The Mortgage Lender Implode-O-Meter News Pick-ups: Imploded: IndyMac Bancorp

Update - 2009-03-23: In a press release Friday, March 20th, it was announced that FDIC had completed the sale of IndyMac Federal Bank to newly formed Pasadena, CA based OneWest Bank Group LLC.

OneWest, led by Terry Laughlin, also acquired reverse mortgage unit Financial Freedom. OneWest was formed by the partnership led by private equity firm Dune Capital Management -- a group that includes billionaire George Soros and Dell Inc. founder Michael Dell -- who agreed to buy the failed bank for $13.9 billion. The FDIC "stands to lose $10.7 billion" in the deal.

Although the press release states the newly formed bank "doesn't plan to close any existing branches" in the IndyMac acquisition, we have received reports that a call center in Kansas City was shut down with operations moved to Austin, TX as part of the process. Rumors that as many as 700 employees may be (or have been) laid off were later said to have been exaggerated.

Update - 2009-01-02: As first reported in the Mortgage Lender Implode-O-Meter on 2008-12-26, the FDIC said in a press release today that it had entered into a Letter of Intent to sell Indymac Federal Bank FSB for approximately $13.9 billion to IMB HoldCo LLC, a thrift holding company controlled by IMB Management Holdings LP. IMB HoldCo is owned by a consortium of private equity investors led by Steven T. Mnuchin of Dune Capital Management LP.

In an attachment to the release, FDIC indicates the transaction will be structured as the sale of New IndyMac to IMB HoldCo. New IndyMac is comprised of:

The retail bank headquartered in Pasadena, CA, with 33 branches located primarily in the Los Angeles MSA with approximately $6.5 billion in deposits;
A loan portfolio of $16 billion and a securities portfolio of $6.9 billion;
A servicing platform with mortgage servicing rights ("MSRs") representing an unpaid principal balance of $157.7 billion; and
A reverse mortgage platform, Financial Freedom, with $1.5 billion of reverse mortgages and MSRs representing an unpaid principal balance of $20.2 billion.

The sale will close in late January or early February, with an estimated cost to the FDIC of between $8.5 to $9.4 billion.

Update - 2008-08-02: Indymac Bancorp, Inc., the parent holding company for Indymac Bank, F.S.B., filed a Chapter 7 bankruptcy on 2008-07-31. From Bloomberg:

"The FDIC "has been in sole possession custody and control of all of the books and records of" IndyMac Bancorp and the court filing was made without access to information that bankruptcy laws typically require, Chief Executive Officer Michael W. Perry said in court papers.

While banks are prohibited from filing for U.S. bankruptcy protection, bank holding companies aren't. Perry is Pasadena, California-based IndyMac Bancorp's sole remaining employee, according to the filing."

Update - 2008-07-11: (End of day - 3:57 pm PDT) "On, Friday, July 11, 2008, IndyMac Bank, FSB ("IndyMac Bank") was closed by the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC") was appointed as Receiver (the "Receiver"). Under the laws of the United States, the Receiver is charged with the duty of winding up the affairs of IndyMac Bank."

To view the entire 2-page letter to Employees, click here (pdf).

The FDIC (click here) has put out a guide to answer consumer, investor and media questions.

Update - 2008-07-11: "The FDIC is in charge" was the verbal announcement ringing through the halls of IndyMac's Pasadena offices. "Everyone show up for work on Monday."

The above information came from an inside source just minutes ago. A formal announcement will be made later today.

Update - 2008-07-10: According to a source that has proved credible in the past, we were told a meeting will be held at IndyMac HQ tomorrow announcing the FDIC will put them into conservatorship.

According to this source, $190 million was pulled in yesterday's run, and $100 million today.

Mr. Perry left for a haircut at 4:00 pm (PDT)

Update - 2008-07-08: Indymac has announced the sale of Retail Lending Group (RLG) to Prospect Mortgage. In a memo received today:

"...Prospect Mortgage will acquire the majority of the retail branches of IndyMac Bank Home Lending. This transaction includes approximately 750 employees and over 60 branch locations. We are excited to have them onboard! The IndyMac branches will adopt the Prospect brand."

You can view the entire announcement here.

