $              | (20,520   | ) |              | $ | 131,019   | 
|Pledged as collateral                |  |                | 2,986,916 |   |              |   | 2,721,189 | 



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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)






|   |                              
|-- | -----------------------------
|4. | Available for Sale Securities



|                      |                                 |                |         |                  |       |   |       |        |  |   |            |        |   |   |         |         | 
|--------------------- | ------------------------------- | -------------- | ------- | ---------------- | ----- | - | ----- | ------ |  | - | ---------- | ------ | - | - | ------- | ------- | 
|                      |                                 | June 30, 2006  |        
|                      |                                 |                |        
|                      |                                 |                |         | Gross Unrealized |       |   |      
|                      |                                 |                |         |                  |       |   |      
|                      |                                 | Cost           |         |                  | Gains |   |       | Losses |  |   | Fair Value |       
|                      |                                 |                |         |                  |       |   |       |        |  |   |            |       
|                      |                                 | (In thousands) |        
|Debt securities:      |                                 |                |         |                  |       |   |       |        |  |   |            |        |   |   |         |        
|                      | Mortgage-backed securities      |                | $       | 110,083          |       |   | $     | 1      |  |   | $          | (2,836 | ) |   | $       | 107,248 | 
|                      | Interest-only securities(a)     |                |         | 2,108            |       |   |       | 3,595  |  |   |            |       |   |   |         | 5,703   | 
|                      | Principal-only securities       |                |         | 205              |       |   |       | 117    |  |   |            | (2     | ) |   |         | 320     | 
|                      | States & political subdivisions |                |         | 4,775            |       |   |       |       |  |   |            | (266   | ) |   |         | 4,509   | 
|                      | Other                           |                |         | 45,452           |       |   |       |       |  |   |            | (981   | ) |   |         | 44,471  | 
|                      |                                 |                |         |                  |       |   |       |        |  |   |            |       
|Total debt securities |                                 |                | 162,623 |                  |       |   | 3,713 |        |  |   | (4,085     | )      |   |   | 162,251 |        
|Equity securities     |                                 |                | 967     |                  |       |   |      |        |  |   | (138       | )      |   |   | 829     |        
|                      |                                 |                |         |                  |       |   |       |        |  |   |            |       
|Total                 |                                 | $              | 163,590 |                  |       | $ | 3,713 |        |  | $ | (4,223     | )      |   | $ | 163,080 |        
|                      |                                 |                |         |                  |       |   |       |        |  |   |            |       

|                      |                                 |                   |           |                  |       |   |       |        |  |   |            |         |   |   |           |         | 
|--------------------- | ------------------------------- | ----------------- | --------- | ---------------- | ----- | - | ----- | ------ |  | - | ---------- | ------- | - | - | --------- | ------- | 
|                      |                                 | December 31, 2005 |          
|                      |                                 |                   |          
|                      |                                 |                   |           | Gross Unrealized |       |   |      
|                      |                                 |                   |           |                  |       |   |      
|                      |                                 | Cost              |           |                  | Gains |   |       | Losses |  |   | Fair Value |        
|                      |                                 |                   |           |                  |       |   |       |        |  |   |            |        
|                      |                                 | (In thousands)    |          
|Debt securities:      |                                 |                   |           |                  |       |   |       |        |  |   |            |         |   |   |           |        
|                      | U.S. Treasury securities        |                   | $         | 952,860          |       |   | $     |       |  |   | $          | (25,719 | ) |   | $         | 927,141 | 
|                      | Mortgage-backed securities      |                   |           | 99,113           |       |   |       | 20     |  |   |            | (1,907  | ) |   |           | 97,226  | 
|                      | Interest-only securities(a)     |                   |           | 3,031            |       |   |       | 2,240  |  |   |            |        |   |   |           | 5,271   | 
|                      | Principal-only securities       |                   |           | 212              |       |   |       | 159    |  |   |            |        |   |   |           | 371     | 
|                      | States & political subdivisions |                   |           | 4,882            |       |   |       |       |  |   |            | (33     | ) |   |           | 4,849   | 
|                      | Other                           |                   |           | 33,607           |       |   |       | 36     |  |   |            | (284    | ) |   |           | 33,359  | 
|                      |                                 |                   |           |                  |       |   |       |        |  |   |            |        
|Total debt securities |                                 |                   | 1,093,705 |                  |       |   | 2,455 |        |  |   | (27,943    | )       |   |   | 1,068,217 |        
|Equity securities     |                                 |                   | 900       |                  |       |   |      |        |  |   | (180       | )       |   |   | 720       |        
|                      |                                 |                   |           |                  |       |   |       |        |  |   |            |        
|Total                 |                                 | $                 | 1,094,605 |                  |       | $ | 2,455 |        |  | $ | (28,123    | )       |   | $ | 1,068,937 |        
|                      |                                 |                   |           |                  |       |   |       |        |  |   |            |        






|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | These interest-only securities are interests that continue to be
    held by the Company from the Companys off-balance sheet
    securitizations.



|                          |  |                |   |      |  |   |        |  
|------------------------- |  | -------------- | - | ---- |  | - | ------ | -
|Six Months Ended June 30, |  | 2006           |   | 2005 | 
|                          |  |                |   |      | 
|                          |  | (In thousands) |  
|Gross realized gains      |  | $              |  |      |  | $ | 22,511 |  
|Gross realized losses     |  |                |  |      |  |   | (1,378 | )
|                          |  |                |   |      |  |  
|Net realized gains        |  | $              |  |      |  | $ | 21,133 |  
|                          |  |                |   |      |  |  



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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)








|   |                                   
|-- | ----------------------------------
|5. | Mortgage Loans Held for Investment



|                               |       |                |            |            |              |   |            |            | 
|------------------------------ | ----- | -------------- | ---------- | ---------- | ------------ | - | ---------- | ---------- | 
|                               |       | June 30,       |            |            | December 31, |  
|                               |       | 2006           |            |            | 2005         |  
|                               |       |                |            |            |              |  
|                               |       | (In thousands) |           
|Prime conforming               |       | $              | 1,458,162  |            |              | $ | 1,517,456  |           
|Prime non-conforming           |       |                | 6,848,268  |            |              |   | 6,186,374  |           
|Nonprime                       |       |                | 56,911,997 |            |              |   | 56,923,366 |           
|Prime second-lien              |       |                | 7,214,150  |            |              |   | 4,330,537  |           
|Government                     |       |                | 796        |            |              |   | 833        |           
|                               |       |                |            |            |              |  
|                               | Total |                |            | 72,433,373 |              |   |            | 68,958,566 | 
|Less allowance for loan losses |       |                | (1,041,497 | )          |              |   | (1,065,906 | )         
|                               |       |                |            |            |              |  
|Total, net                     |       | $              | 71,391,876 |            |              | $ | 67,892,660 |           
|                               |       |                |            |            |              |  







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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)




|   |                    
|-- | -------------------
|6. | Lending Receivables



|                               |       |                |            |            |              |   |            |            | 
|------------------------------ | ----- | -------------- | ---------- | ---------- | ------------ | - | ---------- | ---------- | 
|                               |       | June 30,       |            |            | December 31, |  
|                               |       | 2006           |            |            | 2005         |  
|                               |       |                |            |            |              |  
|                               |       | (In thousands) |           
|Warehouse                      |       | $              | 9,194,207  |            |              | $ | 9,003,196  |           
|Construction                   |       |                | 3,033,406  |            |              |   | 2,677,301  |           
|Commercial business            |       |                | 1,131,023  |            |              |   | 1,026,572  |           
|Healthcare                     |       |                | 557,822    |            |              |   | 593,230    |           
|Commercial real estate         |       |                | 234,524    |            |              |   | 212,272    |           
|Other                          |       |                | 107,072    |            |              |   | 75,883     |           
|                               |       |                |            |            |              |  
|                               | Total |                |            | 14,258,054 |              |   |            | 13,588,454 | 
|Less allowance for loan losses |       |                | (188,662   | )          |              |   | (187,407   | )         
|                               |       |                |            |            |              |  
|Total, net                     |       | $              | 14,069,392 |            |              | $ | 13,401,047 |           
|                               |       |                |            |            |              |  





|   |                          
|-- | -------------------------
|7. | Allowance for Loan Losses



|                           |  |                |           |   |             |   |         |       |  |   |           |  
|-------------------------- |  | -------------- | --------- | - | ----------- | - | ------- | ----- |  | - | --------- | -
|                           |  | Mortgage Loans |           |   |             |   |        
|                           |  | Held for       |           |   | Lending     |   |         |      
|                           |  | Investment     |           |   | Receivables |   |         | Total | 
|                           |  |                |           |   |             |   |         |       | 
|                           |  | (In thousands) |          
|Balance at January 1, 2006 |  | $              | 1,065,906 |   |             | $ | 187,407 |       |  | $ | 1,253,313 |  
|Provision for loan losses  |  |                | 238,835   |   |             |   | 6,502   |       |  |   | 245,337   |  
|Charge-offs                |  |                | (288,445  | ) |             |   | (5,601  | )     |  |   | (294,046  | )
|Recoveries                 |  |                | 25,201    |   |             |   | 354     |       |  |   | 25,555    |  
|                           |  |                |           |   |             |   |         |       | 
|Balance at June 30, 2006   |  | $              | 1,041,497 |   |             | $ | 188,662 |       |  | $ | 1,230,159 |  
|                           |  |                |           |   |             |   |         |       | 
|Balance at January 1, 2005 |  | $              | 872,954   |   |             | $ | 141,723 |       |  | $ | 1,014,677 |  
|Provision for loan losses  |  |                | 276,575   |   |             |   | 21,351  |       |  |   | 297,926   |  
|Charge-offs                |  |                | (239,072  | ) |             |   | (2,552  | )     |  |   | (241,624  | )
|Recoveries                 |  |                | 23,141    |   |             |   | 260     |       |  |   | 23,401    |  
|                           |  |                |           |   |             |   |         |       | 
|Balance at June 30, 2005   |  | $              | 933,598   |   |             | $ | 160,782 |       |  | $ | 1,094,380 |  
|                           |  |                |           |   |             |   |         |       | 

14



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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)




|   |                          
|-- | -------------------------
|8. | Mortgage Servicing Rights



|                                                |                                                                                   |                                      |           |             |         |   |               |          |   |   |       |    |  |   |           |          |  
|----------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------ | --------- | ----------- | ------- | - | ------------- | -------- | - | - | ----- | -- |  | - | --------- | -------- | -
|                                                |                                                                                   | Mortgage Servicing Rights Managed By |           |             |        
|                                                |                                                                                   |                                      |           |             |        
|                                                |                                                                                   |                                      |           | Residential |         |   | International |          |   |  
|                                                |                                                                                   | GMAC                                 |           |             | Capital |   |               | Business |   |   |      
|                                                |                                                                                   | Residential                          |           |             | Group   |   |               | Group    |   |   | Total |   
|                                                |                                                                                   |                                      |           |             |         |   |               |          |   |   |       |   
|                                                |                                                                                   | (In thousands)                       |          
|Estimated fair value at January 1, 2006         |                                                                                   | $                                    | 3,056,446 |             |         | $ | 959,708       |          |   | $ | 4,850 |    |  | $ | 4,021,004 |         
|Additions obtained from sales of mortgage loans |                                                                                   |                                      | 522,285   |             |         |   | 247,890       |          |   |   |      |    |  |   | 770,175   |         
|Additions from purchases of servicing assets    |                                                                                   |                                      | 5,520     |             |         |   |              |          |   |   |      |    |  |   | 5,520     |         
|Changes in fair value:                          |                                                                                   |                                      |           |             |         |   |               |          |   |   |       |    |  |   |           |         
|                                                | Due to changes in valuation inputs or assumptions used in the
    valuation model |                                      |           | 563,957     |         |   |               | 90,313   |   |   |       |   |  |   |           | 654,270  |  
|                                                | Other changes in fair value                                                       |                                      |           | (210,045    | )       |   |               | (145,030 | ) |   |       | 74 |  |   |           | (355,001 | )
|Other changes that affect the balance           |                                                                                   |                                      |          |             |         |   | (2,670        | )        |   |   | 305   |    |  |   | (2,365    | )       
|                                                |                                                                                   |                                      |           |             |         |   |               |          |   |   |       |   
|Estimated fair value at June 30, 2006           |                                                                                   | $                                    | 3,938,163 |             |         | $ | 1,150,211     |          |   | $ | 5,229 |    |  | $ | 5,093,603 |         
|                                                |                                                                                   |                                      |           |             |         |   |               |          |   |   |       |   





|                                  |  |             |           |             |         |  |               |          |  |  |          |  
|--------------------------------- |  | ----------- | --------- | ----------- | ------- |  | ------------- | -------- |  |  | -------- | -
|                                  |  |             |           | Residential |         |  | International |         
|                                  |  | GMAC        |           |             | Capital |  |               | Business | 
|June 30, 2006                     |  | Residential |           |             | Group   |  |               | Group    | 
|                                  |  |             |           |             |         |  |               |          | 
|Weighted average prepayment speed |  |             | 16.1      | %           |         |  | 27.2          | %        |  |  | 8.0      | %
|Range of prepayment speeds        |  |             | 15.1-38.2 | %           |         |  | 12.5- 38.5    | %        |  |  | 7.0-15.0 | %
|Weighted average discount rate    |  |             | 9.2       | %           |         |  | 12.4          | %        |  |  | 8.0      | %
|Range of discount rates           |  |             | 9.0-13.5  | %           |         |  | 12.0- 14.0    | %        |  |  | 8.0      | %



15



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)






|                                                                                  |  |                |         | 
|--------------------------------------------------------------------------------- |  | -------------- | ------- | 
|                                                                                  |  | (In thousands) |        
|Contractual servicing fees (net of guarantee fees and including
    subservicing) |  | $              | 640,093 | 
|Late fees                                                                         |  |                | 61,845  | 
|Ancillary fees                                                                    |  |                | 59,230  | 
|                                                                                  |  |                |        
|Total                                                                             |  | $              | 761,168 | 
|                                                                                  |  |                |        





|                                           |  |                |           |  
|------------------------------------------ |  | -------------- | --------- | -
|                                           |  | (In thousands) |          
|Balance at January 1, 2005                 |  | $              | 4,294,846 |  
|Originations and purchases, net of sales   |  |                | 665,048   |  
|Amortization                               |  |                | (487,467  | )
|Valuation adjustments for hedge accounting |  |                | (338,004  | )
|Other than temporary impairment            |  |                | (20,514   | )
|                                           |  |                |          
|Balance at June 30, 2005                   |  |                | 4,113,909 |  
|Valuation allowance                        |  |                | (867,582  | )
|                                           |  |                |          
|Carrying value at June 30, 2005            |  | $              | 3,246,327 |  
|                                           |  |                |          
|Estimated fair value at June 30, 2005      |  | $              | 3,259,000 |  
|                                           |  |                |          



|                                |  |                |         |  
|------------------------------- |  | -------------- | ------- | -
|                                |  | (In thousands) |        
|Balance at January 1, 2005      |  | $              | 928,854 |  
|Impairment                      |  |                | (40,758 | )
|Other than temporary impairment |  |                | (20,514 | )
|                                |  |                |        
|Balance at June 30, 2005        |  | $              | 867,582 |  
|                                |  |                |        



