July 19, 2007

Alt-A "Liar's Loan" king IndyMac falling off the cliff, right on schedule


Weeeeeeeeeeeeeeeeeeeeeeeeee..... (yes, I'm short IndyMac and can't for the life of me figure out why the Feds haven't raided their offices yet)

Funny though how the King of Liar's Loans appears to be run by liars themselves (Mark to Market?). But don't worry HP'ers, like Enron and WorldCom before them, eventually IndyMac's probably incompetent auditors (where their CFO came from btw) will have to do their jobs. Eventually. I feel sorry for their likely soon-to-be-laid-off 8,600 employees, but hopefully they'll find honest work next time.

With a reported 8% of their entire portfolio already in default, home prices crashing, the Great Unwinding underway, and "Mark to Market" (which IndyMac refuses to do so far) looming, this pig is in a poke. No matter what the insider stock manipulators and spinmeisters want you to believe. Earnings are July 31 and I predict happy happy talk and spin - but we'll see if anyone believes it.

"Liar's loans". As in "Come on in and commit blatant mortgage fraud" loans. Amazing. How the Fed ever allowed IndyMac and other Liar's Loan facilitators to game the system this bad, I'll never understand. And who bought this crap?

Mortgage Crisis Roughs up IndyMac
The mortgage lender, which provides "Alt-A" loans, suffers as the mortgage crisis

For investors in IndyMac Bancorp (IMB), here's the good news: the mortgage lender handles hardly any subprime loans. Defaults on the risky mortgages have skyrocketed, killing off a few of IndyMac's rivals. And Bear Stearns reported that its two hedge funds that held subprime mortgage debt were virtually worthless.

The bad news for IndyMac: The subprime crisis is spreading to other kinds of debt.

On Wednesday, IndyMac's stock fell 5.5% to $27.45. A downgrade by a Lehman Brothers analyst exacerbated worries that have sent the stock falling almost 40% so far this year.

At the top of the list of worries is so-called "Alt-A" mortgages. Subprime loans are taken out by buyers with low credit scores. Buyers who take out Alt-A loans are supposedly less risky, but they submit little documentation to prove it. The loan approval is usually based on a credit score and little else, with no proof of income. There's a "big spectrum" of quality among the loans, says Standard & Poor's Equity analyst Stuart Plesser. (S&P, like BusinessWeek, is owned by McGraw-Hill.)

IndyMac, as one of the country's biggest Alt-A originators, is vulnerable as the defaults rise among these loans. "From a credit quality perspective, it's a notch above subprime," says Keefe, Bruyette & Woods analyst Manuel Ramirez (KBW does investment banking with IndyMac). However, "you've seen signs of pretty significant credit deterioration," he says. Delinquencies and defaults are up.

Part of the problem is that no one really knows how bad the loan crisis will get, Plesser says. Experts worry that defaults will increase. "How many people were given mortgages who couldn't afford the loan?" Ramirez asks.

As important for IndyMac, what's the value of the homes that serve as collateral for its loans? "Now that you have home prices going down, what they have backing [the loans] isn't as strong as it once was," Plesser says.

35 comments:

Anonymous said...

The first thing that I noticed is that you mentioned only the negatives of the article. Why don't you also quote what Ramirez said about "Indymac is grabbing marketshare as competitors go out of business"...or..."If they survive, Indymac will be in great shape." He also hinted at the fact that because of our access to capital we have a good chance at making it through.

As an employee of Indymac I think your post is highly inaccurate and unsupportive. I am a strong housing bear and I believe that we are in for some very rough times. The fact is, as a highly regulated FSB,investors will conitue to pay a premium for our loans. Indymac also does construction loans, commercial loans and investments. We have over 2 billion in liquid cash my friend.

Your post is indicative of a brash, uninformed soul that only cares about getting his point across. Why don't you post a link so readers can read the entire article and choose for themselves???

keith said...

The article link is always via the header

Hey, good luck with that job search. In the meantime, good luck aiding that mortgage fraud

Man, that's gotta be a weird place to work these days

Anonymous said...

Keith,

The Feds ARE the crooks! There's no jail time in the future for any of these scumbags, especially not "fun in the sun" Mozillo. Good grief, did that simian strike coconut oil and then bathe in it?

Anonymous said...

