IndyMac Struggling to Curb Losses
An article in the Wall Street Journal takes a look at IndyMac’s recent planned changes after suffering from a “wider-than-expected third quarter loss.” According to the article:
IndyMac — the ninth-largest U.S. home-mortgage lender by volume, according to trade publisher Inside Mortgage Finance — posted a net loss of $202.7 million, more than five times wider than the Pasadena, Calif., lender had projected two months ago but much smaller than the $1.2 billion third-quarter loss posted by its bigger rival, Countrywide Financial Corp.
IndyMac Chief Executive Michael Perry blamed a sharp jump in past-due loans in September, including both home mortgages and loans to home builders. As a result, the company decided to set aside more money for future loan losses.
During the third quarter, IndyMac turned its focus from “Alt-A” mortgages — or near-prime loans — intended for sale into the secondary market to mortgages eligible for sale to the two government-sponsored mortgage-finance giants, Fannie Mae and Freddie Mac.
The move raises questions about IndyMac’s ability to make money on potentially far fewer — and less profitable — loans. Mr. Perry said he expects the company’s retooled mortgage-production business to be profitable this quarter, “excluding credit costs from discontinued products and start-up costs from our retail-lending initiative.”
Financial collapse seems to be working itself down the list of major mortgage lenders and those that once were able to provide a home equity line of credit. Having seen what has happened to other major companies, will IndyMac be able to make the necessary changes to save itself from a similar disaster? Or is it already too late to stop the impending doom? We’ll just have to wait and see.
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