The U.S. Treasury and GMAC Financial Services are in advanced talks to prop up the lender with a third tranche of taxpayer-backed funding, the Wall Street Journal reported on Tuesday.

Representatives of GMAC and the Treasury could not be immediately reached for comment.

The newspaper quoted unnamed people familiar with the matter as saying that the U.S. government was likely to inject $2.8 billion to $5.6 billion of capital into Detroit-based GMAC.

That funding would be on top of the $12.5 billion in U.S. government funding that GMAC has received since December, the newspaper said.

The Wall Street Journal said that the capital injection now being negotiated by the company and U.S. government officials would come in the form of preferred stock.

The U.S. government's 34-percent stake in GMAC could rise if the shares are converted into common equity, it said.

The injection of new capital would shore up GMAC's balance sheet and its auto lending business.

GMAC is the traditional lender to General Motors Co and is taking over the auto loan business of Chrysler. Both those automakers were put through bankruptcy reorganizations using federal funding earlier this year.

(Reporting by Kevin Krolicki; Editing by Tim Dobbyn)

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