Change starts at IndyMac
The federal regulators who seized IndyMac Bank late last week reiterated Sunday that its branches would be open as usual this morning but said home equity lines of credit issued by the bank would be frozen pending a review of each account.
During a news conference at the bank’s Pasadena headquarters, officials of the Federal Deposit Insurance Corp. sought to assure customers -- at least those who had less than $100,000 deposited or less than $250,000 in a retirement account -- that their money was safe and would be fully accessible today.
“It’s business as usual,” said John Bovenzi, an FDIC official who was named chief executive of the reconstituted IndyMac Federal Bank when the government took control Friday.
Checks written on IndyMac accounts will be honored as usual, ATM cards will still work and direct deposit arrangements will continue as scheduled, officials said.
But it won’t be business as usual if you were planning to borrow more on an IndyMac home equity line.
“Home equity lines will be frozen and reviewed on a case-by-case basis,” said David Barr, an FDIC spokesman.
Lines of credit to commercial construction contractors also will be frozen pending a review, but construction loans made to individual consumers won’t be affected, he said.
Customers of IndyMac’s reverse mortgage subsidiary will retain unfettered access to their funds, Bovenzi said. Reverse mortgages provide elderly homeowners with either regular payments or a line of credit, secured by their homes. The loans do not have to be repaid until the homeowner dies or chooses to move.
For depositors, interest rates on individual accounts -- excluding $5 billion in so-called brokered deposits -- will remain unchanged until the accounts mature, Bovenzi said.
That’s good news for many depositors. IndyMac has been paying among the highest rates in the nation for certificates of deposit in recent months. The day before it was seized, IndyMac was offering an annualized 4.3% on a six-month CD.
For the estimated 10,000 IndyMac depositors who had a collective $1 billion over federal insurance limits in their accounts, the news was mixed. In an unusual move, the agency said it would give those customers access to 50% of their uninsured deposits. Any additional payments will be made only if the sale of IndyMac assets proves sufficient.
The regulators stressed that many depositors could have more than $100,000 in IndyMac accounts and still be fully insured if their accounts were properly structured. If you have an IRA account, for example, you have $250,000 in coverage on the IRA plus $100,000 on your individual accounts.
Other exceptions to the $100,000 limit may also apply. The FDIC will answer questions about insurance limits at (866) 806-5919. That line, however, has been swamped recently.
Checks written on IndyMac accounts will be honored and direct deposit arrangements will continue as scheduled, government officials said.
Meanwhile, Sen. Charles E. Schumer (D-N.Y.), chairman of Congress’ Joint Economic Committee, held a news conference in New York on Sunday to defend himself against regulators’ accusations that he triggered IndyMac’s failure.
Schumer repeated his contention that the Office of Thrift Supervision, IndyMac’s regulator, had been “asleep at the switch.”
He said his public questioning of IndyMac’s financial health in late June merely stated the obvious.
“The administration is doing what they always do, blaming the fire on the person who called 911,” Schumer said.
The loss-ridden mortgage lender had faced an outflow of deposits since June 26, when Schumer made public a letter he sent to regulators saying he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”
On Friday, the Office of Thrift Supervision said in its statement announcing the seizure that “the immediate cause of the closing was a deposit run that began and continued” after Schumer went public with his concerns.
The FDIC estimates that IndyMac’s failure will cost the agency $4 billion to $8 billion as it unloads bad loans and makes insured depositors whole.
Schumer on Sunday said his June 26 letter contained “no new revelations” about IndyMac.
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The Associated Press was used in compiling this report.
