IndyMac to Cut Work Force, Halt Most Loans Applications

Housing Mkt is still under water. One of largest Alt-A lender is no longer well capitalized and was forced to ratcht up its balance sheet. --- IndyMac Bancorp Inc. said it has stopped taking most types of loan applications and will cut more than half of its work force as it struggles with losses from home-mortgage defaults. The Pasadena, Calif., mortgage company and savings-bank operator is one of the largest lenders yet to be forced by the credit crunch to ditch the bulk of its business. IndyMac specialized during the housing boom in Alt-A loans, a category between prime and subprime that typically involves borrowers who don't fully document their incomes or assets. Associated Press An IndyMac Bank branch in Burbank, Calif., earlier this year. In this year's first quarter, IndyMac was the 11th-largest producer of U.S. home mortgages, according to Inside Mortgage Finance, a trade publication. Hundreds of smaller lenders and mortgage brokers have gone out of business in the past two years. Last week, the largest U.S. home-mortgage lender by loan volume, Countrywide Financial Corp., was acquired in an rescue operation by Bank of America Corp. The disappearance of so many lenders is serving to raise costs for people seeking to buy homes or refinance their mortgages. IndyMac's woes also have created worries for depositors, who have about $18 billion parked at the company's savings bank. IndyMac said more than 96% of those deposits are insured by the Federal Deposit Insurance Corp. IndyMac said Monday that it had been unable to raise fresh capital and that it is likely to report a loss for the second quarter bigger than the $184.2 million loss recorded in the first quarter. Regulators also have advised the thrift operator that it is no longer considered "well-capitalized." When a bank or thrift is no longer deemed well-capitalized, regulators are required to ratchet up their scrutiny. "We're aware of the situation and we're working with them," Office of Thrift Supervision spokesman Bill Ruberry said. IndyMac is reducing its work force to 3,400 from its current head count of 7,200, in a bid to cut 60% of its operating expenses. "If we had another alternative, we clearly would have chosen it," Michael W. Perry, chairman and chief executive, said in a statement late Monday. IndyMac said it will continue to make reverse mortgages, which allow consumers to tap the equity in their homes. IndyMac also plans to continue to service loans and operate a 33-branch retail network in Southern California. In February, IndyMac posted the first annual loss in its 23-year history, which led the company to suspend its dividend on common shares as it attempts to ride out the mortgage crunch. But despite all the lender's troubles, Mr. Perry has insisted that mortgage brokers and home lenders aren't the only ones responsible for credit and housing woes. In February, he listed "systemic problems" and the government's "over-stimulation of the housing market" as contributing factors, adding that "IndyMac and most home lenders weren't 'greedy and stupid.'" Late last month, Sen. Chuck Schumer (D., N.Y.) sent a letter to regulators raising questions about the solvency of the thrift and prodded them to do more to monitor the company closely. The letter spooked investors and depositors, quickly leading customers to withdraw $100 million in deposits. IndyMac's risk-based capital was 10.26% of assets at the end of the first quarter, just above the 10% minimum needed to be classified as well-capitalized.