"We have over 2 billion in liquid cash my friend."

Yo! Have you been watching the Bear Stearns hedge fund meltdown? They supposedly injected $1.2 billion of their own capital to save one of their hedge funds. Then the other day they said the funds are now effectively worthless. That means credit is deteriorating downwards and that any money spent to save things is vaporizing. Good luck with that $2 billion in liquid cash. That will go in the blink of an eye. Ask Bear Sterns.

keith said...

It's sad to see employees of corrupt companies totally clueless while Rome burned

Think Enron. Think WorldCom. Now think IndyMac. I've got a feeling though that IndyMac pretty much hired anyone who could fog a mirror, so par for the course

Mark to Market.

Say it with me.

Mark to Market.

Now say Enron.

Anonymous said...

IMB is down 25% in the past few days their employees probably lost everything right before losing their jobs

Very Enron

Anonymous said...

Worthlessness Now Spreading to Alt-A?

What is this so-called Alt-A mortgage stuff about?
Alt-A mortgages are loans where borrowers lack some of the documentation required by traditional mortgages.
For example, if you are a salesperson with somewhat unpredictable income, but you have otherwise good credit, you may not be able to qualify for a traditional prime mortgage, but you're not subprime either.
In that case you would fit into the Alt-A category; kind of a gray area between prime and subprime.
The potential Moody's downgrades are important because other ratings agencies may follow suit; the result being additional bond downgrades triggering potential sales by funds that own the bonds and aren't allowed by charter or restriction to hold bonds in the portfolio below a certain grade.
Oh yeah, and in a related story crossing the Bloomberg wire was this little nugget from Moody's: "Moody's Investors Service said it wasn't hired for 75% of the commercial mortgage-backed securities ratings assignments in the past few months because of its requirements for extra credit enhancements."
In other words, issuers were and are "rate shopping." How does that work? Well, companies such as Moody's make money by being hired by issuers to rate bonds.
Sort of the way some home appraisers develop reputations for being "generous" in their appraisals to help borrowers meet down payment requirements, for example, the ratings agencies are competitive in how they rate the bonds, some being a bit more "generous" in their ratings than others.

http://globaleconomicanalysis.blogspot.com/2007/07/alt-word.html

Ruh Roh Raggy said...

Flipping houses and refinacing each others homes is our last great industry!

Once that is gone we will realize the chinese make everything that is cheap, the japs make everything that is high quality, and we cant afford either anymore.

Anonymous said...

LAYOFFS TODAY!!!!!!!!

Please see the message below, which contains the contents of an email from Indymac’s CEO, Mike Perry, sent to all Indymac employees today regarding the layoff of approximately 400 employees, or 4% of our total workforce.

Grove Nichols
Communications Director

It is with regret that today we are announcing the layoff of approximately 400 employees, roughly 4% of our workforce, mainly in our Operations and Enterprise Process & Technology (EPAT) groups in various offices around the country. This action is all the more painful given our longstanding and openly stated philosophy of being opposed to layoffs. Most companies in the mortgage industry employ layoffs as standard operating practice, staffing up in good times and letting people go as soon as loan volume falls off. I have never been a fan of this practice, and we have done our best to avoid layoffs in the past by growing our business and prospering even in down markets and through hiring freezes and natural employee turnover. However, we have also said that there could be no absolute guarantees that we would always be able to avoid layoffs if market conditions continued to erode.

The reality is that the mortgage market continues to be very tough right now, and we recognize that we must take action in order to protect our business and remain competitive. Industry loan volumes and profit margins continue to be under pressure, and our dollar loan volume was down 12% in the second quarter compared to the first quarter. Furthermore, our volume in terms of loan units was down by 17% because we have eliminated the 80/20 piggyback product (which requires the processing of two loans in each transaction) in favor of first lien higher-LTV programs with mortgage insurance. While recently our pipeline has been recovering, we concluded that we needed to both “right-size” our workforce to our current volumes and also be very “hardnosed” in redesigning our processes in our drive to become “the” low cost provider in the mortgage industry, while at the same time ensuring that we maintain our high standards for customer service and credit quality. Recent advances in our technology are enabling us to be more productive and efficient, and we simply must reap the cost savings associated with these advances and pass them on to our customers in order to be competitive in the market.