16



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)




|   |           
|-- | ----------
|9. | Borrowings



|                                                      |                                                   |                        |             |            |              |   |             |            |            | 
|----------------------------------------------------- | ------------------------------------------------- | ---------------------- | ----------- | ---------- | ------------ | - | ----------- | ---------- | ---------- | 
|                                                      |                                                   | June 30,               |             |            | December 31, |  
|                                                      |                                                   | 2006                   |             |            | 2005         |  
|                                                      |                                                   |                        |             |            |              |  
|                                                      |                                                   | (In thousands)         |            
|Affiliate borrowings                                  |                                                   | $                      |            |            |              | $ | 5,177,462   |           
|Collateralized borrowings in securitization trusts(a) |                                                   |                        | 57,597,386  |            |              |   | 56,097,801  |           
|Other borrowings:                                     |                                                   |                        |             |            |              |   |             |           
|                                                      | Secured aggregation facilities  short-term       |                        |             | 10,083,552 |              |   |             | 10,959,581 |           
|                                                      | Secured aggregation facilities  long-term(a)     |                        |             | 4,907,595  |              |   |             | 4,738,606  |           
|                                                      | Repurchase agreements  short-term                |                        |             | 9,028,568  |              |   |             | 9,896,658  |           
|                                                      | Repurchase agreements  long-term(a)              |                        |             | 650,000    |              |   |             |           |           
|                                                      | Senior unsecured notes(a)                         |                        |             | 10,874,941 |              |   |             | 5,150,519  |           
|                                                      | Subordinated unsecured notes(a)                   |                        |             | 1,000,000  |              |   |             |           |           
|                                                      | FHLB advances  short-term                        |                        |             | 12,000     |              |   |             | 1,506,000  |           
|                                                      | FHLB advances  long-term(a)                      |                        |             | 4,791,000  |              |   |             | 2,922,000  |           
|                                                      | Third-party bank credit facilities  short-term   |                        |             | 350,000    |              |   |             | 450,000    |           
|                                                      | Third-party bank credit facilities  long-term(a) |                        |             | 1,750,000  |              |   |             | 1,750,000  |           
|                                                      | Debt collateralized by mortgage loans             |                        |             | 1,804,647  |              |   |             | 2,150,529  |           
|                                                      | Servicing advances                                |                        |             | 571,969    |              |   |             | 571,532    |           
|                                                      | Investor custodial funds                          |                        |             | 132,861    |              |   |             | 120,985    |           
|                                                      | Other  short-term                                |                        |             | 1,503,913  |              |   |             | 1,802,789  |           
|                                                      | Other  long-term(a)                              |                        |             | 659,404    |              |   |             | 281,308    |           
|                                                      |                                                   |                        |             |            |              |  
|                                                      |                                                   | Total other borrowings |             |            | 48,120,450   |   |             |            | 42,300,507 | 
|                                                      |                                                   |                        |             |            |              |  
|Total borrowings                                      |                                                   | $                      | 105,717,836 |            |              | $ | 103,575,770 |           
|                                                      |                                                   |                        |             |            |              |  






|    |                                                                                       
|--- | --------------------------------------------------------------------------------------
|(a) | Represents borrowings with an original contractual maturity in
    excess of one year.



|                                     |                                       |                |            |             |              |   |            |             | 
|------------------------------------ | ------------------------------------- | -------------- | ---------- | ----------- | ------------ | - | ---------- | ----------- | 
|                                     |                                       | June 30,       |            |             | December 31, |  
|                                     |                                       | 2006           |            |             | 2005         |  
|                                     |                                       |                |            |             |              |  
|                                     |                                       | (In thousands) |           
|Mortgage loans held for investment   |                                       | $              | 71,323,657 |             |              | $ | 67,798,758 |            
|Mortgage loans held for sale         |                                       |                | 15,684,063 |             |              |   | 16,147,391 |            
|Trading securities                   |                                       |                | 2,986,916  |             |              |   | 2,696,896  |            
|Available for sale securities        |                                       |                | 10,451     |             |              |   | 929,112    |            
|Mortgage servicing rights            |                                       |                | 2,494,431  |             |              |   | 2,220,657  |            
|Lending receivables                  |                                       |                | 12,220,321 |             |              |   | 11,020,766 |            
|Accounts receivable                  |                                       |                | 842,476    |             |              |   | 795,149    |            
|Investments in real estate and other |                                       |                | 512,677    |             |              |   | 357,644    |            
|Other assets                         |                                       |                | 512,473    |             |              |   | 238,758    |            
|                                     |                                       |                |            |             |              |  
|                                     | Total assets restricted as collateral |                | $          | 106,587,465 |              |   | $          | 102,205,131 | 
|                                     |                                       |                |            |             |              |  
|Related secured debt                 |                                       | $              | 90,637,187 |             |              | $ | 89,939,405 |            
|                                     |                                       |                |            |             |              |  



17



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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)






|                                     |       |                |           |           |              |   |           |           | 
|------------------------------------ | ----- | -------------- | --------- | --------- | ------------ | - | --------- | --------- | 
|                                     |       | June 30,       |           |           | December 31, |  
|                                     |       | 2006           |           |           | 2005         |  
|                                     |       |                |           |           |              |  
|                                     |       | (In thousands) |          
|Mortgage loans held for sale         |       | $              | 4,828,382 |           |              | $ | 3,880,448 |          
|Trading securities                   |       |                | 2,265,521 |           |              |   | 2,126,393 |          
|Mortgage loans held for investment   |       |                | 1,813,415 |           |              |   | 2,429,880 |          
|Available for sale securities        |       |                |          |           |              |   | 927,140   |          
|Investments in real estate and other |       |                | 43,545    |           |              |   | 6,276     |          
|                                     |       |                |           |           |              |  
|                                     | Total |                | $         | 8,950,863 |              |   | $         | 9,370,137 | 
|                                     |       |                |           |           |              |  



|    |                    
|--- | -------------------
|10. | Deposit Liabilities



|                                       |  |                |           |  |              |   |           | 
|-------------------------------------- |  | -------------- | --------- |  | ------------ | - | --------- | 
|                                       |  | June 30,       |           |  | December 31, |  
|                                       |  | 2006           |           |  | 2005         |  
|                                       |  |                |           |  |              |  
|                                       |  | (In thousands) |          
|Non-interest bearing deposits          |  | $              | 1,847,189 |  |              | $ | 1,368,345 | 
|NOW and money market checking accounts |  |                | 1,368,902 |  |              |   | 508,830   | 
|Certificates of deposit                |  |                | 3,092,483 |  |              |   | 2,246,129 | 
|                                       |  |                |           |  |              |  
|Total                                  |  | $              | 6,308,574 |  |              | $ | 4,123,304 | 
|                                       |  |                |           |  |              |  





|    |                       
|--- | ----------------------
|11. | Derivative Instruments



18



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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)




|                                              |                               |               |      |      |      |   |      |                                 |   |  |                                               
|--------------------------------------------- | ----------------------------- | ------------- | ---- | ---- | ---- | - | ---- | ------------------------------- | - |  | ----------------------------------------------
|Six Months Ended June 30,                     |                               | 2006          |      |      | 2005 |   |      | Income Statement Classification
|                                              |                               |               |      |      |      |   |      |                                
|                                              |                               | (In millions) |      |      |     
|Fair value hedge ineffectiveness gain (loss): |                               |               |      |      |      |   |      |                                 |   | 
|                                              | Mortgage servicing rights     |               | $    |     |      |   | $    | 9.1                             |   |  | Servicing asset valuation and hedge activities
|                                              | Mortgage loans held for sale  |               |      | (4.5 | )    |   |      | (14.7                           | ) |  | Gain on sale of mortgage loans                
|                                              | Senior unsecured notes        |               |      | 0.3  |      |   |      | (1.6                            | ) |  | Gain (loss) on investment securities          
|Cash flow hedge ineffectiveness gain:         |                               |               |      |      |      |   |      |                                 |   | 
|                                              | Debt and future debt issuance |               |      | 0.4  |      |   |      | 0.3                             |   |  | Interest expense                              
|                                              |                               |               |      |      |      |   |      |                                
|Total                                         |                               | $             | (3.8 | )    |      | $ | (6.9 | )                               |   | 
|                                              |                               |               |      |      |      |   |      |                                





|    |                           
|--- | --------------------------
|12. | Related Party Transactions













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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)










|    |                                
|--- | -------------------------------
|13. | Defined Benefit Retirement Plan





|    |                    
|--- | -------------------
|14. | Segment Information



|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              |  |   |             |   |  |   |             |  
|-------------------------------- |  | -------------- | ---------- | - | ------------- | -------- | ---------- | ------- | ------------- | - | --------- | - |  | ------------- | ---------- | - | ------------ | - | ---------- | ------------ |  | - | ----------- | - |  | - | ----------- | -
|                                 |  |                |            |   |               | Business |            |         | International |   |           |   |  |               |            |  
|                                 |  | GMAC           |            |   | Residential   |          |            | Capital |               |   | Business  |   |  | Corporate and |            |   |              |   |           
|Three Months Ended June 30,      |  | Residential    |            |   | Capital Group |          |            | Group   |               |   | Group     |   |  | Other         |            |   | Eliminations |   |            | Consolidated | 
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|                                 |  | (In thousands) |           
|2006                             |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              |  |   |             |   |  |   |             |  
|Net interest income              |  | $              | 44,999     |   |               | $        | 329,306    |         |               | $ | 22,438    |   |  | $             | 42,730     |   |              | $ | 12,459     |              |  | $ | 96          |   |  | $ | 452,028     |  
|Provision for loan losses        |  |                | (5,995     | ) |               |          | (108,539   | )       |               |   | (4,734    | ) |  |               | (3,358     | ) |              |   | 22         |              |  |   | -           |   |  |   | (122,604    | )
|Other revenue                    |  |                | 311,489    |   |               |          | 257,601    |         |               |   | 491,254   |   |  |               | 69,591     |   |              |   | 117,040    |              |  |   | (2,567      | ) |  |   | 1,244,408   |  
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Total net revenue                |  |                | 350,493    |   |               |          | 478,368    |         |               |   | 508,958   |   |  |               | 108,963    |   |              |   | 129,521    |              |  |   | (2,471      | ) |  |   | 1,573,832   |  
|Operating expenses               |  |                | 239,036    |   |               |          | 249,191    |         |               |   | 23,569    |   |  |               | 63,375     |   |              |   | 120,490    |              |  |   | (595        | ) |  |   | 695,066     |  
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Income before income tax expense |  |                | 111,457    |   |               |          | 229,177    |         |               |   | 485,389   |   |  |               | 45,588     |   |              |   | 9,031      |              |  |   | (1,876      | ) |  |   | 878,766     |  
|Income tax expense (benefit)     |  |                | 53,653     |   |               |          | 86,862     |         |               |   | 186,249   |   |  |               | 5,421      |   |              |   | (889       | )            |  |   | (678        | ) |  |   | 330,618     |  
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Net income                       |  | $              | 57,804     |   |               | $        | 142,315    |         |               | $ | 299,140   |   |  | $             | 40,167     |   |              | $ | 9,920      |              |  |   | (1,198      | ) |  | $ | 548,148     |  
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Total assets                     |  | $              | 26,293,341 |   |               | $        | 80,207,683 |         |               | $ | 6,250,365 |   |  | $             | 10,195,342 |   |              | $ | 22,494,450 |              |  | $ | (20,888,697 | ) |  | $ | 124,552,484 |  
|                                 |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 

20



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              |  |   |             |   |  |   |            |  
|-------------------------------- |  | -------------- | ---------- |  | ------------- | -------- | ---------- | ------- | ------------- | - | --------- | - |  | ------------- | --------- | - | ------------ | - | ---------- | ------------ |  | - | ----------- | - |  | - | ---------- | -
|                                 |  |                |            |  |               | Business |            |         | International |   |           |   |  |               |           |  
|                                 |  | GMAC           |            |  | Residential   |          |            | Capital |               |   | Business  |   |  | Corporate and |           |   |              |   |           
|Three Months Ended June 30,      |  | Residential    |            |  | Capital Group |          |            | Group   |               |   | Group     |   |  | Other         |           |   | Eliminations |   |            | Consolidated | 
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|                                 |  | (In thousands) |           
|2005                             |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              |  |   |             |   |  |   |            |  
|Net interest income              |  | $              | 70,526     |  |               | $        | 335,216    |         |               | $ | 35,757    |   |  | $             | 47,340    |   |              | $ | 16,230     |              |  | $ |            |   |  | $ | 505,069    |  
|Provision for loan losses        |  |                | 4,002      |  |               |          | (132,091   | )       |               |   | (12,191   | ) |  |               | (2,074    | ) |              |   | 260        |              |  |   |            |   |  |   | (142,094   | )
|Other revenue                    |  |                | 301,001    |  |               |          | 153,047    |         |               |   | 66,260    |   |  |               | 84,607    |   |              |   | 130,515    |              |  |   |            |   |  |   | 735,430    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Total net revenue                |  |                | 375,529    |  |               |          | 356,172    |         |               |   | 89,826    |   |  |               | 129,873   |   |              |   | 147,005    |              |  |   |            |   |  |   | 1,098,405  |  
|Operating expenses               |  |                | 225,155    |  |               |          | 200,203    |         |               |   | 20,829    |   |  |               | 60,699    |   |              |   | 132,472    |              |  |   |            |   |  |   | 639,358    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Income before income tax expense |  |                | 150,374    |  |               |          | 155,969    |         |               |   | 68,997    |   |  |               | 69,174    |   |              |   | 14,533     |              |  |   |            |   |  |   | 459,047    |  
|Income tax expense (benefit)     |  |                | 57,540     |  |               |          | 58,472     |         |               |   | 25,657    |   |  |               | 20,650    |   |              |   | (3,698     | )            |  |   |            |   |  |   | 158,621    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Net income                       |  | $              | 92,834     |  |               | $        | 97,497     |         |               | $ | 43,340    |   |  | $             | 48,524    |   |              | $ | 18,231     |              |  | $ |            |   |  | $ | 300,426    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Total assets                     |  | $              | 19,420,718 |  |               | $        | 64,653,984 |         |               | $ | 4,959,319 |   |  | $             | 8,191,500 |   |              | $ | 12,080,166 |              |  | $ | (10,980,376 | ) |  | $ | 98,325,311 |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 

|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              |  |   |             |   |  |   |             |  
|--------------------------------------- |  | -------------- | ---------- | - | ------------- | -------- | ---------- | ------- | ------------- | - | --------- | - |  | ------------- | ---------- | - | ------------ | - | ---------- | ------------ |  | - | ----------- | - |  | - | ----------- | -
|                                        |  |                |            |   |               | Business |            |         | International |   |           |   |  |               |            |  
|Six Months Ended                        |  | GMAC           |            |   | Residential   |          |            | Capital |               |   | Business  |   |  | Corporate and |            |   |              |   |           
|June 30,                                |  | Residential    |            |   | Capital Group |          |            | Group   |               |   | Group     |   |  | Other         |            |   | Eliminations |   |            | Consolidated | 
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|                                        |  | (In thousands) |           
|2006                                    |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              |  |   |             |   |  |   |             |  
|Net interest income                     |  | $              | 103,738    |   |               | $        | 639,917    |         |               | $ | 43,213    |   |  | $             | 83,854     |   |              | $ | 9,206      |              |  | $ | 96          |   |  | $ | 880,024     |  
|Provision for loan losses               |  |                | (8,605     | ) |               |          | (225,349   | )       |               |   | (4,796    | ) |  |               | (6,626     | ) |              |   | 39         |              |  |   |            |   |  |   | (245,337    | )
|Other revenue                           |  |                | 519,601    |   |               |          | 449,601    |         |               |   | 572,207   |   |  |               | 145,136    |   |              |   | 196,342    |              |  |   | (1,866      | ) |  |   | 1,881,021   |  
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Total net revenue                       |  |                | 614,734    |   |               |          | 864,169    |         |               |   | 610,624   |   |  |               | 222,364    |   |              |   | 205,587    |              |  |   | (1,770      | ) |  |   | 2,515,708   |  
|Operating expenses                      |  |                | 472,555    |   |               |          | 460,096    |         |               |   | 36,096    |   |  |               | 118,204    |   |              |   | 211,119    |              |  |   | (595        | ) |  |   | 1,297,475   |  
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Income (loss) before income tax expense |  |                | 142,179    |   |               |          | 404,073    |         |               |   | 574,528   |   |  |               | 104,160    |   |              |   | (5,532     | )            |  |   | (1,175      | ) |  |   | 1,218,233   |  
|Income tax expense (benefit)            |  |                | 75,667     |   |               |          | 155,649    |         |               |   | 221,308   |   |  |               | 22,636     |   |              |   | (6,258     | )            |  |   | (411        | ) |  |   | 468,591     |  
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Net income                              |  | $              | 66,512     |   |               | $        | 248,424    |         |               | $ | 353,220   |   |  | $             | 81,524     |   |              | $ | 726        |              |  | $ | (764        | ) |  | $ | 749,642     |  
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 
|Total assets                            |  | $              | 26,293,341 |   |               | $        | 80,207,683 |         |               | $ | 6,250,365 |   |  | $             | 10,195,342 |   |              | $ | 22,494,450 |              |  | $ | (20,888,697 | ) |  | $ | 124,552,484 |  
|                                        |  |                |            |   |               |          |            |         |               |   |           |   |  |               |            |   |              |   |            |              | 

