Senator asks regulators to probe the financial health of IndyMac
The chairman of the congressional Joint Economic Committee asked U.S. regulators Thursday to scrutinize the financial health of Pasadena-based IndyMac Bancorp Inc. and suggested that the mortgage lender might be on the brink of failure.
IndyMac may have “serious problems” with its loan holdings, Sen. Charles E. Schumer (D-N.Y.) said in letters to the Federal Deposit Insurance Corp., the Office of Thrift Supervision, the Federal Housing Finance Board and the Federal Home Loan Bank of San Francisco.
“I am concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers,” Schumer wrote. The bank “could face a failure if prescriptive measures are not taken quickly.”
An IndyMac spokeswoman declined to comment.
The company’s stock tumbled 28 cents, or 26%, to 80 cents. The shares have plunged 97% in the last year.
IndyMac was the largest maker of “alt-A” mortgages -- home loans that were issued to people with good credit who fell short of meeting the standards for prime loans.
But demand from investors for alt-A mortgages dried up in the wake of the sub-prime crisis, forcing IndyMac to shift to making safer loans. As a result, 88% of the loans written by the company in May were eligible to be sold to or insured by Fannie Mae, Freddie Mac or Ginnie Mae.
But IndyMac loan volume in May was down 13% from the previous month, reflecting a worsening of the housing downturn. The company’s loan production is down by almost two-thirds in the last year, Schumer said.
In addition, the senator wrote, to fund its mortgages IndyMac has become more dependent on large bank deposits arranged by brokers on behalf of their customers.
Schumer this month asked the FDIC to raise the deposit insurance premiums for thrifts that rely on such brokered deposits, which he said had been used to “finance rapid and often irresponsible growth.”