In further news, it appears Indymac is now CHARGING brokers to close their locked loans! This in from one such company, complete with a couple of solutions:

"We have just confirmed word that IndyMac will only fund the [co. name deleted] loans that are currently in their pipeline if they receive a 1% on that total pipeline from us. Suffice it to say that we are not in a position to forward more than $100,000 to guarantee that these loans will close. It is our suggestion at this time that you pull your existing loans and send them to other lenders. We would suggest The Money Store, New Line or Taylor Bean & Whitaker."

To view a copy of the Rate Lock Fee Letter, click here. How desparate do you have to be... how broke are you when you demand 1% lock fees? The Implode-O-Meter is looking for a better solution.

Update - 1:30pm (PDT): To quote a 1:00 pm email distributed by Grove Nichols, signed by M. Perry, Indymac is getting out of the mortgage business.

...will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3.400 or so over the next couple of months."

Indymac has announced they will no longer accept any new loan submissions or rate locks in either retail or wholesale, and are closing their "forward" mortgage business.

To read the full text, visit our Forum here.

Update - 11:30am (PDT): Indymac employees have been on hold waiting for a company-wide 1:00pm conference call.

From an email this morning:

"Indy Mac is closing TODAY. The entire Marlton NJ office is apparently being shut down and their other operations offices are closing. All wholesale operations are gone."

As this news rolls across the country, we will keep you updated on developments. One source says as many as 4,000 people will be laid off. It's early in the day, but an official announcement is expected within hours as to the extent of the shutdown.

7:45 am (PDT) - Bloomberg is showing trading halted.

Original Ailing/Watch Listing - 2008-06-30 (6:30pm EST): At 5:45 pm (EST), the following email was sent to customers of Indymac's commercial lending unit, Indymac Commercial Lending Corp.:

"ICLC, due to the current market and capital constraints has ceased lending operations as of 7/1/08.

A formal announcement from ICLC will be coming out tomorrow regarding details and loans in process."

An official notice was sent out shortly thereafter.

Referring to today's press release on The IMB Report, Indymac's company web site, an LA Times report refers to "a weekend that saw depositors line up at some of its San Gabriel Valley branches to pull their money, as they reacted to news reports questioning the company's survival."

Indymac's article responds with "while branch traffic is somewhat elevated this morning, it is substantially lower than on Saturday, and we are hopeful that this issue appropriately abates soon..."

A thread for the ICLC shutdown has begun on our Discusssion Forum.

Update - 2008-06-30: After the opening bell, Indymac Bancorp Inc. shares dipped to a morning low of $0.60. IndyMac was one of 12 stocks removed from the Russell 1000, moved to the small-cap Russell 2000 Index per Yahoo Finance.

Meanwhile, the Center for Responsible Lending released a report today titled "IndyMac: What Went Wrong?," in which it "finds substantial evidence that IndyMac routinely made loans with little regard for their customers' ability to repay the loans" according to The Earth Times.

"CRL's investigation provides a body of evidence that discredits the idea that IndyMac and other lenders were victims of overreaching borrowers or rogue mortgage brokers," says Michael Hudson, the report's primary author and a senior investigator at CRL. "IndyMac's current problems appear to be largely the legacy of top-down pressures that valued short-term growth over making responsible lending decisions."

That surely can't have a positive effect. Shares continued to struggle, closing at $.062, down over 23% from the morning's open of $0.81.

Update - 2008-06-26: IndyMac shares are finally down to a mid-day low of $0.94 at one point. One of our sources states, "Pretty much we were told informally that if we did not get a capital infusion we would not make it and that we had a 50/50 chance of obtaining said infusion."

Update - 2008-06-23: Shares of IndyMac have fallen in the past year from $32.54 down to $1.32 at mid-day today. Attorneys calling for Class Action suits are lining up:

Brower Piven Encourages Investors Who Have Losses in Excess of $100,000 From Investment...
Stull, Stull & Brody Announces Class Action on Behalf of Shareholders of IndyMac Bancorp, Inc.
Federman & Sherwood Announces That a Securities Class Action Lawsuit Has Been Filed Against IndyMac Bancorp, Inc.
Schatz Nobel Izard P.C. Announces Class Action Lawsuit Against IndyMac Bancorp, Inc.
The Brualdi Law Firm Announces Class Action Lawsuit Against IndyMac Bancorp, Inc.
Scott+Scott LLP Files Class Action Lawsuit Against IndyMac Bancorp, Inc. On Behalf of Investors

Paul Coyne, Business Development MGR issued an email to the troops quoting from a statement by CEO Mike Perry 2008-06-13:

"We don't have any issues with respect to liquidity or funding and we don't have a single warehouse line. We fund ourselves 100% with deposits and FHLB advances and have $4.4 billion of operating liquidity as of today."