21



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              |  |   |             |   |  |   |            |  
|-------------------------------- |  | -------------- | ---------- |  | ------------- | -------- | ---------- | ------- | ------------- | - | --------- | - |  | ------------- | --------- | - | ------------ | - | ---------- | ------------ |  | - | ----------- | - |  | - | ---------- | -
|                                 |  |                |            |  |               | Business |            |         | International |   |           |   |  |               |           |  
|Six Months Ended                 |  | GMAC           |            |  | Residential   |          |            | Capital |               |   | Business  |   |  | Corporate and |           |   |              |   |           
|June 30,                         |  | Residential    |            |  | Capital Group |          |            | Group   |               |   | Group     |   |  | Other         |           |   | Eliminations |   |            | Consolidated | 
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|                                 |  | (In thousands) |           
|2005                             |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              |  |   |             |   |  |   |            |  
|Net interest income              |  | $              | 143,741    |  |               | $        | 751,265    |         |               | $ | 72,971    |   |  | $             | 77,458    |   |              | $ | 10,331     |              |  | $ |            |   |  | $ | 1,055,766  |  
|Provision for loan losses        |  |                | 2,899      |  |               |          | (280,438   | )       |               |   | (19,663   | ) |  |               | (744      | ) |              |   | 20         |              |  |   |            |   |  |   | (297,926   | )
|Other revenue                    |  |                | 579,072    |  |               |          | 345,821    |         |               |   | 116,298   |   |  |               | 144,080   |   |              |   | 282,871    |              |  |   |            |   |  |   | 1,468,142  |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Total net revenue                |  |                | 725,712    |  |               |          | 816,648    |         |               |   | 169,606   |   |  |               | 220,794   |   |              |   | 293,222    |              |  |   |            |   |  |   | 2,225,982  |  
|Operating expenses               |  |                | 429,588    |  |               |          | 414,955    |         |               |   | 38,039    |   |  |               | 119,111   |   |              |   | 236,392    |              |  |   |            |   |  |   | 1,238,085  |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Income before income tax expense |  |                | 296,124    |  |               |          | 401,693    |         |               |   | 131,567   |   |  |               | 101,683   |   |              |   | 56,830     |              |  |   |            |   |  |   | 987,897    |  
|Income tax expense               |  |                | 124,099    |  |               |          | 152,662    |         |               |   | 49,640    |   |  |               | 30,513    |   |              |   | 8,762      |              |  |   |            |   |  |   | 365,676    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Net income                       |  | $              | 172,025    |  |               | $        | 249,031    |         |               | $ | 81,927    |   |  | $             | 71,170    |   |              | $ | 48,068     |              |  | $ |            |   |  | $ | 622,221    |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 
|Total assets                     |  | $              | 19,420,718 |  |               | $        | 64,653,984 |         |               | $ | 4,959,319 |   |  | $             | 8,191,500 |   |              | $ | 12,080,166 |              |  | $ | (10,980,376 | ) |  | $ | 98,325,311 |  
|                                 |  |                |            |  |               |          |            |         |               |   |           |   |  |               |           |   |              |   |            |              | 



|    |                   
|--- | ------------------
|15. | Regulatory Matters





|                          |  |          |   |   |                  |  |    |          |  |  |      |  
|------------------------- |  | -------- | - | - | ---------------- |  | -- | -------- |  |  | ---- | -
|                          |  | Minimum  |   |   | Minimum to be    |  |    | June 30, | 
|                          |  | Required |   |   | Well-Capitalized |  |    | 2006     | 
|                          |  |          |   |   |                  |  |    |          | 
|Tier 1 leverage           |  |          | 4 | % |                  |  | 5  | %        |  |  | 7.4  | %
|Tier 1 risk-based capital |  |          | 4 |   |                  |  | 6  |          |  |  | 10.3 |  
|Total risk-based capital  |  |          | 8 |   |                  |  | 10 |          |  |  | 10.4 |  



|    |                                   
|--- | ----------------------------------
|16. | Supplemental Financial Information





22



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEET


June 30, 2006


|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |             |             |             |   |             |            |             | 
|------------------------------------------ | -------------------------------------------------- | ---------------------- | ---------- | ---------- | ------------ | - | ------------- | ------------ | ---------- | - | ------------ | ---------- | ---------- | ------------ | ----------- | ----------- | ----------- | - | ----------- | ---------- | ----------- | 
|                                           |                                                    |                        |            | Guarantor  |              |   | Non-Guarantor |              |            |   |              |           
|                                           |                                                    | Parent                 |            |            | Subsidiaries |   |               | Subsidiaries |            |   | Eliminations |            |            | Consolidated |            
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|                                           |                                                    | (Dollars in thousands) |           
|ASSETS                                    
|Cash and cash equivalents                  |                                                    | $                      | 1,183,249  |            |              | $ | 182,742       |              |            | $ | 565,913      |            |            | $            | (46,400     | )           |             | $ | 1,885,504   |           
|Mortgage loans held for sale               |                                                    |                        |           |            |              |   | 7,484,724     |              |            |   | 12,945,691   |            |            |              | 8,498       |             |             |   | 20,438,913  |           
|Trading securities                         |                                                    |                        |           |            |              |   | 2,723,675     |              |            |   | 1,521,948    |            |            |              |            |             |             |   | 4,245,623   |           
|Available for sale securities              |                                                    |                        |           |            |              |   | 638,825       |              |            |   | 156,295      |            |            |              | (632,040    | )           |             |   | 163,080     |           
|Mortgage loans held for investment, net    |                                                    |                        |           |            |              |   | 2,570,110     |              |            |   | 68,911,147   |            |            |              | (89,381     | )           |             |   | 71,391,876  |           
|Lending receivables, net                   |                                                    |                        |           |            |              |   | 1,336,623     |              |            |   | 12,732,237   |            |            |              | 532         |             |             |   | 14,069,392  |           
|Mortgage servicing rights                  |                                                    |                        |           |            |              |   | 5,088,374     |              |            |   | 5,229        |            |            |              |            |             |             |   | 5,093,603   |           
|Accounts receivable                        |                                                    |                        | 5,085      |            |              |   | 1,461,479     |              |            |   | 1,191,024    |            |            |              | (612,603    | )           |             |   | 2,044,985   |           
|Investments in real estate and other       |                                                    |                        |           |            |              |   | 98,177        |              |            |   | 2,029,592    |            |            |              |            |             |             |   | 2,127,769   |           
|Goodwill                                   |                                                    |                        |           |            |              |   | 218,803       |              |            |   | 245,391      |            |            |              |            |             |             |   | 464,194     |           
|Other assets                               |                                                    |                        | 341,038    |            |              |   | 5,746,617     |              |            |   | 1,433,686    |            |            |              | (4,893,796  | )           |             |   | 2,627,545   |           
|Investment in and loans to subsidiaries    |                                                    |                        | 20,884,850 |            |              |   | 4,327,872     |              |            |   |             |            |            |              | (25,212,722 | )           |             |   |            |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|Total assets                               |                                                    | $                      | 22,414,222 |            |              | $ | 31,878,021    |              |            | $ | 101,738,153  |            |            | $            | (31,477,912 | )           |             | $ | 124,552,484 |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|                                          
|LIABILITIES                               
|Borrowings:                                |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |             |             |             |   |             |           
|                                           | Affiliate borrowings                               |                        | $          |           |              |   | $             | 11,792,953   |            |   | $            | 1,594,237  |            |              | $           | (13,387,190 | )           |   | $           |           |            
|                                           | Collateralized borrowings in securitization trusts |                        |            |           |              |   |               |             |            |   |              | 57,597,386 |            |              |             |            |             |   |             | 57,597,386 |            
|                                           | Other borrowings                                   |                        |            | 13,624,942 |              |   |               | 9,551,301    |            |   |              | 26,188,315 |            |              |             | (1,244,108  | )           |   |             | 48,120,450 |            
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|                                           |                                                    | Total borrowings       |            |            | 13,624,942   |   |               |              | 21,344,254 |   |              |            | 85,379,938 |              |             |             | (14,631,298 | ) |             |            | 105,717,836 | 
|Deposit liabilities                        |                                                    |                        |           |            |              |   |              |              |            |   | 6,377,974    |            |            |              | (69,400     | )           |             |   | 6,308,574   |           
|Other liabilities                          |                                                    |                        | 385,019    |            |              |   | 3,036,107     |              |            |   | 5,663,222    |            |            |              | (4,962,535  | )           |             |   | 4,121,813   |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|Total liabilities                          |                                                    |                        | 14,009,961 |            |              |   | 24,380,361    |              |            |   | 97,421,134   |            |            |              | (19,663,233 | )           |             |   | 116,148,223 |           
|                                          
|STOCKHOLDERS EQUITY                      
|Common stock and paid-in capital           |                                                    |                        | 3,412,220  |            |              |   | 2,512,221     |              |            |   | 1,487,409    |            |            |              | (3,999,630  | )           |             |   | 3,412,220   |           
|Retained earnings                          |                                                    |                        | 4,717,362  |            |              |   | 4,710,723     |              |            |   | 2,558,184    |            |            |              | (7,268,907  | )           |             |   | 4,717,362   |           
|Accumulated other comprehensive income     |                                                    |                        | 274,679    |            |              |   | 274,716       |              |            |   | 271,426      |            |            |              | (546,142    | )           |             |   | 274,679     |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|Total stockholders equity                 |                                                    |                        | 8,404,261  |            |              |   | 7,497,660     |              |            |   | 4,317,019    |            |            |              | (11,814,679 | )           |             |   | 8,404,261   |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            
|Total liabilities and stockholders equity |                                                    | $                      | 22,414,222 |            |              | $ | 31,878,021    |              |            | $ | 101,738,153  |            |            | $            | (31,477,912 | )           |             | $ | 124,552,484 |           
|                                           |                                                    |                        |            |            |              |   |               |              |            |   |              |            |            |              |            

23



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED STATEMENT OF INCOME


Three Months Ended June 30, 2006


|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | ------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | -------- | - |  | - | --------- | -
|                                                     |  |                        |         | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                     |  | Parent                 |         |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|                                                     |  | (Dollars in thousands) |        
|Revenue                                              |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|Interest income                                      |  | $                      | 222,403 |           |              | $ | 320,157       |              |  | $ | 1,668,869    |   |  | $            | (201,507 | ) |  | $ | 2,009,922 |  
|Interest expense                                     |  |                        | 221,791 |           |              |   | 279,965       |              |  |   | 1,271,048    |   |  |              | (214,910 | ) |  |   | 1,557,894 |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net interest income                                  |  |                        | 612     |           |              |   | 40,192        |              |  |   | 397,821      |   |  |              | 13,403   |   |  |   | 452,028   |  
|Provision for loan losses                            |  |                        |        |           |              |   | 17,910        |              |  |   | 104,922      |   |  |              | (228     | ) |  |   | 122,604   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net interest income after provision for loan losses  |  |                        | 612     |           |              |   | 22,282        |              |  |   | 292,899      |   |  |              | 13,631   |   |  |   | 329,424   |  
|Gain on sale of mortgage loans, net                  |  |                        |        |           |              |   | 289,359       |              |  |   | 80,858       |   |  |              | 4,752    |   |  |   | 374,969   |  
|Servicing fees                                       |  |                        |        |           |              |   | 391,032       |              |  |   | (3,413       | ) |  |              | (1,135   | ) |  |   | 386,484   |  
|Servicing asset valuation and hedge activities, net  |  |                        |        |           |              |   | (171,137      | )            |  |   | 377          |   |  |              |         |   |  |   | (170,760  | )
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net servicing fees                                   |  |                        |        |           |              |   | 219,895       |              |  |   | (3,036       | ) |  |              | (1,135   | ) |  |   | 215,724   |  
|Gain (loss) on investment securities, net            |  |                        | 376     |           |              |   | (47,170       | )            |  |   | 48,262       |   |  |              |         |   |  |   | 1,468     |  
|Real estate related revenues                         |  |                        |        |           |              |   | 22,587        |              |  |   | 164,448      |   |  |              |         |   |  |   | 187,035   |  
|Gain on sale of equity investments                   |  |                        |        |           |              |   | 414,508       |              |  |   |             |   |  |              |         |   |  |   | 414,508   |  
|Other income                                         |  |                        | 595     |           |              |   | 34,860        |              |  |   | 39,210       |   |  |              | (23,961  | ) |  |   | 50,704    |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Total net revenue                                    |  |                        | 1,583   |           |              |   | 956,321       |              |  |   | 622,641      |   |  |              | (6,713   | ) |  |   | 1,573,832 |  
|Expenses                                             |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|Compensation and benefits                            |  |                        |        |           |              |   | 239,103       |              |  |   | 136,554      |   |  |              |         |   |  |   | 375,657   |  
|Professional fees                                    |  |                        |        |           |              |   | 51,566        |              |  |   | 10,356       |   |  |              | 89       |   |  |   | 62,011    |  
|Data processing and telecommunications               |  |                        |        |           |              |   | 34,557        |              |  |   | 13,014       |   |  |              |         |   |  |   | 47,571    |  
|Advertising                                          |  |                        |        |           |              |   | 32,174        |              |  |   | 11,230       |   |  |              |         |   |  |   | 43,404    |  
|Occupancy                                            |  |                        |        |           |              |   | 21,199        |              |  |   | 12,655       |   |  |              |         |   |  |   | 33,854    |  
|Other                                                |  |                        | 1,019   |           |              |   | 86,921        |              |  |   | 68,191       |   |  |              | (23,562  | ) |  |   | 132,569   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Total expenses                                       |  |                        | 1,019   |           |              |   | 465,520       |              |  |   | 252,000      |   |  |              | (23,473  | ) |  |   | 695,066   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Income before income tax expense                     |  |                        | 564     |           |              |   | 490,801       |              |  |   | 370,641      |   |  |              | 16,760   |   |  |   | 878,766   |  
|Income tax expense                                   |  |                        | 216     |           |              |   | 206,089       |              |  |   | 120,552      |   |  |              | 3,761    |   |  |   | 330,618   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Income before equity in net earnings of subsidiaries |  |                        | 348     |           |              |   | 284,712       |              |  |   | 250,089      |   |  |              | 12,999   |   |  |   | 548,148   |  
|Equity in net earnings of subsidiaries               |  |                        | 547,800 |           |              |   | 263,088       |              |  |   |             |   |  |              | (810,888 | ) |  |   |          |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net income                                           |  | $                      | 548,148 |           |              | $ | 547,800       |              |  | $ | 250,089      |   |  | $            | (797,889 | ) |  | $ | 548,148   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         

