| Loan Problems Trouble Lender |
| By Credit Federal |
Published
11/8/2007
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Financial News
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Lender Problems
IndyMac Bancorp, one of the largest independent US mortgage lenders, reported a quarterly loss of $202.7 million, a loss five times larger than it had forecast in September.Escalating delinquencies, late loan payments plus a collapse in investor demand for the lender's home loans are blamed for the first quarterly loss since 1998. The loss compares with a net profit of $86.2 million one year ago.According to chief executive Michael Perry: "While this loss is substantially higher than we had been forecasting, it was clearly not unexpected, given the magnitude of the losses being reported by others in our industry. We are in the midst of the most severe downturn our industry has experienced in modern times."Both Countrywide Financial and GMAC Residential Capital had also reported a third-quarter loss. IndyMac specialized in "Alt-A" loans, offered to lenders who fall short of requirements for prime lending rates. Demand for these loans has collapsed, forcing the company to switch to so called 'conforming mortgages' that can be resold to Freddie Mac and Fannie Mae. Credit losses at IndyMac quadrupled from the second quarter to $407.7 million while losses related to the sale of mortgages totaled $167.2 million. It also increased its reserve for future credit losses from $947 million to a whopping $1.4 billion in the second quarter. Results also reflected charges incurred in the elimination of 1,547 jobs.Mortgage production fell 30% to $16.8 billion in the quarter. The lender cut in half its quarterly stock dividend from 50 cents to 25 cents a share, leaving it with a dividend yield near 8%.Perry warned that another significant cut would be prudent if the company was not profitable in the fourth quarter. He said the company could either be 'modestly profitable' or suffer more losses this quarter and in 2008, but that quarterly losses should be 'substantially lower' than in the third quarter.
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