Perry went on to suggest the following fixes: "...we clearly need to raise capital, reduce our NPAs, and return to profitability for us to ensure our long-term health."

Discussion from our Forums suggest two points of view: Indymac Sinking!!! or INDYMAC: A positive note.

Update - 2008-02-12: From Yahoo! Finance, Feb. 12, 2008:

"LOS ANGELES (AP) -- IndyMac Bancorp Inc. reported the first annual loss in company history Tuesday and scrapped its dividend to shore up capital.

The holding company for IndyMac swung to a fourth-quarter loss as weakness in the housing market forced the mortgage lender to boost provisions for future credit losses from rising defaults, repossessions and other costs."

CEO Perry takes the blame, kills the dividend, and blamed the "errors" on management. Perry offered to quit if not re-elected as CEO. Now that makes a lot of sense.

Update - 2008-01-31: We have several emails, and confirmation from an inside source IndyMac is closing their Construction-to-Perm (CTP) Lending Division. This info has come in late in the day and we expect the company to confirm the shutdown is effective Feb. 1, 2008 tomorrow... in other words, immediately.

Update - 2008-01-16: After cutting 2403 people and closing 5 Operations Centers, IndyMac has put out a "Q & A" hoping to give Brokers/Bankers some reassurance they are 'still in the picture.' Click here to view the entire document.

Update - 2008-01-15: In a statement released today at 'theimbreport.com', IndyMac announced cuts of another 2403 people. In addition:

"...we have made the decision to close down our regional wholesale mortgage centers in Tampa, Philadelphia, Boston, Columbia and Kansas City (the other operations in Kansas City will remain open) by the end of the first quarter and consolidate these mortgage operations into our 11 other regional centers around the country."

Our Forum has been very busy with opinions, detail, and questions on this subject. Click here to view.

Original Ailing/Watch Listing - 2008-01-09: News isn't readily forthcoming, but adding up the little bits it becomes rather obvious: this company is in trouble. There have been a slew of articles recently, scattered across the business world about the current 'state of things.' Most recently, an article from Reuters casts serious doubt on the future for IndyMac:

"Growth in the pipeline and resulting production volume may be negatively impacted by further credit tightening currently being implemented by the GSEs that is requiring IndyMac to implement another round of credit guideline tightening," the company said on its corporate blog, www.theimbreport.com, on Jan. 4.

Total loan production of $4 billion in November was "essentially flat" from October, it said. The loan pipeline of $10.7 billion was down 20 percent for the 12 months to November and up 9 percent from October.

IndyMac Chief Executive Officer Michael Perry last month said he expected the Pasadena, California-based lender will be profitable by the second half of 2008. Its $202.7 million third-quarter loss was more than five times larger than projected as delinquencies mounted."

One large Net Branch operation has put out the word "not to use IndyMac as they think they will have funding problems."

All the while, we have had tips coming in about layoffs, program/product cuts and new restrictions. Like many other lenders going through a similar contraction in today's market, Subprime is gone and Alt-A has been priced out of market. Killing product is a sure way to drive out the AE's, and just before Christmas one tipster wrote:

"... several of us just walked out after they once again, cut programs ... they cut the comp plan for the 5th time in 7 months ... and max pricing on any jumbo Alt-A is 99.00, so it will cost the broker 1.00 just to do the deal. This used to be Indy's bread and butter.

They also put out a voluntary resignation for all A.E.'s last week.... word is they are going retail. The CEO reiterated over and over that everyone was "safe" and Indy was as strong as ever..."

And another tip:

"600 ae's are collecting $2500 per month and close 2-5 loans per quarter. The math is simple get rid of them"

In our Premium Newsletter from Dec. 17th, we reported on IndymacBank GrupoMac.

According to their web site this division within Indymac Bank called GrupoMac is a "Top 5 Wholesale Lender... focused on serving Spanish-speaking customers."