24



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATING STATEMENT OF INCOME


Three Months Ended June 30, 2005


|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | ------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | -------- | - |  | - | --------- | -
|                                                     |  |                        |         | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                     |  | Parent                 |         |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |         
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|                                                     |  | (Dollars in thousands) |        
|Revenue                                              |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|Interest income                                      |  | $                      | 67,538  |           |              | $ | 259,162       |              |  | $ | 1,108,536    |   |  | $            | (80,106  | ) |  | $ | 1,355,130 |  
|Interest expense                                     |  |                        | 57,466  |           |              |   | 171,028       |              |  |   | 700,605      |   |  |              | (79,038  | ) |  |   | 850,061   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net interest income                                  |  |                        | 10,072  |           |              |   | 88,134        |              |  |   | 407,931      |   |  |              | (1,068   | ) |  |   | 505,069   |  
|Provision for loan losses                            |  |                        |        |           |              |   | 33,634        |              |  |   | 108,460      |   |  |              |         |   |  |   | 142,094   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net interest income after provision for loan losses  |  |                        | 10,072  |           |              |   | 54,500        |              |  |   | 299,471      |   |  |              | (1,068   | ) |  |   | 362,975   |  
|Gain on sale of mortgage loans, net                  |  |                        |        |           |              |   | 80,088        |              |  |   | 70,851       |   |  |              | (335     | ) |  |   | 150,604   |  
|Servicing fees                                       |  |                        |        |           |              |   | 354,506       |              |  |   | (8,709       | ) |  |              | (541     | ) |  |   | 345,256   |  
|Amortization and impairment of servicing rights      |  |                        |        |           |              |   | (307,170      | )            |  |   | 241          |   |  |              |         |   |  |   | (306,929  | )
|Servicing asset valuation and hedge activities, net  |  |                        |        |           |              |   | 161,128       |              |  |   |             |   |  |              |         |   |  |   | 161,128   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net servicing fees                                   |  |                        |        |           |              |   | 208,464       |              |  |   | (8,468       | ) |  |              | (541     | ) |  |   | 199,455   |  
|Gain (loss) on investment securities, net            |  |                        | (1,553  | )         |              |   | 46,387        |              |  |   | 58,635       |   |  |              |         |   |  |   | 103,469   |  
|Real estate related revenues                         |  |                        |        |           |              |   | 59,009        |              |  |   | 134,676      |   |  |              |         |   |  |   | 193,685   |  
|Other income                                         |  |                        | 1       |           |              |   | 18,787        |              |  |   | 93,404       |   |  |              | (23,975  | ) |  |   | 88,217    |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Total net revenue                                    |  |                        | 8,520   |           |              |   | 467,235       |              |  |   | 648,569      |   |  |              | (25,919  | ) |  |   | 1,098,405 |  
|Expenses                                             |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |          |   |  |   |           |  
|Compensation and benefits                            |  |                        |        |           |              |   | 217,883       |              |  |   | 146,992      |   |  |              |         |   |  |   | 364,875   |  
|Professional fees                                    |  |                        | 15      |           |              |   | 33,711        |              |  |   | 12,359       |   |  |              |         |   |  |   | 46,085    |  
|Data processing and telecommunications               |  |                        |        |           |              |   | 36,179        |              |  |   | 11,449       |   |  |              |         |   |  |   | 47,628    |  
|Advertising                                          |  |                        |        |           |              |   | 35,798        |              |  |   | 10,815       |   |  |              |         |   |  |   | 46,613    |  
|Occupancy                                            |  |                        |        |           |              |   | 19,108        |              |  |   | 11,729       |   |  |              |         |   |  |   | 30,837    |  
|Other                                                |  |                        | 85      |           |              |   | 92,997        |              |  |   | 51,504       |   |  |              | (41,266  | ) |  |   | 103,320   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Total expenses                                       |  |                        | 100     |           |              |   | 435,676       |              |  |   | 244,848      |   |  |              | (41,266  | ) |  |   | 639,358   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Income before income tax expense                     |  |                        | 8,420   |           |              |   | 31,559        |              |  |   | 403,721      |   |  |              | 15,347   |   |  |   | 459,047   |  
|Income tax expense                                   |  |                        | 3,220   |           |              |   | 14,299        |              |  |   | 135,236      |   |  |              | 5,866    |   |  |   | 158,621   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Income before equity in net earnings of subsidiaries |  |                        | 5,200   |           |              |   | 17,260        |              |  |   | 268,485      |   |  |              | 9,481    |   |  |   | 300,426   |  
|Equity in net earnings of subsidiaries               |  |                        | 295,226 |           |              |   | 277,966       |              |  |   |             |   |  |              | (573,192 | ) |  |   |          |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         
|Net income                                           |  | $                      | 300,426 |           |              | $ | 295,226       |              |  | $ | 268,485      |   |  | $            | (563,711 | ) |  | $ | 300,426   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |         

25



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED STATEMENT OF INCOME


Six Months Ended June 30, 2006


|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | ------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                                     |  |                        |         | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                     |  | Parent                 |         |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |           
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|                                                     |  | (Dollars in thousands) |        
|Revenue                                              |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|Interest income                                      |  | $                      | 424,839 |           |              | $ | 740,494       |              |  | $ | 3,096,473    |   |  | $            | (388,519   | ) |  | $ | 3,873,287 |  
|Interest expense                                     |  |                        | 422,916 |           |              |   | 528,317       |              |  |   | 2,454,980    |   |  |              | (412,950   | ) |  |   | 2,993,263 |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net interest income                                  |  |                        | 1,923   |           |              |   | 212,177       |              |  |   | 641,493      |   |  |              | 24,431     |   |  |   | 880,024   |  
|Provision for loan losses                            |  |                        |        |           |              |   | 28,247        |              |  |   | 217,958      |   |  |              | (868       | ) |  |   | 245,337   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net interest income after provision for loan losses  |  |                        | 1,923   |           |              |   | 183,930       |              |  |   | 423,535      |   |  |              | 25,299     |   |  |   | 634,687   |  
|Gain on sale of mortgage loans, net                  |  |                        |        |           |              |   | 463,252       |              |  |   | 194,917      |   |  |              | (16,136    | ) |  |   | 642,033   |  
|Servicing fees                                       |  |                        |        |           |              |   | 768,366       |              |  |   | (4,632       | ) |  |              | (2,566     | ) |  |   | 761,168   |  
|Servicing asset valuation and hedge activities, net  |  |                        |        |           |              |   | (356,363      | )            |  |   | 90           |   |  |              |           |   |  |   | (356,273  | )
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net servicing fees                                   |  |                        |        |           |              |   | 412,003       |              |  |   | (4,542       | ) |  |              | (2,566     | ) |  |   | 404,895   |  
|Gain (loss) on investment securities, net            |  |                        | 286     |           |              |   | (93,239       | )            |  |   | 75,992       |   |  |              |           |   |  |   | (16,961   | )
|Real estate related revenues                         |  |                        |        |           |              |   | 48,808        |              |  |   | 282,422      |   |  |              |           |   |  |   | 331,230   |  
|Gain on sale of equity investments                   |  |                        |        |           |              |   | 414,508       |              |  |   |             |   |  |              |           |   |  |   | 414,508   |  
|Other income                                         |  |                        | 595     |           |              |   | 68,660        |              |  |   | 80,687       |   |  |              | (44,626    | ) |  |   | 105,316   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Total net revenue                                    |  |                        | 2,804   |           |              |   | 1,497,922     |              |  |   | 1,053,011    |   |  |              | (38,029    | ) |  |   | 2,515,708 |  
|Expenses                                             |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|Compensation and benefits                            |  |                        |        |           |              |   | 434,229       |              |  |   | 248,232      |   |  |              |           |   |  |   | 682,461   |  
|Professional fees                                    |  |                        |        |           |              |   | 96,248        |              |  |   | 22,474       |   |  |              | 89         |   |  |   | 118,811   |  
|Data processing and telecommunications               |  |                        |        |           |              |   | 67,278        |              |  |   | 25,212       |   |  |              |           |   |  |   | 92,490    |  
|Advertising                                          |  |                        |        |           |              |   | 66,395        |              |  |   | 18,757       |   |  |              |           |   |  |   | 85,152    |  
|Occupancy                                            |  |                        |        |           |              |   | 41,735        |              |  |   | 24,944       |   |  |              |           |   |  |   | 66,679    |  
|Other                                                |  |                        | 2,091   |           |              |   | 165,024       |              |  |   | 129,504      |   |  |              | (44,737    | ) |  |   | 251,882   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Total expenses                                       |  |                        | 2,091   |           |              |   | 870,909       |              |  |   | 469,123      |   |  |              | (44,648    | ) |  |   | 1,297,475 |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Income before income tax expense                     |  |                        | 713     |           |              |   | 627,013       |              |  |   | 583,888      |   |  |              | 6,619      |   |  |   | 1,218,233 |  
|Income tax expense                                   |  |                        | 273     |           |              |   | 275,775       |              |  |   | 192,011      |   |  |              | 532        |   |  |   | 468,591   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Income before equity in net earnings of subsidiaries |  |                        | 440     |           |              |   | 351,238       |              |  |   | 391,877      |   |  |              | 6,087      |   |  |   | 749,642   |  
|Equity in net earnings of subsidiaries               |  |                        | 749,202 |           |              |   | 397,964       |              |  |   |             |   |  |              | (1,147,166 | ) |  |   |          |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net income                                           |  | $                      | 749,642 |           |              | $ | 749,202       |              |  | $ | 391,877      |   |  | $            | (1,141,079 | ) |  | $ | 749,642   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           

26



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATING STATEMENT OF INCOME


Six Months Ended June 30, 2005


|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | ------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | --------- | -
|                                                     |  |                        |         | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                     |  | Parent                 |         |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |           
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|                                                     |  | (Dollars in thousands) |        
|Revenue                                              |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|Interest income                                      |  | $                      | 67,538  |           |              | $ | 470,818       |              |  | $ | 2,223,286    |   |  | $            | (89,905    | ) |  | $ | 2,671,737 |  
|Interest expense                                     |  |                        | 57,466  |           |              |   | 290,341       |              |  |   | 1,359,117    |   |  |              | (90,953    | ) |  |   | 1,615,971 |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net interest income                                  |  |                        | 10,072  |           |              |   | 180,477       |              |  |   | 864,169      |   |  |              | 1,048      |   |  |   | 1,055,766 |  
|Provision for loan losses                            |  |                        |        |           |              |   | 88,447        |              |  |   | 209,479      |   |  |              |           |   |  |   | 297,926   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net interest income after provision for loan losses  |  |                        | 10,072  |           |              |   | 92,030        |              |  |   | 654,690      |   |  |              | 1,048      |   |  |   | 757,840   |  
|Gain on sale of mortgage loans, net                  |  |                        |        |           |              |   | 251,514       |              |  |   | 228,216      |   |  |              | 517        |   |  |   | 480,247   |  
|Servicing fees                                       |  |                        |        |           |              |   | 700,543       |              |  |   | (13,472      | ) |  |              | (1,048     | ) |  |   | 686,023   |  
|Amortization and impairment of servicing rights      |  |                        |        |           |              |   | (447,275      | )            |  |   | 566          |   |  |              |           |   |  |   | (446,709  | )
|Servicing asset valuation and hedge activities, net  |  |                        |        |           |              |   | 93,267        |              |  |   |             |   |  |              |           |   |  |   | 93,267    |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net servicing fees                                   |  |                        |        |           |              |   | 346,535       |              |  |   | (12,906      | ) |  |              | (1,048     | ) |  |   | 332,581   |  
|Gain (loss) on investment securities, net            |  |                        | (1,553  | )         |              |   | 100,620       |              |  |   | 76,517       |   |  |              |           |   |  |   | 175,584   |  
|Real estate related revenues                         |  |                        |        |           |              |   | 105,723       |              |  |   | 219,336      |   |  |              |           |   |  |   | 325,059   |  
|Other income                                         |  |                        | 1       |           |              |   | 37,109        |              |  |   | 168,923      |   |  |              | (51,362    | ) |  |   | 154,671   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Total net revenue                                    |  |                        | 8,520   |           |              |   | 933,531       |              |  |   | 1,334,776    |   |  |              | (50,845    | ) |  |   | 2,225,982 |  
|Expenses                                             |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |           |  
|Compensation and benefits                            |  |                        |        |           |              |   | 426,506       |              |  |   | 258,300      |   |  |              |           |   |  |   | 684,806   |  
|Professional fees                                    |  |                        | 15      |           |              |   | 74,470        |              |  |   | 21,898       |   |  |              |           |   |  |   | 96,383    |  
|Data processing and telecommunications               |  |                        |        |           |              |   | 69,327        |              |  |   | 27,746       |   |  |              |           |   |  |   | 97,073    |  
|Advertising                                          |  |                        |        |           |              |   | 68,421        |              |  |   | 17,497       |   |  |              |           |   |  |   | 85,918    |  
|Occupancy                                            |  |                        |        |           |              |   | 37,762        |              |  |   | 22,642       |   |  |              |           |   |  |   | 60,404    |  
|Other                                                |  |                        | 85      |           |              |   | 161,644       |              |  |   | 119,478      |   |  |              | (67,706    | ) |  |   | 213,501   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Total expenses                                       |  |                        | 100     |           |              |   | 838,130       |              |  |   | 467,561      |   |  |              | (67,706    | ) |  |   | 1,238,085 |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Income before income tax expense                     |  |                        | 8,420   |           |              |   | 95,401        |              |  |   | 867,215      |   |  |              | 16,861     |   |  |   | 987,897   |  
|Income tax expense                                   |  |                        | 3,220   |           |              |   | 65,354        |              |  |   | 290,686      |   |  |              | 6,416      |   |  |   | 365,676   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Income before equity in net earnings of subsidiaries |  |                        | 5,200   |           |              |   | 30,047        |              |  |   | 576,529      |   |  |              | 10,445     |   |  |   | 622,221   |  
|Equity in net earnings of subsidiaries               |  |                        | 617,021 |           |              |   | 586,974       |              |  |   |             |   |  |              | (1,203,995 | ) |  |   |          |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           
|Net income                                           |  | $                      | 622,221 |           |              | $ | 617,021       |              |  | $ | 576,529      |   |  | $            | (1,193,550 | ) |  | $ | 622,221   |  
|                                                     |  |                        |         |           |              |   |               |              |  |   |              |   |  |              |           

