Feds to freeze IndyMac’s home-equity credit lines
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The Federal Deposit Insurance Corp. today provided more guidance for IndyMac Bank customers who are awaiting the bank’s reopening on Monday, after it was declared insolvent on Friday and seized by the government.
Some key points from a news conference the FDIC held today, as relayed by Times staff writer Kathy M. Kristof:
--Customers with home-equity credit lines will have their accounts frozen and ‘reviewed on a case-by-case basis,’ according to the FDIC. That’s a move by the agency to make sure its losses on the bank’s loan portfolio don’t balloon from the FDIC’s current estimates.
--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.
--Customers of IndyMac’s reverse-mortgage subsidiary will continue to have access to their funds. Reverse mortgages provide elderly homeowners with either regular payments or a line of credit secured by their homes.
--For insured depositors, the bank will continue to honor existing terms on accounts, meaning the interest rates on outstanding certificates of deposit will be whatever IndyMac promised.
But that won’t apply to so-called brokered deposits -- funds brought in by Wall Street firms or other middlemen. Those deposits stopped accruing interest Friday, and once the FDIC identifies all the uninsured depositors the brokered deposits that are within insurance limits will be returned to their owners.
--Depositors with funds over the FDIC’s insurance limits will have access to 50% of the uninsured sum beginning on Monday. Whether they get any more of that money back will depend on how much the FDIC recovers in selling IndyMac assets in the next few months.