IndyMac Leaves the Mortgage Arena

This announcement from IndyMac came via a press release today:

“…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.”

IndyMac is planning on retaining the FHA portion of their reverse mortgage division, Financial Freedom.

This also means more people will be displaced from the mortgage industry.

“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…”

The press release mentions a couple locations where employees will be retained…no word or mention of the Bellevue office.

IndyMac had a lot of unique products and were no stranger to the subprime and alt-a markets.   They had their own automated underwriting system, eMits, that provided “risk based” decisions and pricing.    They are reported as being the seventh largest savings and loan in the nation with both retail and wholesale operations.

20 thoughts on “IndyMac Leaves the Mortgage Arena

  1. Hi Rhonda,

    Thanks for the post. I’ve been busy all day preparing for an FHA class in the morning but have been following the news. Question: How do you think Indymac’s exit will effect mortgage brokers and CLA’s (consumer loan lenders) in the Seattle area?

    Still lots of lenders to broker to?

  2. Jillayne, I was sure we were posting this at the same time…almost contacted you first but I was running short on time too.

    In my 8+ years as a Mortgage Professional, I only sent one loan to IndyMac…so this will not impact me at all.

    As a correspondent lender, we still have many lenders that we work with (we don’t sell or broker loans until after closing). It is concerning to have a larger one go away. I’ll be more concerned if it’s one of my “top 4-5” conforming lenders that I like to work with.

  3. Yeah, Schumer outed them with a letter detailing the “quality” of the OA collateral they were using to borrow from the Atlanta Fed. Caused a minor bank-run last week.

    They would have suffered the same fate, though perhaps Schumer accelerated it. Maybe saved a few depositors as well, though anyone under a 100K. I agree with his motive but not his methods.

  4. From their website, it looks as though they REALLY don’t want to lock and fund the business they’ve committed to:

    “In order to protect your rate locks, we will require a 1% cash deposit to convert these loans to mandatory delivery. All fees must be received by the end of business on Thursday, July 10th, or your rate locks are subject to cancellation. These fees are fully refundable in the event IMB declines the loan. This fee requirement is all inclusive. You must protect the entire pipeline as part of this process. If you do not submit the required fee for any individual loan as part of this process, all of your rate locks will be subject to cancellation.”

    IMB has serious issues with its reserve requirements and capital needs that aren’t being met. It’s ability to fund any loans going forward is suspect. And in fact, I’d be surprised if they’re still operating three months from now. A FDIC takeover is more likely.

  5. As a loan originator, I am very thankful our company didn’t send any loans to IndyMac. It would be very painful to call clients requesting that they cough up 1% up front fee by Thursday!
    The wording says “cash deposit” which implies that it would be a credited at closing. Or is this an additional fee which would trigger a new Good Faith and TIL?
    Scotsman, I agree with you. Apparently, they had a “run” on their deposits and there is some real question about their continued existence in the next few days. And, Indymac is lying through their teeth… to wit… “We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks.

  6. Cathy R, I agree. Plus, with it being mandetory, I wonder what implications that would cause. I lock everything “best efforts”. The last of the subprime/alt-a giants are falling.

    Who can be trusted now? Boy…I think it’s a good reason to work with a lender who can dance quick (i.e. move a loan to another lender quickly in the event “lender a” fails”).

    It’s almost an argument for quicker closings.

  7. Out of curiosity, just who are the major wholsale lenders these days? Who do the mortgage brokers in the Puget Sound rely on most? Is Countrywide still the largest wholesaler? What about Wells Fargo, WaMu, or BofA?

  8. The list is everchanging, Sniglet. Countrywide is now BOA? BoA and WaMU no longer are in the wholesale markets. Here’s a quick list off the top of my head of who’s still working with brokers/lenders:

    Wells Fargo, Chase, Flagstar, Citi, SunTrust, Franklin American, WaFed, Wachovia… there’s others we work with too…(I know I’m forgetting some). We are still receiving Countrywide rate sheets at this time.

  9. Tid-bit from the latest IndyMac memo:

    “For all loans where final approval was not provided by Indymac Bank on or before July 8th, 2008, an executed IRS Form 4506–T must be received for all Borrowers of record on the loan in order to complete the underwriting process.

    This requirement affects all forward mortgage programs, including Agency, ALT–A Preferred, Super Jumbo, FHA, VA, and Agency Jumbo programs.”

    I’m not sure if IndyMac WAS still doing stated income or low doc docs since I didn’t work with them…however…if they did–this means these loans (unless the stated income matches what is filed with the tax returns w/IRS) are probably toast.

    This is a way out of some of the loans remaining assuming the consumers are willing to pay the 1% mandetory lock fee IndyMac is adding as well (see comment 6).

  10. My client had a loan brokered through IndyMac. They were waiting for loan docs when the news hit the press. Unfortunately, what they found out is that IndyMac also required an audit of all files that had rate locks on them, further backing up the process and guaranteeing that IndyMac really wants to get out of this type of business NOW. Their suggestion that they will honor all prior loans that have the rate locked is rubbish. They’ll slow down the process to a trickle so the buyer walks away rather than wait for something that may not be there.
    We were supposed to sign off last Tuesday, but loan docs are nowhere in site. My client had to go to plan “B” and they only had 10 days to find a new loan and close. They’re at day 4 and looks like they’ll make it, but IndyMac’s implosion has created huge levels of stress for all involved. Why couldn’t IndyMac make this announcement 2 weeks from now? Oh well.

  11. DaveB, I’m glad you’re working with a lender who can offer you “plan b”. I have a “plan b” for most of the borrowers I’m working with in this market.

    I’m sure IndyMac was hoping it wouldn’t come to this and somehow, they’d get out of it.

  12. Looks like IndyMac is going into FDIC receivership Friday, 8-11-2008. That was quick. They had a bit of a run, lost over $200 million in deposits, enough to put them under. Announcement tomorrow afternoon.

  13. I would add to Rhonda’s list of above the following lenders that I have used in the past year, that are still in business:

    TBW, HSBC, Provident, and GB.

    Fairly conservative lenders, not much in the way of exotic products.

    Indy Mac’s departure is sad, but did not affect me much. Just another leak in the dike, unfortunately.

  14. They were probably the first subprime lender that I worked with. I remember entering the borrowers criteria into eMits and then pressing the “run” button and going “ewwww” with the rate…I was not used to those of types of loans and more often than not, at that time, consumers would opt to wait to be come FHA eligible instead of going for the subprime mortgage.

    I only had one loan ever go to IndyMac… afterwards, First Franklin, New Century and Homecomings entered the subprime scenario (at least for our office, I guess we were late to the subprime game–thankfully!) with better rates and programs than IndyMac…at least that’s what I found.

    So like you, Roger, there exit does not impact me. And since we’re FHA lenders and my business was never focused on subprime, I have not been hit too badly by that market. I was whammo’d pretty good this time last year when Jumbo’s went away!

  15. I see that Inman News is reporting that the Fed has closed down IndyMac:

    In the biggest bank failure of the housing downturn to date, federal banking regulators today closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. as conservator.

    The FDIC said it will transfer insured deposits and “substantially all the assets” of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by the FDIC.

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