Who has been impacted and how were individuals selected?
Employees are being impacted mainly in EPAT as well as in centralized and regional mortgage operations where we have excess capacity, in positions across the spectrum ranging from customer account managers to funders and post closers. The impacted group includes both management and staff. We have been as fair and objective as possible in the selection process, taking into consideration an individual’s quality of work as measured either by performance metrics in a compensation plan and/or performance rating, tenure for those employees hired since March 1, any recent performance counseling and, finally, the employee’s cost per unit of output. In addition, some groups and job functions have been eliminated entirely, such that unfortunately even some solid performers have been laid off. At the end of the day, these were not easy decisions to make, but I do believe that our process was fair and based on objective criteria.

What does this mean for the impacted employees?
All impacted employees are being notified today. For most, today will be their last day at work, while others will be leaving over the next few weeks. Our hearts truly go out to them as this is certainly not easy. However, while most other companies in our industry pay very little, if any, severance, Indymac has a generous severance package for laid off employees to assist them with this difficult transition. Our severance policy is designed both to have Indymac be the compassionate organization we want to be and also, frankly, to make it expensive for us to have layoffs so that we will do everything possible to avoid them. The bottom line is that those being laid off are receiving severance in amounts ranging from two weeks of pay to 12 months plus full payment by Indymac of COBRA insurance coverage for two months to 13 months, depending on length of service with Indymac. While perhaps nothing can really compensate for the impact of job loss, we feel that the severance payments we are making will surely provide some measure of relief. In addition, we will be hosting career seminars for those employees impacted.

What does this mean for Indymac?
The layoffs will result in Indymac taking a pre-tax charge to earnings of approximately $6.5 million in the third quarter, most of which is severance. The cost savings we will realize will more than offset this charge during the second half of this year, and on an ongoing basis we project $30 million in annual cost savings.

As you know, last month I provided an update on our strategy and explained how in today’s competitive environment for our commoditized business, where our outlook must be for margins to be thin into the future, we must put a stake in the ground and change our business foundation to set our goal to be “The” low cost provider rather that just “A” low cost provider. This is essential for us to protect our business and be a viable competitor going forward. In this respect, perhaps our most important cost metric is our operating cost (excluding marketing and sales costs) to produce a funded loan in our largest lending group, the Mortgage Professionals Group (MPG). That cost currently stands at $918/loan. With the cost savings outlined above and the efficiencies gained through new technologies, we anticipate being able drive our cost per loan down to $776 by the fourth quarter of this year. As we grow the business and reap further efficiencies, our goal is to drive this down to $572/loan by the end of 2008. These cost savings will both be passed on to our customers, which is critical for us to remain competitive in the mortgage business, and also help to restore our profitability, which has suffered in the current downturn.

Looking ahead
The question most of you must be asking is whether we are done with layoffs or whether there are more in store in the future. First, let me say that our overall philosophy on layoffs remains intact. We are fundamentally opposed to mass layoffs because they are harsh, hurt people and families, are costly and are disruptive to our business. While we know that our business is cyclical, our goal is to avoid layoffs by being smart in our planning and by being able to out-execute our competition and grow our business even in the face of market downturns. We recognize, however, that this will not always be possible, as is the case today. We have never been able to offer an absolute guarantee of no layoffs, nor can we do so as we look ahead. As I sit here today, I see that it is likely there will be some further staffing re-alignments later this year and into 2008, but I do not currently foresee anything of the magnitude of this current downsizing. Bear in mind, however, that in a layoff, those most likely to be impacted are those people who are at the bottom of the rankings in terms of job performance and cost effectiveness.

As unfortunate as these layoffs are, it is important to put them into perspective. At the end of 2003, just four and a half years ago, our workforce was only 3,900 strong. Today, our workforce is comprised of almost 9,600 people. That’s a lot of growth, prosperity and job creation at Indymac. Today’s layoffs of approximately 400 of our colleagues, while very painful for us and certainly for those impacted, represent about 4% of our workforce at a time when many of our competitors are cutting much more deeply and many have closed down altogether. Importantly, we are doing the right thing for those people who are leaving by providing them with severance packages to ease the transition, and we are protecting our business and the jobs of the remaining 96% of our employees.