27



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##### Table of Contents



RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


Six Months Ended June 30, 2006


|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|-------------------------------------------------------------------------------- |  | ---------------------- | ---------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | ----------- | -
|                                                                                 |  |                        |            | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                                                 |  | Parent                 |            |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |           
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|                                                                                 |  | (Dollars in thousands) |           
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                              |  | $                      | 81,751     |           |              | $ | (9,876,755    | )            |  | $ | 2,573,213    |   |  | $            | 1,264      |   |  | $ | (7,220,527  | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|Net (increase) decrease in lending receivables                                   |  |                        |           |           |              |   | 383,247       |              |  |   | (1,050,878   | ) |  |              |           |   |  |   | (667,631    | )
|Originations and purchases of mortgage loans held for investment                 |  |                        |           |           |              |   | (6,958,470    | )            |  |   | (4,079,283   | ) |  |              | 1,350,377  |   |  |   | (9,687,376  | )
|Proceeds from sales and repayments of mortgage loans held for
    investment     |  |                        |           |           |              |   | 2,910,564     |              |  |   | 11,054,679   |   |  |              | (1,346,256 | ) |  |   | 12,618,987  |  
|Purchases of available for sale securities                                       |  |                        |           |           |              |   | (12           | )            |  |   | (32,946      | ) |  |              |           |   |  |   | (32,958     | )
|Proceeds from sales and repayments of available for sale
    securities          |  |                        |           |           |              |   | 941           |              |  |   | 10,172       |   |  |              |           |   |  |   | 11,113      |  
|Additions to mortgage servicing rights                                           |  |                        |           |           |              |   | (5,520        | )            |  |   |             |   |  |              |           |   |  |   | (5,520      | )
|Purchase of and advances to investments in real estate and other                 |  |                        |           |           |              |   | (18,765       | )            |  |   | (749,783     | ) |  |              |           |   |  |   | (768,548    | )
|Proceeds from sales of and returns of investments in real estate
    and other   |  |                        |           |           |              |   | 630,685       |              |  |   | 331,933      |   |  |              |           |   |  |   | 962,618     |  
|Acquisitions, net of cash acquired                                               |  |                        |           |           |              |   |              |              |  |   | (2,219       | ) |  |              |           |   |  |   | (2,219      | )
|Payment of capital contribution                                                  |  |                        | (100,000   | )         |              |   | (112,939      | )            |  |   |             |   |  |              | 212,939    |   |  |   |            |  
|Net increase in affiliate lending                                                |  |                        | (3,011,922 | )         |              |   |              |              |  |   | 52,703       |   |  |              | 2,959,219  |   |  |   |            |  
|Other, net                                                                       |  |                        | (192,040   | )         |              |   | 94,836        |              |  |   | 423,630      |   |  |              | (2,659     | ) |  |   | 323,767     |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|Net cash provided by (used in) investing activities                              |  |                        | (3,303,962 | )         |              |   | (3,075,433    | )            |  |   | 5,958,008    |   |  |              | 3,173,620  |   |  |   | 2,752,233   |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|Net increase (decrease) in affiliate borrowings                                  |  |                        | (4,130,000 | )         |              |   | 1,364,981     |              |  |   | 546,776      |   |  |              | (2,959,219 | ) |  |   | (5,177,462  | )
|Net increase in other short-term borrowings                                      |  |                        |           |           |              |   | (591,205      | )            |  |   | (3,491,719   | ) |  |              | 2,615      |   |  |   | (4,080,309  | )
|Proceeds from issuance of collateralized borrowings in
    securitization trusts |  |                        |           |           |              |   | 12,102,987    |              |  |   | 70,142       |   |  |              |           |   |  |   | 12,173,129  |  
|Repayments of collateralized borrowings in securitization trusts                 |  |                        |           |           |              |   |              |              |  |   | (10,989,930  | ) |  |              |           |   |  |   | (10,989,930 | )
|Proceeds from secured aggregation facilities, long-term                          |  |                        |           |           |              |   |              |              |  |   | 10,930,165   |   |  |              |           |   |  |   | 10,930,165  |  
|Repayments of secured aggregation facilities, long-term                          |  |                        |           |           |              |   |              |              |  |   | (10,761,175  | ) |  |              |           |   |  |   | (10,761,175 | )
|Proceeds from other long-term borrowings                                         |  |                        | 6,956,965  |           |              |   |              |              |  |   | 3,190,247    |   |  |              |           |   |  |   | 10,147,212  |  
|Repayments of other long-term borrowings                                         |  |                        |           |           |              |   |              |              |  |   | (273,695     | ) |  |              |           |   |  |   | (273,695    | )
|Payments of debt issuance costs                                                  |  |                        | (46,161    | )         |              |   |              |              |  |   | (36,231      | ) |  |              |           |   |  |   | (82,392     | )
|Proceeds from capital contribution                                               |  |                        |           |           |              |   | 100,000       |              |  |   | 112,939      |   |  |              | (212,939   | ) |  |   |            |  
|Dividends paid                                                                   |  |                        |           |           |              |   |              |              |  |   | (2,659       | ) |  |              | 2,659      |   |  |   |            |  
|Increase in deposit liabilities                                                  |  |                        |           |           |              |   |              |              |  |   | 2,165,190    |   |  |              | 20,080     |   |  |   | 2,185,270   |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|Net cash provided by (used in) financing activities                              |  |                        | 2,780,804  |           |              |   | 12,976,763    |              |  |   | (8,539,950   | ) |  |              | (3,146,804 | ) |  |   | 4,070,813   |  
|Effect of foreign exchange rates on cash and cash equivalents                    |  |                        | (2,158     | )         |              |   |              |              |  |   | 18,390       |   |  |              |           |   |  |   | 16,232      |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                             |  |                        | (443,565   | )         |              |   | 24,575        |              |  |   | 9,661        |   |  |              | 28,080     |   |  |   | (381,249    | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   |  |                        | 1,626,814  |           |              |   | 158,167       |              |  |   | 556,252      |   |  |              | (74,480    | ) |  |   | 2,266,753   |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       |  | $                      | 1,183,249  |           |              | $ | 182,742       |              |  | $ | 565,913      |   |  | $            | (46,400    | ) |  | $ | 1,885,504   |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           










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RESIDENTIAL CAPITAL CORPORATION


NOTES TO CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)  (Continued)


RESIDENTIAL CAPITAL CORPORATION


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


Six Months Ended June 30, 2005


|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|-------------------------------------------------------------------------------- |  | ---------------------- | ---------- | --------- | ------------ | - | ------------- | ------------ |  | - | ------------ | - |  | ------------ | ---------- | - |  | - | ----------- | -
|                                                                                 |  |                        |            | Guarantor |              |   | Non-Guarantor |              |  |   |              |  
|                                                                                 |  | Parent                 |            |           | Subsidiaries |   |               | Subsidiaries |  |   | Eliminations |   |  | Consolidated |           
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|                                                                                 |  | (Dollars in thousands) |           
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                              |  | $                      | 24,670     |           |              | $ | (5,519,790    | )            |  | $ | 956,638      |   |  | $            | (257,028   | ) |  | $ | (4,795,510  | )
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|Net increase in lending receivables                                              |  |                        |           |           |              |   | (287,852      | )            |  |   | (812,783     | ) |  |              |           |   |  |   | (1,100,635  | )
|Originations and purchases of mortgage loans held for investment                 |  |                        |           |           |              |   | (7,471,768    | )            |  |   | (2,539,435   | ) |  |              |           |   |  |   | (10,011,203 | )
|Proceeds from sales and repayments of mortgage loans held for
    investment     |  |                        |           |           |              |   | 3,586,779     |              |  |   | 10,693,169   |   |  |              |           |   |  |   | 14,279,948  |  
|Purchases of available for sale securities                                       |  |                        |           |           |              |   | (552,144      | )            |  |   | (10,597      | ) |  |              |           |   |  |   | (562,741    | )
|Proceeds from sales and repayments of available for sale
    securities          |  |                        |           |           |              |   | 434,793       |              |  |   | 10,165       |   |  |              |           |   |  |   | 444,958     |  
|Additions to mortgage servicing rights                                           |  |                        |           |           |              |   | (69,471       | )            |  |   | 3,047        |   |  |              |           |   |  |   | (66,424     | )
|Purchase of and advances to investments in real estate and other                 |  |                        |           |           |              |   | (15,453       | )            |  |   | (413,368     | ) |  |              |           |   |  |   | (428,821    | )
|Proceeds from sales of and returns of investments in real estate
    and other   |  |                        |           |           |              |   | 64,049        |              |  |   | 309,395      |   |  |              |           |   |  |   | 373,444     |  
|Payment of capital contribution                                                  |  |                        |           |           |              |   | (5,884        | )            |  |   |             |   |  |              | 5,884      |   |  |   |            |  
|Net increase in affiliate lending                                                |  |                        | (2,971,376 | )         |              |   |              |              |  |   |             |   |  |              | 2,971,376  |   |  |   |            |  
|Other, net                                                                       |  |                        |           |           |              |   | (26,127       | )            |  |   | 144,279      |   |  |              |           |   |  |   | 118,152     |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|Net cash provided by (used in) investing activities                              |  |                        | (2,971,376 | )         |              |   | (4,343,078    | )            |  |   | 7,383,872    |   |  |              | 2,977,260  |   |  |   | 3,046,678   |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |            |   |  |   |             |  
|Net increase (decrease) in affiliate borrowings                                  |  |                        | 491,000    |           |              |   | 2,757,000     |              |  |   | (64,299      | ) |  |              | (2,971,376 | ) |  |   | 212,325     |  
|Net increase in other short-term borrowings                                      |  |                        |           |           |              |   | 27,958        |              |  |   | 471,072      |   |  |              | 240,893    |   |  |   | 739,923     |  
|Proceeds from issuance of collateralized borrowings in
    securitization trusts |  |                        |           |           |              |   | 6,547,583     |              |  |   | 282,000      |   |  |              |           |   |  |   | 6,829,583   |  
|Repayments of collateralized borrowings in securitization trusts                 |  |                        |           |           |              |   |              |              |  |   | (10,817,845  | ) |  |              |           |   |  |   | (10,817,845 | )
|Proceeds from other long-term borrowings                                         |  |                        | 3,996,963  |           |              |   |              |              |  |   | 829,000      |   |  |              |           |   |  |   | 4,825,963   |  
|Repayments of other long-term borrowings                                         |  |                        |           |           |              |   |              |              |  |   | (40,000      | ) |  |              |           |   |  |   | (40,000     | )
|Payments of debt issuance costs                                                  |  |                        |           |           |              |   |              |              |  |   | (24,268      | ) |  |              |           |   |  |   | (24,268     | )
|Proceeds from capital contribution                                               |  |                        |           |           |              |   |              |              |  |   | 5,884        |   |  |              | (5,884     | ) |  |   |            |  
|Increase in deposit liabilities                                                  |  |                        |           |           |              |   |              |              |  |   | 1,326,026    |   |  |              |           |   |  |   | 1,326,026   |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|Net cash provided by (used in) financing activities                              |  |                        | 4,487,963  |           |              |   | 9,332,541     |              |  |   | (8,032,430   | ) |  |              | (2,736,367 | ) |  |   | 3,051,707   |  
|Effect of foreign exchange rates on cash and cash equivalents                    |  |                        |           |           |              |   |              |              |  |   | (12,569      | ) |  |              |           |   |  |   | (12,569     | )
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                             |  |                        | 1,541,257  |           |              |   | (530,327      | )            |  |   | 295,511      |   |  |              | (16,135    | ) |  |   | 1,290,306   |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   |  |                        |           |           |              |   | 648,511       |              |  |   | 293,712      |   |  |              | (43,140    | ) |  |   | 899,083     |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       |  | $                      | 1,541,257  |           |              | $ | 118,184       |              |  | $ | 589,223      |   |  | $            | (59,275    | ) |  | $ | 2,189,389   |  
|                                                                                 |  |                        |            |           |              |   |               |              |  |   |              |   |  |              |           











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Item 2.     Managements
Discussion and Analysis of Financial Condition and Results of
Operations


Overview






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | GMAC Residential. Our GMAC Residential segment primarily
    originates, purchases, sells, securitizes and services
    residential mortgage loans. This segment originates residential
    mortgage loans through a retail branch network, direct lending
    centers and mortgage brokers, and also purchases residential
    mortgage loans from correspondent lenders. The majority of the
    loans originated or purchased by this segment are prime credit
    quality loans that meet the underwriting standards of Fannie Mae
    or Freddie Mac. This segment also provides collateralized lines
    of credit to other originators of residential mortgage loans,
    which we refer to as warehouse lending. Our limited banking
    activities through GMAC Bank are included in this segment.
|
| |  | Residential Capital Group. Our Residential Capital Group
    originates, purchases, sells, securitizes and services
    residential mortgage loans. This segment originates residential
    mortgage loans primarily through mortgage brokers, purchases
    loans from correspondent lenders and other third parties and
    provides warehouse lending. The residential mortgage loans
    produced by this segment cover a broad credit spectrum and
    generally do not conform to the underwriting requirements of
    Fannie Mae or Freddie Mac. These loans are primarily securitized
    through the issuance of non-agency mortgage-backed and mortgage
    related asset-backed securities.                                                                                                     
|
| |  | Business Capital Group. Our Business Capital Group
    provides financing and equity capital to residential land
    developers and homebuilders and financing to resort developers
    and healthcare-related enterprises.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | International Business Group. Our International Business
    Group includes substantially all of our operations outside of
    the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



Results of Operations




| |                     
| | --------------------
| | Consolidated Results





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|                     |                       |                                       |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |        |  |  |         |         |  |   |        |        | 
|-------------------- | --------------------- | ------------------------------------- | ------- | ------- | ------------------------- | - | ------ | ------ |  |  | ---------- | ------- |  | ------ | ------ | ------ | ---------- |  | ------- | ------- |  | - | ---------- | ------ |  |  | ------- | ------- |  | - | ------ | ------ | 
|                     |                       | U.S. Mortgage Loan Production by Type |        
|                     |                       |                                       |        
|                     |                       | Three Months Ended June 30,           |         |         | Six Months Ended June 30, |  
|                     |                       |                                       |         |         |                           |  
|                     |                       | 2006                                  |         |         | 2005                      |   |        | 2006   |  |  | 2005       |        
|                     |                       |                                       |         |         |                           |   |        |        |  |  |            |        
|                     |                       | No. of                                |         |         | Dollar Amt                |   |        | No. of |  |  | Dollar Amt |         |  | No. of |        |        | Dollar Amt |  |         | No. of  |  |   | Dollar Amt |       
|                     |                       | Loans                                 |         |         | of Loans                  |   |        | Loans  |  |  | of Loans   |         |  | Loans  |        |        | of Loans   |  |         | Loans   |  |   | of Loans   |       
|                     |                       |                                       |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       
|                     |                       | (Dollars in millions)                 |        
|Prime conforming     |                       |                                       | 64,690  |         |                           | $ | 11,965 |        |  |  | 59,839     |         |  | $      | 10,512 |        |            |  | 110,743 |         |  | $ | 20,534     |        |  |  | 137,319 |         |  | $ | 24,700 |       
|Prime non-conforming |                       |                                       | 46,312  |         |                           |   | 14,638 |        |  |  | 46,139     |         |  |        | 14,998 |        |            |  | 85,351  |         |  |   | 26,365     |        |  |  | 88,235  |         |  |   | 25,066 |       
|Government           |                       |                                       | 7,513   |         |                           |   | 1,081  |        |  |  | 7,551      |         |  |        | 1,044  |        |            |  | 13,511  |         |  |   | 1,942      |        |  |  | 16,955  |         |  |   | 2,241  |       
|Nonprime             |                       |                                       | 42,983  |         |                           |   | 6,060  |        |  |  | 51,851     |         |  |        | 8,321  |        |            |  | 102,213 |         |  |   | 15,156     |        |  |  | 91,862  |         |  |   | 13,937 |       
|Prime second-lien    |                       |                                       | 112,260 |         |                           |   | 6,585  |        |  |  | 61,574     |         |  |        | 3,186  |        |            |  | 213,680 |         |  |   | 12,400     |        |  |  | 112,233 |         |  |   | 5,674  |       
|                     |                       |                                       |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       
|                     | Total U.S. production |                                       |         | 273,758 |                           |   | $      | 40,329 |  |  |            | 226,954 |  |        | $      | 38,061 |            |  |         | 525,498 |  |   | $          | 76,397 |  |  |         | 446,604 |  |   | $      | 71,618 | 
|                     |                       |                                       |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       



|                    |                 |                      |        |        |                    |   |        |        |  |   |        |        |  |   |        |        | 
|------------------- | --------------- | -------------------- | ------ | ------ | ------------------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                    |                 | For the Three Months |        |        | For the Six Months |  
|                    |                 | Ended June 30,       |        |        | Ended June 30,     |  
|                    |                 |                      |        |        |                    |  
|                    |                 | 2006                 |        |        | 2005               |   |        | 2006   |  |   | 2005   |       
|                    |                 |                      |        |        |                    |   |        |        |  |   |        |       
|                    |                 | (In millions)        |       
|Purpose:            |                 |                      |        |        |                    |   |        |        |  |   |        |        |  |   |        |       
|                    | Purchase        |                      | $      | 16,903 |                    |   | $      | 16,750 |  |   | $      | 30,568 |  |   | $      | 28,594 | 
|                    | Non-purchase    |                      |        | 23,426 |                    |   |        | 21,311 |  |   |        | 45,829 |  |   |        | 43,024 | 
|                    |                 |                      |        |        |                    |   |        |        |  |   |        |       
|                    |                 | $                    | 40,329 |        |                    | $ | 38,061 |        |  | $ | 76,397 |        |  | $ | 71,618 |       
|                    |                 |                      |        |        |                    |   |        |        |  |   |        |       
|                   
|Interest rate type: |                 |                      |        |        |                    |   |        |        |  |   |        |        |  |   |        |       
|                    | Fixed rate      |                      | $      | 22,816 |                    |   | $      | 18,862 |  |   | $      | 42,116 |  |   | $      | 36,243 | 
|                    | Adjustable rate |                      |        | 17,513 |                    |   |        | 19,199 |  |   |        | 34,281 |  |   |        | 35,375 | 
|                    |                 |                      |        |        |                    |   |        |        |  |   |        |       
|                    |                 | $                    | 40,329 |        |                    | $ | 38,061 |        |  | $ | 76,397 |        |  | $ | 71,618 |       
|                    |                 |                      |        |        |                    |   |        |        |  |   |        |       



