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GMAC Financial Services to Sell Up to $20 Billion in Auto Loans

General Motors Corp.'s GMAC financial services unit announced it will sell up to $20 billion in U.S. auto loans to Scotia Capital, the corporate and investment banking arm of The Bank of Nova Scotia, according to the Associate Press.

General Motors Corp.'s GMAC financial services unit announced it will sell up to $20 billion in U.S. auto loans to Scotia Capital, the corporate and investment banking arm of The Bank of Nova Scotia, according to the Associate Press. Terms of the deal were not disclosed.

GMAC Spokeswoman Joanne Krell told the Associate Press that the agreement will allow GMAC to redeploy its assets into its more lucrative mortgage and insurance businesses. It also will help the company access funding.

In May, Standard & Poor's Ratings Services and Fitch Ratings downgraded both GM and GMAC's debt to junk status. According to the Associate Press report, the newly announced deal will help GMAC as it tries to get its rating upgraded.

The report says that the Bank of Nova Scotia will buy up to $20 billion in auto loans over a five-year period ending in October 2010 and that the initial purchase of $3 billion will be made this month. In addition, the report states that GMAC will continue to service the contracts while The Bank of Nova Scotia will hold the loans and sell them to investors.

Originating $40 billion in auto loans each year, the $20 billion sale represents only a fraction of GMAC's auto-financing assets.

GMAC completed a similar deal with Bank of America Corp. in July. Under that agreement, Bank of America will buy $55 billion worth of U.S. auto loans over the next five years in a deal to raise cash and help the division finance more vehicles.

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