In closing, I want to thank all of you for your hard work and dedication, and I want to wish those employees who are leaving us the very best for the future.

mike

http://theimbreport.com/?p=39

Anonymous said...

Indymac is hiring more employees...to handle delinquent loans and foreclosures.

IndyMac to add 195 by year end
Sacramento Business Journal - 6:06 PM PDT Wednesday, July 18, 2007

National mortgage company IndyMac Bancorp Inc. started the second phase of its expansion into Austin, Texas, and plans to nearly double its employees there by year's end.

The Pasadena company set up a home loan servicing center in Austin last fall, where it has about 200 people working now. IndyMac just began the second phase of construction to accommodate about 195 more people that it plans to add to its Austin ranks by the end of this year, said J.K. Huey, IndyMac's senior vice president of home loan servicing.


IndyMac (NYSE: IMB) is one of the nation's largest mortgage companies, servicing roughly 650,000 residential loans.

About 8 percent of the loans in its portfolio are in delinquency. Many of the jobs opening up this year at the Austin servicing center will be focused on dealing with delinquent loans and foreclosures, Huey said.

IndyMac has a regional center in Rancho Cordova that employs about 130 people. It opened its Sacramento operations in 2000.

IndyMac chief executive officer Michael Perry is a Sacramento native and graduate of California State University Sacramento. He ran a mortgage operation in Sacramento for Commerce Security Bank from 1988 to 1993, where he used automated underwriting and information systems to build a volume mortgage business model. He took control of IndyMac when it had four employees. It now has more than 8,600 employees.

Austin Business Journal

Anonymous said...

I have had 2 job seekers in my office this week who worked for real estate mortgage brokers in Phoenix.

Usually I cant find anyone to fill inside sales slots who are educated and can pass a piss test.

They didn't even flinch at the starting pay, LOL.

Over the last 5 years I have been short handed and my employees know they have me by the balls because it is so difficult to find good help. Now, the tide is turning.

Mark in San Diego said...

I am in San Francisco this week, and they are all patting themselves on the back that condo/housing prices are still going up in SF. . .but. . .I count about 10 huge (40 story) condo projects, and can't figure out who will fill them. . .are there THAT many Google employees who reverse commute?? Me thinks that SF is about two years behind Miami and San Diego (which are in freefall). . .we will see. . .

Charlie_in_LA said...

When I purchased a house in Phoenix in 2004, there was a mix up and delay when IndyMac bought my loan from the builder. As I was making payments to the builder, I started to get collections calls, from persons with heavy accents from India. Yes, collection calls from India. If there is a staff build up for collections, it would problaby be in India and not here in the states.

Anonymous said...

why would a bank loan funds to someone who it suspects will not be able to pay the loan off? i realize it is all just computerized numbers on a page, but, my question is i guess, are we at the end of the building boom that started after ww2? it would appear that the home building companies have run out of responsible buyers to purchase their homes that they build on spec, etc. what does this mean? it means the middle class is dying. the middle class is disappearing. the middle class is swamped with bills and debts as it works overtime to try and pay for the everyday needs of living. these people who bought these homes were apartment dwellers for the most part, who should never have been allowed to buy homes. so i ask. why were they allowed to do this at this time? what is the real purpose of this? they couch it all in the vanacular of trying to help the poor establish themselves as home owners and participate in the american dream. but the fact is that many cannot and will never be able to , buy and pay for a home. it is not their fault more or less. the jobs in this country do not pay that well. the illegals continue to come over the border at a rapid pace. the manufacturing jobs have for the most part, already disappeared. it is dusk in the day of america now. the sun is going down. and instead of addressing this problem, we watch baseball, go out and eat, watch stupid movies and pretend we are free. we have become a sorry lot. our founding fathers would have been very disappointed in us as a nation and a people.

Bitter Renter said...

To be fair, most private employees in a capitalist system, especially those who work for corporations, are aiding a corrupt system. Very few escape being tainted. You can trace almost any corporate endeavor or occupation back to something awful.

No one wants to believe that their livelihood comes from misery, destruction or exploitation but they almost all do.

Anonymous said...

>>>>The first thing that I noticed is that you mentioned only the negatives of the article. Why don't you also quote what Ramirez said about "Indymac is grabbing marketshare as competitors go out of business"...or..."If they survive, Indymac will be in great shape." He also hinted at the fact that because of our access to capital we have a good chance at making it through.

As an employee of Indymac I think your post is highly inaccurate and unsupportive. I am a strong housing bear and I believe that we are in for some very rough times. The fact is, as a highly regulated FSB,investors will conitue to pay a premium for our loans. Indymac also does construction loans, commercial loans and investments. We have over 2 billion in liquid cash my friend.

Your post is indicative of a brash, uninformed soul that only cares about getting his point across. Why don't you post a link so readers can read the entire article and choose for themselves???<<<

instead of trolling on this blog, shouldn't you be looking for another job?..

Magoo said...

"Buyers who take out Alt-A loans are supposedly less risky, but they submit little documentation to prove it."

As sound bites go, this is a beautiful way to describe Alt-A.

Anonymous said...

I didn't realize that the title linked to the article.

It also seems like an insider posts insode info. I can confirm that 4% of the workforce was laid off today. Our company is taking necessary steps to insure its profitability.

I think it is pretty rude and unconscionable to assume that all Indymac Bank employees are liars. Your random, grossly inaccurate classification of human beings that you don't even know strips the power from your argument.

Where did you get the stat that 8% of our loans are delinquent?

Indymac doesn't sell loans to Bear Stearns. What you don't know is that for the last 6 months we've been streamlining our ARMS into fixed rate loans at no cost. Not a refi but a note modification and the secondary market is eating it up.

Unless you work for the company on a daily basis, don't assume you know what's going on. While we are making less money year-over-year we are still EXTREMELY profitable. How do you compare us to CIT which realized a net loss of over 100 million?

Anonymous said...

Yet more evidence of the handy work of Fredy Krueger and Jason on wall street. i have no ide why you don't give the gruesome twosome their due, keith.

Anonymous said...

Alt-A loans are also ideal in you are an illegal Mexican. You can buy a house and live in it until you leave, then give it back to the US taxpayers.

All you need is a credit score - that is a credit card and make payments for a year - then you qualify for 500K ALT-A Loan as long as you and your mortgage broker are willing to strecth the truth a little.

But I don't suspect anyone in America would do that.

Anonymous said...

>>>> Anonymous said...

I didn't realize that the title linked to the article.

It also seems like an insider posts insode info. I can confirm that 4% of the workforce was laid off today. Our company is taking necessary steps to insure its profitability.

I think it is pretty rude and unconscionable to assume that all Indymac Bank employees are liars. Your random, grossly inaccurate classification of human beings that you don't even know strips the power from your argument.

Where did you get the stat that 8% of our loans are delinquent?

Indymac doesn't sell loans to Bear Stearns. What you don't know is that for the last 6 months we've been streamlining our ARMS into fixed rate loans at no cost. Not a refi but a note modification and the secondary market is eating it up.

Unless you work for the company on a daily basis, don't assume you know what's going on. While we are making less money year-over-year we are still EXTREMELY profitable. How do you compare us to CIT which realized a net loss of over 100 million?

July 20, 2007 3:11 AM<<<<

who are you? the official housing panic, indymac damage control guy? hey pal, save your typing. where there is smoke there is fire. we know what is going on. no amount of covering up by you will suffice. the jig is up. the fantasy of mortgage lending is becoming a bad nightmare. and this is good. what goes up must come down....

Anonymous said...

Hey, IndyMac shill...remember this word: ramen.

LOL

Anonymous said...

I just love the spin about taking market share because other competitors are failing. Why are they failing? Could it be because the whole episode was a Ponzi scheme? The debt market is puking up mortgage backed CDOs now. What makes IndyMacs debt any better than say Washington Mutual's? WM is sitting on a mountain of pay-option mortgages, who's homedebtors can pay minimums until the deferred loan balance reaches a certain percentage above the original loan amount. How do you think WM is handling this unpaid amount on their balance sheet and income statement? How are they making earnings?

IndyMac is a house of cards just waiting to collapse.

But wait, there's more: Wells Fargo said there loan portfolio is fine yet managed to cut 500 jobs in their lending division. I guess those 500 people did nothing before? Wells Fargo is f*cked up too, all to come apparent in due course.

keith said...

There were buggy whip and 8-track-tape producers who took market share too for a time

And we all know how that turned out

Stephen said...

"Rightsizing"

Anonymous said...