|                                                     |                       |                                          |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |        |  |  |         |         |  |   |        |        | 
|---------------------------------------------------- | --------------------- | ---------------------------------------- | ------- | ------- | ------------------------- | - | ------ | ------ |  |  | ---------- | ------- |  | ------ | ------ | ------ | ---------- |  | ------- | ------- |  | - | ---------- | ------ |  |  | ------- | ------- |  | - | ------ | ------ | 
|                                                     |                       | U.S. Mortgage Loan Production by Channel |        
|                                                     |                       |                                          |        
|                                                     |                       | Three Months Ended June 30,              |         |         | Six Months Ended June 30, |  
|                                                     |                       |                                          |         |         |                           |  
|                                                     |                       | 2006                                     |         |         | 2005                      |   |        | 2006   |  |  | 2005       |        
|                                                     |                       |                                          |         |         |                           |   |        |        |  |  |            |        
|                                                     |                       | No. of                                   |         |         | Dollar Amt                |   |        | No. of |  |  | Dollar Amt |         |  | No. of |        |        | Dollar Amt |  |         | No. of  |  |   | Dollar Amt |       
|                                                     |                       | Loans                                    |         |         | of Loans                  |   |        | Loans  |  |  | of Loans   |         |  | Loans  |        |        | of Loans   |  |         | Loans   |  |   | of Loans   |       
|                                                     |                       |                                          |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       
|                                                     |                       | (Dollars in millions)                    |        
|Retail branches                                      |                       |                                          | 29,289  |         |                           | $ | 4,237  |        |  |  | 34,605     |         |  | $      | 5,206  |        |            |  | 54,610  |         |  | $ | 7,832      |        |  |  | 62,452  |         |  | $ | 9,403  |       
|Direct lending (other than retail branches)          |                       |                                          | 35,722  |         |                           |   | 3,187  |        |  |  | 41,964     |         |  |        | 4,490  |        |            |  | 71,289  |         |  |   | 6,270      |        |  |  | 80,518  |         |  |   | 8,774  |       
|Mortgage brokers                                     |                       |                                          | 45,386  |         |                           |   | 7,898  |        |  |  | 31,690     |         |  |        | 5,306  |        |            |  | 86,051  |         |  |   | 14,951     |        |  |  | 60,863  |         |  |   | 10,070 |       
|Correspondent lenders and secondary market purchases |                       |                                          | 163,361 |         |                           |   | 25,007 |        |  |  | 118,695    |         |  |        | 23,059 |        |            |  | 313,548 |         |  |   | 47,344     |        |  |  | 242,771 |         |  |   | 43,371 |       
|                                                     |                       |                                          |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       
|                                                     | Total U.S. production |                                          |         | 273,758 |                           |   | $      | 40,329 |  |  |            | 226,954 |  |        | $      | 38,061 |            |  |         | 525,498 |  |   | $          | 76,397 |  |  |         | 446,604 |  |   | $      | 71,618 | 
|                                                     |                       |                                          |         |         |                           |   |        |        |  |  |            |         |  |        |        |        |            |  |         |         |  |   |            |       

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|                               |  |                                        |        |        |                           |   |       |        |        |  |           |  |  |        |       |  |           |  |        |        |  |   |           |  |  |  |        |  |  |   |       | 
|------------------------------ |  | -------------------------------------- | ------ | ------ | ------------------------- | - | ----- | ------ | ------ |  | --------- |  |  | ------ | ----- |  | --------- |  | ------ | ------ |  | - | --------- |  |  |  | ------ |  |  | - | ----- | 
|                               |  | International Mortgage Loan Production |       
|                               |  |                                        |       
|                               |  | Three Months Ended June 30,            |        |        | Six Months Ended June 30, |  
|                               |  |                                        |        |        |                           |  
|                               |  | 2006                                   |        |        | 2005                      |   |       | 2006   |        |  | 2005      | 
|                               |  |                                        |        |        |                           |   |       |        |        |  |           | 
|                               |  |                                        |        | Dollar |                           |   |       |        | Dollar |  |           |  |  | Dollar |       |  |           |  | Dollar |       
|                               |  | No. of                                 |        |        | Amount of                 |   |       | No. of |        |  | Amount of |  |  | No. of |       |  | Amount of |  |        | No. of |  |   | Amount of | 
|                               |  | Loans                                  |        |        | Loans                     |   |       | Loans  |        |  | Loans     |  |  | Loans  |       |  | Loans     |  |        | Loans  |  |   | Loans     | 
|                               |  |                                        |        |        |                           |   |       |        |        |  |           |  |  |        |       |  |           |  |        |        |  |   |           | 
|                               |  | (Dollars in millions)                  |       
|Total International Production |  |                                        | 30,712 |        |                           | $ | 6,693 |        |        |  | 22,079    |  |  | $      | 4,547 |  |           |  | 57,223 |        |  | $ | 12,205    |  |  |  | 36,700 |  |  | $ | 7,451 | 
|                               |  |                                        |        |        |                           |   |       |        |        |  |           |  |  |        |       |  |           |  |        |        |  |   |           | 









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|                                    |                                    |                                        |           |           |                   |   |         |         |  |  |            |           |  |   |         |         | 
|----------------------------------- | ---------------------------------- | -------------------------------------- | --------- | --------- | ----------------- | - | ------- | ------- |  |  | ---------- | --------- |  | - | ------- | ------- | 
|                                    |                                    | U.S. Mortgage Loan Servicing Portfolio |          
|                                    |                                    |                                        |          
|                                    |                                    | June 30, 2006                          |           |           | December 31, 2005 |  
|                                    |                                    |                                        |           |           |                   |  
|                                    |                                    | No. of                                 |           |           | Dollar Amt        |   |         | No. of  |  |  | Dollar Amt |          
|                                    |                                    | Loans                                  |           |           | of Loans          |   |         | Loans   |  |  | of Loans   |          
|                                    |                                    |                                        |           |           |                   |   |         |         |  |  |            |          
|                                    |                                    | (Dollars in millions)                  |          
|Prime conforming mortgage loans     |                                    |                                        | 1,421,361 |           |                   | $ | 194,907 |         |  |  | 1,393,379  |           |  | $ | 186,405 |        
|Prime non-conforming mortgage loans |                                    |                                        | 293,923   |           |                   |   | 89,415  |         |  |  | 257,550    |           |  |   | 76,980  |        
|Government mortgage loans           |                                    |                                        | 179,721   |           |                   |   | 18,342  |         |  |  | 181,679    |           |  |   | 18,098  |        
|Nonprime mortgage loans             |                                    |                                        | 472,491   |           |                   |   | 55,168  |         |  |  | 493,486    |           |  |   | 56,373  |        
|Prime second-lien mortgage loans    |                                    |                                        | 621,689   |           |                   |   | 24,234  |         |  |  | 500,534    |           |  |   | 17,073  |        
|                                    |                                    |                                        |           |           |                   |   |         |         |  |  |            |          
|                                    | Total Primary Servicing Portfolio* |                                        |           | 2,989,185 |                   |   | $       | 382,066 |  |  |            | 2,826,628 |  |   | $       | 354,929 | 
|                                    |                                    |                                        |           |           |                   |   |         |         |  |  |            |          






|  |                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Excludes loans for which we acted as a subservicer. Subserviced
    loans totaled 304,749 with an unpaid principal balance of
    $45.4 billion at June 30, 2006 and 271,489 with an
    unpaid principal balance of $38.9 billion at
    December 31, 2005.













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| |                
| | ---------------
| | Segment Results



| |                 
| | ----------------
| | GMAC Residential



|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                    |  | Three Months Ended |        |   | Six Months Ended |  
|                                                    |  | June 30,           |        |   | June 30,         |  
|                                                    |  |                    |        |   |                  |  
|                                                    |  | 2006               |        |   | 2005             |   |        | 2006 |  |   | 2005   |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|                                                    |  | (In millions)      |       
|Net interest income                                 |  | $                  | 45.0   |   |                  | $ | 70.5   |      |  | $ | 103.7  |   |  | $ | 143.7  |  
|Provision for loan losses                           |  |                    | (6.0   | ) |                  |   | 4.0    |      |  |   | (8.6   | ) |  |   | 2.9    |  
|Gain on sales of mortgage loans, net                |  |                    | 120.5  |   |                  |   | 64.8   |      |  |   | 210.1  |   |  |   | 197.2  |  
|Servicing fees                                      |  |                    | 254.2  |   |                  |   | 243.5  |      |  |   | 503.0  |   |  |   | 478.0  |  
|Amortization and impairment of servicing rights     |  |                    |       |   |                  |   | (162.3 | )    |  |   |       |   |  |   | (300.0 | )
|Servicing asset valuation and hedge activities, net |  |                    | (82.3  | ) |                  |   | 50.5   |      |  |   | (203.6 | ) |  |   | 36.7   |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net servicing fees                                  |  |                    | 171.9  |   |                  |   | 131.7  |      |  |   | 299.4  |   |  |   | 214.7  |  
|Other income                                        |  |                    | 19.2   |   |                  |   | 104.6  |      |  |   | 10.2   |   |  |   | 167.2  |  
|Operating expenses                                  |  |                    | (239.1 | ) |                  |   | (225.3 | )    |  |   | (472.6 | ) |  |   | (429.6 | )
|Income tax expense                                  |  |                    | (53.7  | ) |                  |   | (57.5  | )    |  |   | (75.7  | ) |  |   | (124.1 | )
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income                                          |  | $                  | 57.8   |   |                  | $ | 92.8   |      |  | $ | 66.5   |   |  | $ | 172.0  |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  













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| |                          
| | -------------------------
| | Residential Capital Group



|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                    |  | Three Months Ended |        |   | Six Months Ended |  
|                                                    |  | June 30,           |        |   | June 30,         |  
|                                                    |  |                    |        |   |                  |  
|                                                    |  | 2006               |        |   | 2005             |   |        | 2006 |  |   | 2005   |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|                                                    |  | (In millions)      |       
|Net interest income                                 |  | $                  | 329.3  |   |                  | $ | 335.2  |      |  | $ | 639.9  |   |  | $ | 751.3  |  
|Provision for loan losses                           |  |                    | (108.5 | ) |                  |   | (132.1 | )    |  |   | (225.4 | ) |  |   | (280.4 | )
|Gain on sales of mortgage loans, net                |  |                    | 217.9  |   |                  |   | 14.7   |      |  |   | 327.5  |   |  |   | 80.4   |  
|Servicing fees                                      |  |                    | 127.1  |   |                  |   | 109.1  |      |  |   | 251.2  |   |  |   | 218.7  |  
|Amortization and impairment of servicing rights     |  |                    |       |   |                  |   | (143.1 | )    |  |   |       |   |  |   | (148.3 | )
|Servicing asset valuation and hedge activities, net |  |                    | (89.1  | ) |                  |   | 110.6  |      |  |   | (152.8 | ) |  |   | 56.6   |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net servicing fees                                  |  |                    | 38.0   |   |                  |   | 76.6   |      |  |   | 98.4   |   |  |   | 127.0  |  
|Other income                                        |  |                    | 1.7    |   |                  |   | 61.8   |      |  |   | 23.7   |   |  |   | 138.4  |  
|Operating expenses                                  |  |                    | (249.2 | ) |                  |   | (200.2 | )    |  |   | (460.1 | ) |  |   | (415.0 | )
|Income tax expense                                  |  |                    | (86.9  | ) |                  |   | (58.5  | )    |  |   | (155.6 | ) |  |   | (152.7 | )
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income                                          |  | $                  | 142.3  |   |                  | $ | 97.5   |      |  | $ | 248.4  |   |  | $ | 249.0  |  
|                                                    |  |                    |        |   |                  |   |        |      |  |   |        |  









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| |                       
| | ----------------------
| | Business Capital Group



|                          |  |                    |        |   |                  |   |       |      |  |   |        |   |  |   |       |  
|------------------------- |  | ------------------ | ------ | - | ---------------- | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                          |  | Three Months Ended |        |   | Six Months Ended |  
|                          |  | June 30,           |        |   | June 30,         |  
|                          |  |                    |        |   |                  |  
|                          |  | 2006               |        |   | 2005             |   |       | 2006 |  |   | 2005   |  
|                          |  |                    |        |   |                  |   |       |      |  |   |        |  
|                          |  | (In millions)      |       
|Net interest income       |  | $                  | 22.4   |   |                  | $ | 35.8  |      |  | $ | 43.2   |   |  | $ | 73.0  |  
|Provision for loan losses |  |                    | (4.7   | ) |                  |   | (12.2 | )    |  |   | (4.8   | ) |  |   | (19.7 | )
|Other income              |  |                    | 491.2  |   |                  |   | 66.2  |      |  |   | 572.2  |   |  |   | 116.2 |  
|Operating expenses        |  |                    | (23.6  | ) |                  |   | (20.8 | )    |  |   | (36.1  | ) |  |   | (38.0 | )
|Income tax expense        |  |                    | (186.2 | ) |                  |   | (25.7 | )    |  |   | (221.3 | ) |  |   | (49.6 | )
|                          |  |                    |        |   |                  |   |       |      |  |   |        |  
|Net income                |  | $                  | 299.1  |   |                  | $ | 43.3  |      |  | $ | 353.2  |   |  | $ | 81.9  |  
|                          |  |                    |        |   |                  |   |       |      |  |   |        |  





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| |                             
| | ----------------------------
| | International Business Group



|                                                |  |                    |       |   |                  |   |       |      |  |   |        |   |  |   |        |  
|----------------------------------------------- |  | ------------------ | ----- | - | ---------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                |  | Three Months Ended |       |   | Six Months Ended |  
|                                                |  | June 30,           |       |   | June 30,         |  
|                                                |  |                    |       |   |                  |  
|                                                |  | 2006               |       |   | 2005             |   |       | 2006 |  |   | 2005   |  
|                                                |  |                    |       |   |                  |   |       |      |  |   |        |  
|                                                |  | (In millions)      |      
|Net interest income                             |  | $                  | 42.8  |   |                  | $ | 47.3  |      |  | $ | 83.9   |   |  | $ | 77.5   |  
|Provision for loan losses                       |  |                    | (3.3  | ) |                  |   | (2.1  | )    |  |   | (6.6   | ) |  |   | (0.7   | )
|Gain on sales of mortgage loans, net            |  |                    | 39.7  |   |                  |   | 69.7  |      |  |   | 106.4  |   |  |   | 136.7  |  
|Servicing fees                                  |  |                    | 1.8   |   |                  |   | (8.0  | )    |  |   | (0.5   | ) |  |   | (11.9  | )
|Amortization and impairment of servicing rights |  |                    |      |   |                  |   | 0.2   |      |  |   |       |   |  |   | 0.6    |  
|Servicing valuation and hedge activities, net   |  |                    | 0.4   |   |                  |   |      |      |  |   | 0.1    |   |  |   |       |  
|                                                |  |                    |       |   |                  |   |       |      |  |   |        |  
|Net servicing fees (loss)                       |  |                    | 2.2   |   |                  |   | (7.8  | )    |  |   | (0.4   | ) |  |   | (11.3  | )
|Other income                                    |  |                    | 27.5  |   |                  |   | 22.8  |      |  |   | 39.0   |   |  |   | 18.6   |  
|Operating expenses                              |  |                    | (63.4 | ) |                  |   | (60.7 | )    |  |   | (118.2 | ) |  |   | (119.1 | )
|Income tax expense                              |  |                    | (5.4  | ) |                  |   | (20.7 | )    |  |   | (22.6  | ) |  |   | (30.5  | )
|                                                |  |                    |       |   |                  |   |       |      |  |   |        |  
|Net income                                      |  | $                  | 40.1  |   |                  | $ | 48.5  |      |  | $ | 81.5   |   |  | $ | 71.2   |  
|                                                |  |                    |       |   |                  |   |       |      |  |   |        |  











