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Breaking News: IndyMac Closed By Federal Regulators
Updated: 7:57 p.m. ET — 7/11/08
Federal regulators from the Office of Thrift Supervision have seized and shut down IndyMac Bank, transferring its operations to the Federal Deposit Insurance Corporation (FDIC). Today’s move, which just happened moments ago, came on the heels of renewed concerns of a looming government bailout for the lending giant.
Indymac Bancorp, Inc. is the holding company for Indymac Bank, F.S.B., the largest savings and loan in the Los Angeles area and the 7th largest mortgage originator in the nation. Indymac Bank, operating as a hybrid thrift/mortgage banker, provides financing for the acquisition, development, and improvement of single-family homes. Indymac Bank also provides financing secured by single-family homes and other banking products to facilitate consumers’ personal financial goals.
Just this past Monday, IndyMac announced it had stopped making new loans and would cut up to 3,800 jobs. The bank reported a sharp increase in the number of depositor withdrawals following those announcements and remarks made by Senator Charles Schumer (D-NY) on the bank’s ability to survive the current mortgage and foreclosure crisis.
IndyMac is the second largest financial institution to close in U.S. history, and as one may suspect, today’s action may create further insecurity on Wall Street about mortgage backed securities (fraudulent and illegal loans and sloppy underwriting practices tend to make this sort of thing happen).
As the battle intensifies about IndyMac financial stability, a new report from the Center for Responsible Lending (CRL) provides evidence that the lending giant put itself in a hole by engaging in unsound and abusive lending during the nation’s mortgage boom. The report, “‘IndyMac: What Went Wrong?,” finds substantial evidence that IndyMac routinely made loans with little regard for their customers’ ability to repay the loans.
CRL’s interviews with former IndyMac employees and a review of lawsuits in 10 states indicate that IndyMac:
- Pushed through loans based on inflated appraisals and income data that exaggerated borrowers’ finances
- Worked hand-in-hand with mortgage brokers who misled borrowers about their rates and other loan terms and stuck them with unwarranted fees
- Treated many elderly and minority consumers unfairly
In CRL interviews and court documents, 19 former IndyMac employees describe an atmosphere where the drive to close loans ruled even when IndyMac’s own risk experts recommended against approvals. Most of the ex-employees who provided information for the CRL report were mortgage underwriters who were supposed to be making sure borrowers could afford the deals.
According to the FDIC, insured depositors and borrowers will automatically become customers of IndyMac Federal, FSB and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards and writing checks in the same manner as before. Depositors of IndyMac Federal Bank, FSB will have no access to on-line and phone banking services this weekend. These services will be operational again on Monday, July 14. Loan customers should continue making loan payments as usual.
Beginning on Monday, July 14, IndyMac Federal Bank, FSB’s 33 branches will observe normal operating hours and will continue to offer full banking services, including on-line banking..
At the time of closing, IndyMac Bank, F.S.B. had about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors. The FDIC will begin contacting customers with uninsured deposits to arrange an appointment with an FDIC claims agent by Monday. Customers can contact the FDIC for an appointment using the toll-free number above. The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount.
Stay tuned to Flipping Frenzy for more news and analysis on this breaking development. In the meantime, for additional information, the FDIC has established a toll-free number for customers of IndyMac Federal Bank, FSB. The toll-free number is 1-866-806-5919 and will operate today from 3:00 p.m. to 9:00 p.m. (PDT), and then daily from 8:00 a.m. to 8:00 p.m. thereafter, except Sunday, July 13, when the hours will be 8:00 a.m. to 6:00 p.m.
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