"Furthermore, our volume in terms of loan units was down by 17% because we have eliminated the 80/20 piggyback product (which requires the processing of two loans in each transaction) in favor of first lien higher-LTV programs with mortgage insurance".

LauraVella said: Everyone had to get these loans to buy a house dating back to AT LEAST 2000. Why? because houses were unafforable back then too. This housing boom is a maxed out Ponzi Scheme that is going collapse...hard. The loan pushers of these kinds of loans said they are great (the piggyback)because that second loan is tax deductable! LOL! If they're so great, why go back to PMI insurance? After all, PMI IS NOT tax deductable! On top of everything else (correct me if I'm wrong) that second mortgages are all ADJUSTABLE mortgages. Wow, this crash is going to be spectacular to watch and live through. The greatest housing crash in history, and we are all here to witness it. Fasten those seat belts...

Anonymous said...

"There were buggy whip and 8-track-tape producers who took market share too for a time"

Hey, but I know what my reel to reel is worth and I ain't gonna give it away! I'll just hold onto it till the market conditions change.

Anonymous said...

Well I just so happen to LOVE my old reel to reel! (Not exactly "portable" I'll grant you) but when you tire of the SHRILL, tinny and sterile sound of CD's and want real depth, tone and warmth you can't beat a reel!

Reels didn't die b/c of inferior sound by a long shot. Most people couldn't handle the tapes after a few drinks and there were way too many knobs and switches for the avg. consumer. Musicians that learn "by ear" can also slow the tape down for more detail.

Oh, btw IndyMac sucks and yes, they are going down! (I just wish I could record it!)

DinOR

Anonymous said...

buggy whip and 8-track-tape always goes up - they are not making anymore.

Rordogma said...

RE: "No one wants to believe that their livelihood comes from misery, destruction or exploitation but they almost all do."

Not if you bake cookies!

Follow your bliss and seldom, if ever, will people get hurt.

Unles you're Hitler.

westwest888 said...

http://apps.indymacbank.com/individuals/realestate/search.asp

IndyMac trolls - wouldn't it be funny if your very own house ended up "bank owned" by the company you used to work for? You should look for your coworkers houses. Hey, if that's a profitable business maybe they'll start laying you chumps off and taking your houses. Hell, it's some foreign investor that bought the lowest tranch, so who cares?

Anonymous said...

Every stock connected to housing got killed again today

Shakster said...

Indymac doesn't sell loans to Bear Stearns. What you don't know is that for the last 6 months we've been streamlining our ARMS into fixed rate loans at no cost. Not a refi but a note modification and the secondary market is eating it up.

Anonymous IndyMac eater said----Unless you work for the company on a daily basis, don't assume you know what's going on. While we are making less money year-over-year we are still EXTREMELY profitable. How do you compare us to CIT which realized a net loss of over 100 million?

July 20, 2007 3:11 AM
______________________________________________________________________
"Eating them up"?????
Don't you mean swallowing by force,or out of desperation?
How could anyone with a conscience push an ARM or piggy back?
What,market rates weren't good enouph?Did ,or do you ever look to see if a buyer is qualified for your contracts in the first place?
Did you disclose everything?How about "no doc "?
I don't need to know about you,but anyone pushing ARMs to uninformed,unqualified,and financially unqualified buyers is either stupid ,or a shark.Did you buy the appraisers bunk?Were you Really looking out for the buyer,or is that just not your job?
You have no passion,no understanding,and you don't fool HPers.

Anonymous said...

Part of the problem is that no one really knows how bad the loan crisis will get, Plesser says. Experts worry that defaults will increase. "How many people were given mortgages who couldn't afford the loan?" Ramirez asks.
--

Well, no crap! They lied to get the loan!!

Anonymous said...

I'm an Indymac underwriter. For the record, the job blows. The process sucks, I haven't seen my kids in weeks because of the OT I'm required to work, and I'm grinding the enamel off my teeth. That said, in my "insider" opinion, the fraud you're blasting IMB for is industry-wide, and starts and ends with brokers, not your average ops people. I actually get a production BONUS for catching fraud. Stated loans? I do mostly full docs, because I end up countering nearly half of all the stated deals I see to full doc because they're garbage. Should I be looking for another job? Yep, and I am. But not for the reasons you're talking about.