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| |                    
| | -------------------
| | Corporate and Other



|                                                         |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                         |  | Three Months Ended |        |   | Six Months Ended |  
|                                                         |  | June 30,           |        |   | June 30,         |  
|                                                         |  |                    |        |   |                  |  
|                                                         |  | 2006               |        |   | 2005             |   |        | 2006 |  |   | 2005   |  
|                                                         |  |                    |        |   |                  |   |        |      |  |   |        |  
|                                                         |  | (In millions)      |       
|Net interest income                                      |  | $                  | 12.5   |   |                  | $ | 16.2   |      |  | $ | 9.2    |   |  | $ | 10.3   |  
|Provision for loan losses                                |  |                    |       |   |                  |   | 0.3    |      |  |   |       |   |  |   |       |  
|Gain (loss) on sales of loans                            |  |                    | (1.8   | ) |                  |   | 1.4    |      |  |   | (1.8   | ) |  |   | 65.9   |  
|Servicing fees                                           |  |                    | 4.6    |   |                  |   | 0.6    |      |  |   | 9.2    |   |  |   | 1.3    |  
|Amortization and impairment of mortgage servicing rights |  |                    |       |   |                  |   | (1.8   | )    |  |   |       |   |  |   | 1.1    |  
|Servicing asset valuation and hedge activities, net      |  |                    | (0.6   | ) |                  |   |       |      |  |   | (0.8   | ) |  |   |       |  
|                                                         |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net servicing fees                                       |  |                    | 4.0    |   |                  |   | (1.2   | )    |  |   | 8.4    |   |  |   | 2.4    |  
|Other income                                             |  |                    | 114.8  |   |                  |   | 130.3  |      |  |   | 189.7  |   |  |   | 214.7  |  
|Operating expenses                                       |  |                    | (120.5 | ) |                  |   | (132.5 | )    |  |   | (211.1 | ) |  |   | (236.4 | )
|Income tax (expense) benefit                             |  |                    | 0.9    |   |                  |   | 3.7    |      |  |   | 6.3    |   |  |   | (8.8   | )
|                                                         |  |                    |        |   |                  |   |        |      |  |   |        |  
|Net income                                               |  | $                  | 9.9    |   |                  | $ | 18.2   |      |  | $ | 0.7    |   |  | $ | 48.1   |  
|                                                         |  |                    |        |   |                  |   |        |      |  |   |        |  









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Asset Quality




| |                          
| | -------------------------
| | Allowance for Loan Losses



|                                    |                   |                |         |       |             |   |       |       |  |   |         |       | 
|----------------------------------- | ----------------- | -------------- | ------- | ----- | ----------- | - | ----- | ----- |  | - | ------- | ----- | 
|                                    |                   | Mortgage Loans |         |       |             |   |      
|                                    |                   | Held for       |         |       | Lending     |   |       |      
|                                    |                   | Investment     |         |       | Receivables |   |       | Total | 
|                                    |                   |                |         |       |             |   |       |       | 
|                                    |                   | (In millions)  |        
|Balance at January 1, 2006          |                   | $              | 1,065.9 |       |             | $ | 187.4 |       |  | $ | 1,253.3 |      
|Provision for loan losses           |                   |                | 238.8   |       |             |   | 6.5   |       |  |   | 245.3   |      
|Charge-offs                         |                   |                | (288.4  | )     |             |   | (5.6  | )     |  |   | (294.0  | )    
|Recoveries                          |                   |                | 25.2    |       |             |   | 0.4   |       |  |   | 25.6    |      
|                                    |                   |                |         |       |             |   |       |       | 
|Balance at June 30, 2006            |                   | $              | 1,041.5 |       |             | $ | 188.7 |       |  | $ | 1,230.2 |      
|                                    |                   |                |         |       |             |   |       |       | 
|Balance at January 1, 2005          |                   | $              | 873.0   |       |             | $ | 141.7 |       |  | $ | 1,014.7 |      
|Provision for loan losses           |                   |                | 276.6   |       |             |   | 21.4  |       |  |   | 298.0   |      
|Charge-offs                         |                   |                | (239.1  | )     |             |   | (2.6  | )     |  |   | (241.7  | )    
|Recoveries                          |                   |                | 23.1    |       |             |   | 0.3   |       |  |   | 23.4    |      
|                                    |                   |                |         |       |             |   |       |       | 
|Balance at June 30, 2005            |                   | $              | 933.6   |       |             | $ | 160.8 |       |  | $ | 1,094.4 |      
|                                    |                   |                |         |       |             |   |       |       | 
|Allowance as a percentage of total: |                   |                |         |       |             |   |       |       |  |   |         |      
|                                    | June 30, 2006     |                |         | 1.44% |             |   |       | 1.32% |  |   |         | 1.42% | 
|                                    | December 31, 2005 |                |         | 1.55% |             |   |       | 1.38% |  |   |         | 1.52% | 



|                      |                        |                    |        |        |                  |   |        |        |   |   |        |        |   |   |        |        |  
|--------------------- | ---------------------- | ------------------ | ------ | ------ | ---------------- | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|                      |                        | Three Months Ended |        |        | Six Months Ended |  
|                      |                        | June 30,           |        |        | June 30,         |  
|                      |                        |                    |        |        |                  |  
|                      |                        | 2006               |        |        | 2005             |   |        | 2006   |   |   | 2005   |       
|                      |                        |                    |        |        |                  |   |        |        |   |   |        |       
|                      |                        | (In millions)      |       
|Mortgage loans:       |                        |                    |        |        |                  |   |        |        |   |   |        |        |   |   |        |       
|                      | Prime conforming       |                    | $      |       |                  |   | $      |       |   |   | $      | (0.8   | ) |   | $      |       |  
|                      | Prime non-conforming   |                    |        | (10.4  | )                |   |        | 12.3   |   |   |        | (16.9  | ) |   |        | (2.1   | )
|                      | Prime second-lien      |                    |        | (0.3   | )                |   |        | (1.7   | ) |   |        | (2.6   | ) |   |        | (3.7   | )
|                      | Nonprime               |                    |        | (137.5 | )                |   |        | (131.8 | ) |   |        | (242.9 | ) |   |        | (210.1 | )
|Lending receivables:  |                        |                    |        |        |                  |   |        |        |   |   |        |        |   |   |        |       
|                      | Warehouse              |                    |        | 0.1    |                  |   |        | 0.1    |   |   |        | (0.2   | ) |   |        | (0.2   | )
|                      | Construction           |                    |        |       |                  |   |        | (1.9   | ) |   |        |       |   |   |        | (2.0   | )
|                      | Commercial real estate |                    |        | (5.0   | )                |   |        |       |   |   |        | (5.0   | ) |   |        | (0.1   | )
|                      |                        |                    |        |        |                  |   |        |        |   |   |        |       
|Total net charge-offs |                        | $                  | (153.1 | )      |                  | $ | (123.0 | )      |   | $ | (268.4 | )      |   | $ | (218.2 | )     
|                      |                        |                    |        |        |                  |   |        |        |   |   |        |       



| |                     
| | --------------------
| | Nonperforming Assets



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|                                                                                                               |                      |                        |         |   |              |   |         |          |         |   |         |   |         | 
|-------------------------------------------------------------------------------------------------------------- | -------------------- | ---------------------- | ------- | - | ------------ | - | ------- | -------- | ------- | - | ------- | - | ------- | 
|                                                                                                               |                      | June 30,               |         |   | December 31, |   |         | June 30, |        
|                                                                                                               |                      | 2006                   |         |   | 2005         |   |         | 2005     |        
|                                                                                                               |                      |                        |         |   |              |   |         |          |        
|                                                                                                               |                      | (In millions)          |        
|Nonaccrual loans:                                                                                              |                      |                        |         |   |              |   |         |          |         |   |         |  
|                                                                                                               | Mortgage loans:      |                        |         |   |              |   |         |          |         |   |         |   |        
|                                                                                                               |                      | Prime conforming       |         | $ | 8.5          |   |         | $        | 9.8     |   |         | $ | 19.4    | 
|                                                                                                               |                      | Prime non-conforming   |         |   | 327.6        |   |         |          | 361.7   |   |         |   | 175.9   | 
|                                                                                                               |                      | Government             |         |   | 0.1          |   |         |          | 0.1     |   |         |   | 31.6    | 
|                                                                                                               |                      | Prime second-lien      |         |   | 69.6         |   |         |          | 84.8    |   |         |   | 58.5    | 
|                                                                                                               |                      | Nonprime*              |         |   | 5,587.3      |   |         |          | 5,730.7 |   |         |   | 4,841.3 | 
|                                                                                                               | Lending receivables: |                        |         |   |              |   |         |          |         |   |         |   |        
|                                                                                                               |                      | Warehouse              |         |   | 21.5         |   |         |          | 41.8    |   |         |   | 4.2     | 
|                                                                                                               |                      | Construction           |         |   | 13.3         |   |         |          | 8.6     |   |         |   | 8.6     | 
|                                                                                                               |                      | Commercial real estate |         |   |             |   |         |          | 17.0    |   |         |   |        | 
|                                                                                                               |                      |                        |         |   |              |   |         |          |        
|Total nonaccrual loans                                                                                         |                      |                        | 6,027.9 |   |              |   | 6,254.5 |          |         |   | 5,139.5 |  
|Restructured loans                                                                                             |                      |                        | 17.3    |   |              |   | 22.8    |          |         |   | 8.6     |  
|Foreclosed assets                                                                                              |                      |                        | 727.8   |   |              |   | 506.5   |          |         |   | 525.1   |  
|                                                                                                               |                      |                        |         |   |              |   |         |          |        
|Total nonperforming assets                                                                                     |                      | $                      | 6,773.0 |   |              | $ | 6,783.8 |          |         | $ | 5,673.2 |  
|                                                                                                               |                      |                        |         |   |              |   |         |          |        
|Total nonaccrual loans as a percentage of total mortgage loans
    held for investment and lending receivables |                      |                        | 7.0     | % |              |   | 7.6     | %        |         |   | 7.6     | %
|                                                                                                               |                      |                        |         |   |              |   |         |          |        
|Total nonperforming assets as a percentage of total consolidated
    assets                                    |                      |                        | 5.4     | % |              |   | 5.7     | %        |         |   | 5.7     | %
|                                                                                                               |                      |                        |         |   |              |   |         |          |        






|  |                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Includes $179.9 million as of June 30, 2006,
    $374.1 million as of December 31, 2005 and
    $843.4 million as of June 30, 2005 of loans that were
    purchased distressed and already in nonaccrual status.

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|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |   |        |       |  |  |       |     | 
|------------------------------ | --------------- | --------------------- | ------ | ---------- | ------------------ |  | ----- | -------------- | ---------- | - | ------ | ----- |  | ---------- | ----- | --- | ----- | - | ------ | ----- |  |  | ----- | --- | 
|                               |                 | As of June 30,        |        |            | As of December 31, |  |       | As of June 30, |           
|                               |                 |                       |        |            |                    |  |       |                |           
|                               |                 | 2006                  |        |            | 2005               |  |       | 2005           |           
|                               |                 |                       |        |            |                    |  |       |                |           
|                               |                 |                       |        | Percent of |                    |  |       |                | Percent of |   |        |       |  | Percent of |      
|                               |                 | Amount                |        |            | Total              |  |       | Amount         |            |   | Total  |       |  | Amount     |       |     | Total |  
|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |  
|                               |                 | (Dollars in millions) |       
|Current                        |                 | $                     | 60,834 |            |                    |  | 85.0  | %              |            | $ | 56,576 |       |  |            | 83.3  | %   |       | $ | 47,109 |       |  |  | 84.6  | %  
|Past due:                      |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |   |        |       |  |  |       |    
|                               | 30 to 59 days   |                       |        | 3,906      |                    |  |       | 5.5            |            |   |        | 4,773 |  |            |       | 7.0 |       |   |        | 3,747 |  |  |       | 6.7 | 
|                               | 60 to 89 days   |                       |        | 1,587      |                    |  |       | 2.2            |            |   |        | 1,528 |  |            |       | 2.2 |       |   |        | 1,128 |  |  |       | 2.0 | 
|                               | 90 days or more |                       |        | 2,337      |                    |  |       | 3.2            |            |   |        | 2,258 |  |            |       | 3.3 |       |   |        | 1,158 |  |  |       | 2.1 | 
|Foreclosures pending           |                 |                       | 1,697  |            |                    |  | 2.4   |                |            |   | 1,356  |       |  |            | 2.0   |     |       |   | 1,311  |       |  |  | 2.4   |    
|Bankruptcies                   |                 |                       | 1,206  |            |                    |  | 1.7   |                |            |   | 1,520  |       |  |            | 2.2   |     |       |   | 1,235  |       |  |  | 2.2   |    
|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |  
|Total unpaid principal balance |                 |                       | 71,567 |            |                    |  | 100.0 | %              |            |   | 68,011 |       |  |            | 100.0 | %   |       |   | 55,688 |       |  |  | 100.0 | %  
|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |  
|Net premiums                   |                 |                       | 866    |            |                    |  |       |                |            |   | 948    |       |  |            |       |     |       |   | 866    |       |  |  |       |    
|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |  
|Total                          |                 | $                     | 72,433 |            |                    |  |       |                |            | $ | 68,959 |       |  |            |       |     |       | $ | 56,554 |       |  |  |       |    
|                               |                 |                       |        |            |                    |  |       |                |            |   |        |       |  |            |       |     |       |  









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|                                                                  |                                                     |                          |   |          |                    |  |   |          | 
|----------------------------------------------------------------- | --------------------------------------------------- | ------------------------ | - | -------- | ------------------ |  | - | -------- | 
|                                                                  |                                                     | Unpaid Principal Balance |  
|                                                                  |                                                     |                          |  
|                                                                  |                                                     | As of June 30,           |   |          | As of December 31, | 
|                                                                  |                                                     | 2006                     |   |          | 2005               | 
|                                                                  |                                                     |                          |   |          |                    | 
|                                                                  |                                                     | (In millions)            |  
|Mortgage Loans Held for
    Sale  Domestic                       |                                                     |                          |   |          |                    |  |   |         
|                                                                  | Interest-only mortgage loans                        |                          | $ | 3,478.6  |                    |  | $ | 3,316.3  | 
|                                                                  | Payment option adjustable rate mortgage loans       |                          |   | 2,480.9  |                    |  |   | 1,097.6  | 
|                                                                  | High loan-to-value (100% or more) mortgage loans    |                          |   | 949.2    |                    |  |   | 391.7    | 
|                                                                  | Below market initial rate (teaser) mortgage loans |                          |   | 25.7     |                    |  |   | 16.6     | 
|                                                                 
|Mortgage Loans Held for
    Investment  Domestic                 |                                                     |                          |   |          |                    |  |   |         
|                                                                  | Interest-only mortgage loans                        |                          | $ | 12,635.8 |                    |  | $ | 11,118.9 | 
|                                                                  | Payment option adjustable rate mortgage loans       |                          |   | 41.3     |                    |  |   | 16.3     | 
|                                                                  | High loan-to-value (100% or more) mortgage loans    |                          |   | 11,275.8 |                    |  |   | 12,904.7 | 
|                                                                  | Below market initial rate (teaser) mortgage loans |                          |   | 175.1    |                    |  |   | 394.8    | 
|                                                                 
|Mortgage Loans  Held for Sale and
    Investment  International |                                                     |                          |   |          |                    |  |   |         
|                                                                  | Interest-only mortgage loans                        |                          | $ | 3,975.7  |                    |  | $ | 4,925.9  | 
|                                                                  | Payment option adjustable rate mortgage loans       |                          |   |         |                    |  |   |         | 
|                                                                  | High loan-to-value (100% or more) mortgage loans    |                          |   | 15.4     |                    |  |   | 67.9     | 
|                                                                  | Below market initial rate (teaser) mortgage loans |                          |   |         |                    |  |   |         | 



|                                                    |  |                  |          |  |      |   |          | 
|--------------------------------------------------- |  | ---------------- | -------- |  | ---- | - | -------- | 
|                                                    |  | Loan Production  |         
|                                                    |  | for the          |         
|                                                    |  | Six Months Ended |         
|                                                    |  | June 30,         |         
|                                                    |  |                  |         
|                                                    |  | 2006             |          |  | 2005 |  
|                                                    |  |                  |          |  |      |  
|                                                    |  | (In millions)    |         
|Interest-only mortgage loans                        |  | $                | 22,387.0 |  |      | $ | 18,165.5 | 
|Payment option adjustable rate mortgage loans       |  |                  | 8,423.1  |  |      |   | 432.7    | 
|High loan-to-value (100% or more) mortgage loans    |  |                  | 3,754.2  |  |      |   | 3,264.0  | 
|Below market initial rate (teaser) mortgage loans |  |                  | 114.2    |  |      |   | 25.7     | 



