Standard & Poor's Ratings Services said it lowered itslong-term counterparty credit rating today for GMAC LLC, the parentof GMAC Insurance, to "CCC" from "B-minus."

The firm said it also lowered the long-term counterparty creditrating on GMAC's mortgage finance subsidiary, Residential CapitalLLC, to "CCC-minus" from "CCC-plus," and said both parent andsubsidiary are in a "dire situation."

GMAC's subsidiary, GMAC Insurance, provides commercial vehicle,homeowners and recreational vehicle coverage and property andcasualty reinsurance programs primarily to regional directinsurance companies.

The S&P ratings on GMAC were removed from CreditWatchNegative, where they were placed Oct. 9, and the outlooks for GMACand Residential Capital LLC are negative, said S&P.

"The ratings actions follow the companies' third-quarterearnings release that indicates continued intense financial stressat both entities," said an S&P credit analyst, John K.Bartko.

According to the S&P analysis, GMAC's consolidated $2.5billion loss for the quarter was driven largely by ResidentialCapital LLC's loss of $1.9 billion.

S&P said that GMAC, absent Residential Capital LLC,continues to be pressured in its core auto finance business byelevated provisioning and overall weak economic conditions.

The rating firm said further that as demand for car and truckproducts wanes, so have residual values, leading to additionallease impairments.

Residential Capital LLC represents a significant economic burdenfor GMAC, and S&P does not anticipate the financial pressure atResidential Capital LLC dissipating in the intermediate term.S&P added that "a strategic solution appears the only optionwithin this time frame."

In the mortgage business, losses have placed Residential CapitalLLC "perilously close to its tangible net-worth covenant limit,with a $100 million cushion"--the calculation of which excludesGMAC Bank, S&P found.

The analysis noted that the company's quarterly report saidResidential Capital LLC's status as a going concern is in"substantial doubt" absent economic support from GMAC.

According to S&P, de-leveraging is now less of an option, asasset sales result in losses that threaten the tangible net worthcovenant, and broader economic and housing-related trends are notcurrently accommodative.

Compounding this issue, S&P found, are a dearth of revenueopportunities and the negative impact of foreign currencyexposures. The company, S&P noted, is examining other optionsfor reducing risk and enhancing capital.

GMAC is considering various options, according toS&P--including applying for status as a bank holding company soit could access federal funding, a potential debt exchange, andaccessing federal liquidity programs where possible.

But analysts said it is unclear as to the likelihood ofachieving any of these alternatives, or if any of them would leadto financial stability for GMAC or Residential Capital LLC.

S&P said if GMAC employs a debt exchange "that we deem to bea distressed exchange, we would lower our rating on GMAC to 'SD'(selective default)."

S&P said Residential Capital LLC's status as an ongoingconcern as explicitly acknowledged in GMAC's earnings presentationis highly contingent on support from GMAC.