IndyMac Bancorp became the biggest retail bank to fall victim to the US mortgage crisis on Friday, as regulators shut down the Californian savings back after the markets closed because it was unable to raise the cash needed to make good the almost $900 million of losses it has suffered in the worst housing crisis since the Great Depression.
The Federal Deposit Insurance Corporation, which regulates the bank, said it would take over the running of the group from when it will be called IndyMac Federal Bank.
IndyMac specialises in so-called Alt-A mortgages, relatively high-risk homeloans which don't require borrowers to prove their incomes. It suffered badly as its home state of California ranked second among the US states in terms of foreclosures, which accounted for one in every 192 households in June, nearly three times the national average.
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Bloomberg:
IndyMac announced on July 7 that it was firing half its employees. The lender agreed to sell most of its retail mortgage branches to Prospect Mortgage, giving the Northbrook, Illinois based-company more than 60 branch offices with 750 employees. IndyMac also has a retail network with 33 branches and $18 billion in deposits, mostly insured by the FDIC.
The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a savings institution from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.
Under Perry's leadership, profit more than doubled from $118 million in 2000 to $343 million in 2006 amid the housing boom. The stock more than tripled over that stretch.
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