Liquidity and Capital Resources




| |                                 
| | --------------------------------
| | Liquidity and Capital Management



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| |                
| | ---------------
| | Funding Sources



|                                                   |                               |                   |          |           |              |   |          |           | 
|-------------------------------------------------- | ----------------------------- | ----------------- | -------- | --------- | ------------ | - | -------- | --------- | 
|                                                   |                               | Outstanding as of |         
|                                                   |                               |                   |         
|                                                   |                               | June 30,          |          |           | December 31, |  
|                                                   |                               | 2006              |          |           | 2005         |  
|                                                   |                               |                   |          |           |              |  
|                                                   |                               | (In millions)     |         
|Collateralized borrowings in securitization trusts |                               | $                 | 57,597.4 |           |              | $ | 56,097.8 |          
|Short-term secured borrowings                      |                               |                   | 22,506.8 |           |              |   | 24,675.0 |          
|Short-term unsecured non-affiliate borrowings      |                               |                   | 968.7    |           |              |   | 1,277.1  |          
|Long-term secured borrowings                       |                               |                   | 5,730.0  |           |              |   | 4,738.6  |          
|Long-term unsecured non-affiliate borrowings       |                               |                   | 14,111.9 |           |              |   | 7,181.8  |          
|FHLB advances  short-term                         |                               |                   | 12.0     |           |              |   | 1,506.0  |          
|FHLB advances  long-term                          |                               |                   | 4,791.0  |           |              |   | 2,922.0  |          
|Affiliate borrowings  short-term                  |                               |                   |         |           |              |   | 1,047.5  |          
|Affiliate subordinated borrowings  long-term      |                               |                   |         |           |              |   | 4,130.0  |          
|                                                   |                               |                   |          |           |              |  
|                                                   | Total borrowings              |                   |          | 105,717.8 |              |   |          | 103,575.8 | 
|Bank deposits                                      |                               |                   | 6,308.6  |           |              |   | 4,123.3  |          
|                                                   |                               |                   |          |           |              |  
|                                                   | Total borrowings and deposits |                   |          | 112,026.4 |              |   |          | 107,699.1 | 
|Off-balance sheet financings                       |                               |                   | 93,320.0 |           |              |   | 78,290.7 |          
|                                                   |                               |                   |          |           |              |  
|                                                   | Total                         |                   | $        | 205,346.4 |              |   | $        | 185,989.8 | 
|                                                   |                               |                   |          |           |              |  



|                                                |       |                            |          |          |                            |   |          |          |  |   |              |          |  |   |         |         | 
|----------------------------------------------- | ----- | -------------------------- | -------- | -------- | -------------------------- | - | -------- | -------- |  | - | ------------ | -------- |  | - | ------- | ------- | 
|                                                |       | Secured Committed          |          |          | Unused Secured Committed   |  
|                                                |       | Liquidity Facilities as of |          |          | Liquidity Facilities as of |  
|                                                |       |                            |          |          |                            |  
|                                                |       | June 30,                   |          |          | December 31,               |   |          | June 30, |  |   | December 31, |         
|                                                |       | 2006                       |          |          | 2005                       |   |          | 2006     |  |   | 2005         |         
|                                                |       |                            |          |          |                            |   |          |          |  |   |              |         
|                                                |       | (In millions)              |         
|Mortgage loans and warehouse lending(a)         |       | $                          | 24,078.2 |          |                            | $ | 23,739.8 |          |  | $ | 11,262.7     |          |  | $ | 9,456.0 |        
|Residential construction lending receivables(b) |       |                            | 1,575.0  |          |                            |   | 1,275.0  |          |  |   | 60.0         |          |  |   | 220.0   |        
|Other(c)                                        |       |                            | 2,925.0  |          |                            |   | 2,625.0  |          |  |   | 293.8        |          |  |   | 246.9   |        
|                                                |       |                            |          |          |                            |   |          |          |  |   |              |         
|                                                | Total |                            | $        | 28,578.2 |                            |   | $        | 27,639.8 |  |   | $            | 11,616.5 |  |   | $       | 9,922.9 | 
|                                                |       |                            |          |          |                            |   |          |          |  |   |              |         






|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Facilities to fund mortgage loan and warehouse lending
    receivables.                                                                           
|   
|(b) | Facilities to fund residential construction and resort finance.                                                                                   
|   
|(c) | Facilities to fund servicing advances, servicing rights and
    interests that continue to be held from our off-balance sheet
    securitizations.



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364-day


Off-Balance
Sheet Financings






Credit Ratings




|              |  |              |  |        |  |                   
|------------- |  | ------------ |  | ------ |  | ------------------
|              |  | Commercial   |  | Senior |  |                   
|Rating Agency |  | Paper        |  | Debt   |  | Outlook           
|              |  |              |  |        |  |                   
|Fitch         |  | F3           |  | BBB-   |  | Positive          
|Moodys       |  | P-3          |  | Baa3   |  | Possible Downgrade
|S&P           |  | A-3          |  | BBB-   |  | Developing        
|DBRS          |  | R-2 (middle) |  | BBB    |  | Developing        





Recently Issued Accounting Standards


Statement of Financial Accounting Standards
No. 154 Accounting Changes and Error
Corrections


Financial Accounting Standards Board Staff Position
Nos. 115-1 and
124-1 115-1 124-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to
Certain Investments


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The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments 03-1). 115-1 124-1 115-1 124-1


Statement of Financial Accounting Standards
No. 155 Accounting
for Certain Hybrid Financial Instruments (SFAS 155),


Financial Accounting Standards Board Staff
Position  FIN 46(R)-6 Determining the
Variability to Be Considered in Applying FASB Interpretation
No. 46(R)


Financial Accounting Standards Board Interpretation
No. 48 Accounting for Uncertainty in
Income Taxes







|        |                                                                
|------- | ---------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk.





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|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |      |      |      |  
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------- | ----------------------------------------------------------- | ---- | ---- | --- | ---- | ---- | ---- | -- | ---- | ---- | ---- | --- | ---- | ---- | ---- | ---- | -
|                                                                                                  |                                                        | Change in Fair Value                      |                                                            
|                                                                                                  |                                                        |                                           |                                                            
|Change in Interest Rate (basis points)                                                            |                                                        | -100                                      |                                                             |      | -50  |     |      | +50  |      |    | +100 |     
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  |                                                        | (In millions)                             |                                                            
|Mortgage serving rights and other financial instruments:                                          |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |     
|                                                                                                  | Mortgage servicing rights and other retained interests |                                           | $                                                           | (737 | )    |     | $    | (288 | )    |    | $    | 153  |      |     | $    | 196  |     
|                                                                                                  | Impact of servicing hedge:                             |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |      |     
|                                                                                                  |                                                        | Swap-based                                |                                                             |      | 42   |     |      |      | (15  | )  |      |      | 69   |     |      |      | 175  |     
|                                                                                                  |                                                        | Treasury-based                            |                                                             |      | 95   |     |      |      | 47   |    |      |      | (45  | )   |      |      | (88  | )   
|                                                                                                  |                                                        | Others                                    |                                                             |      | 518  |     |      |      | 255  |    |      |      | (259 | )   |      |      | (524 | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  |                                                        |                                           | Mortgage servicing rights and other retained interests, net |      |      | (82 | )    |      |      | (1 | )    |      |      | (82 | )    |      |      | (241 | )
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  | Committed pipeline                                     |                                           |                                                             | 70   |      |     |      | 48   |      |    |      | (88  | )    |     |      | (214 | )   
|                                                                                                  | Mortgage loan inventory                                |                                           |                                                             | 256  |      |     |      | 143  |      |    |      | (170 | )    |     |      | (364 | )   
|                                                                                                  | Impact of associated derivative instruments:           |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |      |     
|                                                                                                  |                                                        | Mortgage-based                            |                                                             |      | (167 | )   |      |      | (104 | )  |      |      | 152  |     |      |      | 346  |     
|                                                                                                  |                                                        | Eurodollar-based                          |                                                             |      | (17  | )   |      |      | (9   | )  |      |      | 9    |     |      |      | 17   |     
|                                                                                                  |                                                        | Others                                    |                                                             |      | (129 | )   |      |      | (66  | )  |      |      | 68   |     |      |      | 138  |     
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  |                                                        |                                           | Committed pipeline and mortgage loan inventory, net         |      |      | 13  |      |      |      | 12 |      |      |      | (29 | )    |      |      | (77  | )
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|Net change in fair value related to other businesses                                              |                                                        |                                           | 3                                                           |      |      |     | 2    |      |      |    | (3   | )    |      |     | (5   | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|GMAC Bank:                                                                                        |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |     
|                                                                                                  | Securities portfolio                                   |                                           |                                                             | 1    |      |     |      | 1    |      |    |      | (1   | )    |     |      | (1   | )   
|                                                                                                  | Mortgage loans                                         |                                           |                                                             | 179  |      |     |      | 97   |      |    |      | (108 | )    |     |      | (224 | )   
|                                                                                                  | Deposit liabilities                                    |                                           |                                                             | (10  | )    |     |      | (5   | )    |    |      | 5    |      |     |      | 10   |     
|                                                                                                  | Federal Home Loan Bank advances                        |                                           |                                                             | (140 | )    |     |      | (71  | )    |    |      | 73   |      |     |      | 146  |     
|                                                                                                  | Other liabilities                                      |                                           |                                                             | (26  | )    |     |      | (13  | )    |    |      | 13   |      |     |      | 25   |     
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  |                                                        | GMAC Bank, net                            |                                                             |      | 4    |     |      |      | 9    |    |      |      | (18  | )   |      |      | (44  | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|Notes payable and capital securities                                                              |                                                        |                                           | (291                                                        | )    |      |     | (143 | )    |      |    | 139  |      |      |     | 275  |     
|Impact of associated derivative instruments:                                                      |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |      |      |     |      |     
|                                                                                                  |                                                        | Swap-based                                |                                                             |      | 334  |     |      |      | 165  |    |      |      | (161 | )   |      |      | (318 | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|                                                                                                  |                                                        | Notes payable and capital securities, net |                                                             |      | 43   |     |      |      | 22   |    |      |      | (22  | )   |      |      | (43  | )   
|Insurance company investment portfolios                                                           |                                                        |                                           | 3                                                           |      |      |     | 2    |      |      |    | (2   | )    |      |     | (4   | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|Net change in fair value related to mortgage servicing rights
    and other financial instruments |                                                        | $                                         | (16                                                         | )    |      | $   | 46   |      |      | $  | (156 | )    |      | $   | (414 | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     
|Net change in fair value related to broker-dealer trading
    securities                          |                                                        | $                                         |                                                            |      |      | $   | 1    |      |      | $  | (1   | )    |      | $   | (3   | )   
|                                                                                                  |                                                        |                                           |                                                             |      |      |     |      |      |      |    |      |     



46



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Item 4.  Controls and Procedures.


13a-15(e) 10-K




13a-15(f)


47



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##### Table of Contents






PART II  OTHER INFORMATION





Item 1.  Legal Proceedings.




Golden.


Santiago.







|         |             
|-------- | ------------
|Item 1A. | Risk Factors

10-K


Risks Related to Our Business




| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business requires substantial capital, and if we are
    unable to maintain adequate financing sources our profitability
    and financial condition will suffer and jeopardize our ability
    to continue operations.



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| |                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rating agencies may downgrade their ratings for us in the
    future, which would adversely affect our ability to raise
    capital in the debt markets at attractive rates and increase the
    interest that we pay on our outstanding publicly traded notes,
    which could have a material adverse effect on our results of
    operations and financial condition.







| |                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial results could be materially adversely affected
    if we are required to incur a charge for loan losses or
    reductions in carrying value of mortgage loans held for
    investment if a large number of homeowners to whom we have lent
    money were to suffer uninsured catastrophic damage to their
    property due to a terrorist attack or natural disaster.





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | An interruption in or breach of our information systems may
    result in lost business, regulatory actions or litigation or
    otherwise harm our reputation.



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| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Our business capital activities expose us to additional risks
    that may adversely affect our revenues and profitability.







| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the performance and financial strength of the developer;                                                                                                                                                                                   
|
| |  | development, construction and other costs of the project not
    exceeding original estimates;                                                                                                                                             
|
| |  | the ability of the project to attract creditworthy buyers;                                                                                                                                                                                 
|
| |  | the project being completed on schedule, which is subject to
    many factors, several of which are beyond the control of the
    developer, such as required governmental approvals, weather,
    labor conditions and material shortages;
|
| |  | the continued involvement of key personnel; and                                                                                                                                                                                            
|
| |  | local housing demand and competition, including the strength of
    the local and national economy and fluctuations in interest
    rates.                                                                                                 





| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Our business outside the United States exposes us to
    additional risks that may cause our revenues and profitability
    to decline.



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| |   |                                                                          
| | - | -------------------------------------------------------------------------
| |  | multiple foreign regulatory requirements that are subject to
    change; 
|
| |  | differing local product preferences and product requirements;            
|
| |  | fluctuations in foreign currency exchange rates and interest
    rates;  
|
| |  | difficulty in establishing, staffing and managing foreign
    operations;
|
| |  | differing legal and regulatory requirements;                             
|
| |  | potentially negative consequences from changes in tax laws; and          
|
| |  | political and economic instability.                                      



Legal and Regulatory Risks Related to Our Business




| |                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The scope of our residential mortgage loan production and
    servicing operations exposes us to risks of noncompliance with
    an increasing and inconsistent body of complex laws and
    regulations at the federal, state and local levels in the United
    States and in the international markets in which we operate.







| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | civil and criminal liability:                                                    
|
| |  | loss of licenses and approvals;                                                  
|
| |  | damage to our reputation in the industry;                                        
|
| |  | inability to sell or securitize our loans, or otherwise raise
    capital;       
|
| |  | demands for indemnification or loan repurchases from purchasers
    of our loans;
|
| |  | Fines and penalties and litigation, including class action
    lawsuits;         
|
| |  | governmental investigations and enforcement actions; and                         
|
| |  | claims that an allegedly non-compliant loan is rescindable or
    unenforceable. 



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| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Enhanced reporting required by the Home Mortgage Disclosure
    Act may lead to increased litigation, media coverage and
    challenges to our reputation.



debt-to





Item 2.  Unregistered Sales of Equity Securities
and Use of Proceeds.







Item 3.  Defaults Upon Senior Securities.







Item 4.  Submission of Matters to a Vote of
Security Holders.







Item 5.  Other Information.







Item 6.  Exhibits.




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SIGNATURES






| |                                        
| | ---------------------------------------
| | Residential Capital Corporation        
| | (Registrant)                           
|
| | /s/ Davee L. Olson                     
| |                                        
| | Davee L. Olson                         
| | Chief Financial Officer                
|
| | /s/ James N. Young                     
| |                                        
| | James N. Young                         
| | Chief Accounting Officer and Controller

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INDEX OF EXHIBITS


|        |      |  |             |                                                                                      
|------- | ---- |  | ----------- | -------------------------------------------------------------------------------------
|Exhibit |      |  | Description
|        |      |  |            
|        | 12.1 |  |             | Computation of ratio of earnings to fixed charges                                    
|        | 31.1 |  |             | Certification of Principal Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a)
|        | 31.2 |  |             | Certification of Principal Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a)



| |    |  |  |                                                                                                                    
| | -- |  |  | -------------------------------------------------------------------------------------------------------------------
| | 32 |  |  | Certification of Principal Executive Officer and Principal
    Financial Officer pursuant to 18 U.S.C. Section 1350

54