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IndyMac Cuts Staff, Trims Mortgage Operations

California S&L grew fast, is shrinking even faster

July 8, 2008

The Pasadena, Calif.-based savings and loan said it would lay off at least 3,800 people and close nine regional loan offices that made loans through independent mortgage brokers.

CEO Michael W. Perry said the company was struggling with “the continuing erosion of the housing and mortgage markets.”

It's one of the latest aftershocks of the meltdown of the mortgage market. The stocks of Fannie Mae and Freddie Mac, the huge government-sponsored entities that buy much of the “paper” in the mortgage industry, sank yesterday after a warning that they could need to raise as much as $75 billion in new capital.

IndyMac was founded in 1985 and became the leader in “alt-A” mortgages, those written to consumers whose credit was good if not outstanding, on terms that included adjustable interest rates, flexible pay plans and other features that often meant consumers' loan balances grew instead of declining over time.

The company was also heavily into subprime and home-equity loans and often required little or no documentation of borrowers' income, critics said.

The Center for Responsible Lending, a consumer advocacy organization, said IndyMac's decline was caused by “unsound and abusive lending” practices.

IndyMac said it will remain active in reverse mortgages, which allow elderly homeowners to convert their home equity into cash without selling their homes. It will also continue its billing, collection and foreclosure operations.

IndyMac will also continue to operate its retail banking business, accepting savings deposits and certificates of deposit. Such accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per depositor plus $250,000 per retirement account.

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