Rumor has it that this division will be closed and Mark Mozzilo (CEO) is rumored to have left Indymac or leaving to another Indymac unit.

One tipster writes, "None of the ae's from grupo mac will transfer all of them will be laid off."

There are a number of ongoing discussions on our forum. Take your pick by clicking here, here, or here. If you have more information, updates or corrections to this post, please email us directly.

alphajej at 16:12 2008-07-07 said:

Indymac Issues Stakeholder Letter July 7th, 2008 Dear Indymac Stakeholders:

In this very difficult and challenging environment, any of the actions that we take to keep Indymac safe and sound unfortunately have negative consequences to some important constituency. As we stated in our financial update on May 12, 2008, we have been working with our investment bankers to raise additional capital. To-date, we have not been successful with these efforts, and, while we will continue these efforts with our bankers and others, we don’t expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets. While some shareholders may believe it is in their best interests that we not raise capital right now given the significant dilution that it would cause, there are consequences of not being able to raise more capital and, therefore, actions that we now must take.

Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.

In light of the current environment and related deterioration of our financial position since last quarter, we have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer “well capitalized”, which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB’s mortgage loans and securities or the bid/ask spreads are abnormally wide, “fire-selling” assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new loan production.

In addition to needing to shrink our assets to improve our capital ratios, we also need to do so to ensure that we maintain prudent operating liquidity. A consequence of falling below well-capitalized is that we are no longer permitted to accept new brokered deposits or renew or roll over existing ones, unless we get a waiver from the FDIC. While we have submitted a waiver application, it is uncertain as to whether such a waiver will be granted.

As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and “feed” growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital.

In closing our forward mortgage business, we will refocus our lending efforts on supporting and building within regulatory constraints Financial Freedom, our reverse mortgage unit (FHA production only), and on continuing the retention activities associated with our servicing portfolio. Combined, we currently expect these units to produce roughly $5 billion to $10 billion per year of new FHA/GSE loans. Thus, our core business model will include (1) Financial Freedom, one of the largest reverse mortgage lenders in the Country; (2) a top ten mortgage loan servicing operation, with a solid retention production unit; and (3) a Southern California retail bank branch network, including 33 branches and roughly $18 billion in deposits, of which over 96% is fully covered by FDIC insurance. In addition, when this housing and mortgage crisis abates and we return to health, we would also hope to be an investor in mortgage loans and mortgage-backed securities and might re-enter the national forward mortgage production business with a low-cost, non-commissioned-based business model.

Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac’s current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac’s Board of Directors that they reduce my base salary by 50%.

With respect to severance, our policy has always been that the fair and right thing to do is to provide our departing employees with a generous severance program to ease their transition to the next stage of their career. Our severance program, which provided one month of pay and one month of Indymac-paid COBRA insurance coverage for each year of service, was clearly the most generous in the mortgage industry, if not among most of the Fortune 500. I very much regret that the reality today, however, is that we can no longer afford this program given our need to preserve capital and return to profitability. Therefore, we will be providing employees with a minimum 30-day notice of the termination of their employment (effectively, 30 days severance), with employees covered under the Federal WARN Act and similar state statutes (“WARN”) receiving 60 days of advance notice prior to the effective date of the their termination. Affected employees with five or more years of service will receive a minimum $20,000 severance, including any compensation payments made during the notice period.

With all of the above said, in this environment plans can change often and quickly (e.g. ability to raise capital and/or liquidity, regulatory actions, etc.). All we can do is continue to work hard and do our very best to keep Indymac safe and sound, so that we can rebuild our workforce and shareholder value when the housing and mortgage markets stabilize. We will be providing more information on our plans and prospects when we release Q208 earnings.

Very truly yours,

Michael W. Perry Chairman and Chief Executive Officer Permalink

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IndyMac Bancorp - Wholesale/Retail

griztown at 14:58 2008-06-11 said:

Trojanbiz at 18:23 2008-06-16 said:

8bpChip at 14:26 2008-06-23 said:

CAPUDO34 at 21:28 2008-06-25 said:

Aristotle at 04:10 2008-06-26 said:

8bpChip at 10:53 2008-06-26 said:

SubPrimeTime at 07:02 2008-07-05 said:

alphajej at 16:12 2008-07-07 said:

SMonk432 at 20:03 2008-07-07 said: