Irwin Union Bank & Trust Co. - Wholesale - Agency, Alt-A, Home Equity

Update - 2008-08-21: Irwin Home Mortgage officially announced the suspension of wholesale operations today. No new applications will be accepted and existing loan submissions must close by September 30th, 2008.

Original Listing - 2008-07-25: In a conference call just minutes ago, it was announced with regard to mortgage lending, "...none would be through brokers in the future." Of the three transactions relating to the restructuring, one was reported to be at a "substantial discount." We will update this listing when the full transcript becomes available. Actual figures for associated losses will not be available until some during the first week of August, with the 10Q filing.

Original Ailing/Watch Listing - 2008-07-25: Irwin Financial Corp. of Indianapolis, IN has an investor conference call scheduled for 1:00 pm (EDT) today. The press release yesterday was titled "Irwin Financial Corporation Announces Major Strategic Restructuring to Refocus on Small Business and Local Community Banking." It's a theme we've heard before.

"We are pleased to announce the execution of an agreement to sell our home equity residual interests to Roosevelt Management Company LLC, a New York-based financial services firm focused on investments in, and servicing of, seasoned residential mortgage loans and securities. This will remove $1.0 billion of home equity loans from our balance sheet. In addition, we have reached agreement with Roosevelt to deliver substantially all of the remaining loans in our home equity business into a securitization structure that will cap our remaining exposure at less than $100 million."

Irwin Home Equity has already ceased lending, and recently established Irwin Home Mortgage is carrying on with wholesale lending operations, offering saleable first mortgage liens according to a "Division Update" posted on their web site. Portfolio lending was to be no more.

This process, be it a "restructuring" or "shutdown" of lending operations, has been in the works for some time. We reported in a newsletter on 2008-05-08 the elimination of second mortgage liens and the cessation of Correspondent lending.

Slogging through SEC filings is not exactly our idea of fun, but that's where the scoop was on Irwin Home Equity (IHE), a subsidiary of Irwin Union Bank and Trust Company (IUB), wholly owned by Irwin Financial Corp. (NYSE: IFC). We went digging after we received copies of the following announcements:

Second Mortgages Discontinued - "Second mortgages will no longer be allowed effective 5:00 p.m. PT on Monday May 5, 2008."

Even though it said "no exceptions," a tipster noted "I spoke with a rep from Irwin Home equity and they told me they had shut their 2nd mortgage division down last Friday. They are not taking any more apps from brokers. However they are trying to break into the 1st mortgage market. They will do a 2nd if they are doing the 1st." Combos are still listed on their web site.

That was soon followed by this announcement:

Correspondent Operations Suspended - "Effective 5 p.m. Pacific Time on Monday, May 5, 2008, all Correspondent lending operations will be suspended and no new registrations will be accepted."

One need only look at this table from their 2007 Annual Report to understand the significance of shutting down this business channel:

In their 10-K filing for 2007, we also find the human cost of these changes:

"The lack of secondary market liquidity in the second half of the year (and continuing into 2008) meant, however, that we needed to modify our product offerings significantly and limit our production to the amount we wished to hold on balance sheet. This significantly reduced our production and led us to meaningfully reduce staff. In total, we reduced staff (FTE's) by 152 or 31 percent, incurring severance related charges of $4 million."

Reuters reported IFC "is exploring alternatives, including recapitalization and asset spin-off."

"Of the three operating segments, the commercial banking and commercial finance segments posted profits but the home equity segment posted a loss of $16 million."

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