1332815--3/28/2006--RESIDENTIAL_CAPITAL

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Rating agencies may downgrade their ratings for us in the future, which 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. GM is considering the sale of a controlling interest in GMAC as well as exploring strategic and structural alternatives for us; there is a risk that these initiatives may not occur, or if they do occur, they may not restore GMAC s investment grade rating or maintain our investment grade ratings. Our earnings may decrease because of increases or decreases in interest rates. Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates. We use estimates and various assumptions in determining the fair value of certain of our assets, and in determining our allowance for loan losses. If our estimates or assumptions prove to be incorrect, we may be required to write down the value of these assets or increase our allowance for loan losses, either of which could adversely affect our earnings and financial condition. We remain exposed to credit risk associated with the assets held in our portfolio of mortgage loans held for investment and retained interests, and higher rates of delinquency and default rates could adversely affect our profitability and financial condition. Our profitability and financial condition could be adversely affected if the assumptions underlying our risk-based underwriting and pricing models prove to be incorrect. Changes in existing U.S. government-sponsored mortgage programs, or disruptions in the secondary markets in the United States or in other countries in which we operate, could adversely affect our profitability and financial condition. General business and economic conditions may significantly and adversely affect our revenues, profitability and financial condition. We face intense competition that could harm our market share, revenues and profitability. Increasing competition in the acquisition of mortgage loans from correspondent lenders in the secondary market and the origination of loans through mortgage brokers, and recent consolidation in the mortgage loan industry, may harm our profitability. 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. Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect our reported revenues, profitability and financial condition. An interruption in or breach of our information systems may result in lost business, regulatory actions or litigation or otherwise harm our reputation. The success and growth of our business may be adversely affected if we do not adapt to and implement technological changes. We depend on the accuracy and completeness of information about our customers and counterparties, and inaccuracies in such information could adversely affect our profitability. We may be required to repurchase mortgage loans or indemnify investors if we breach representations and warranties, which could harm our profitability. Our business capital activities expose us to additional risks that may adversely affect our revenues and profitability. Our business outside the United States exposes us to additional risks that may cause our revenues and profitability to decline. A significant portion of our business is in the State of California, and our business may be significantly harmed by a slowdown in the economy or the occurrence of a natural disaster in California. Because we are a wholly-owned subsidiary of GM, we may be jointly and severally responsible with GM and its other subsidiaries for funding obligations under GM s and its subsidiaries tax-qualified U.S. defined benefit pension plans. If we are required to pay some or all of those obligations, our profitability and financial condition could be materially adversely affected. If GM and/or GMAC were to become the subject of a bankruptcy proceeding and we were substantively consolidated with GM and/or GMAC, our assets would become subject to the claims of our creditors and the creditors of GM and/or GMAC. GM and GMAC control all fundamental matters affecting us, and their interests may differ from ours. 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 outside the United States. New legislation with respect to so-called predatory lending practices could restrict our ability to produce mortgage loans, which could harm our revenues and profitability. We may be subject to fines or other penalties based upon the conduct of independent mortgage brokers through which we originate mortgage loans and lenders from which we acquire mortgage loans. If warehouse lenders and securitization underwriters face exposure stemming from legal violations committed by the companies to which they provide financing or underwriting services, this could increase our borrowing costs and harm the market for our whole loans and mortgage-backed securities. Enhanced reporting required by the Home Mortgage Disclosure Act may lead to increased litigation, media coverage and challenges to our reputation. We are no longer able to rely on the Alternative Mortgage Transactions Parity Act of 1982 to preempt certain state law restrictions on prepayment penalties, which could harm our revenues and profitability.

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1332815--3/28/2006--RESIDENTIAL_CAPITAL_CORP