IndyMac to cut 3,800 jobs and stop most mortgage loans

7/07/2008 - 21:56

By Jonathan Stempel

NEW YORK (Reuters) - IndyMac Bancorp Inc , one of the largest U.S. mortgage lenders, said on Monday it will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well-capitalized."

In a letter to shareholders posted on IndyMac's corporate blog, http://theimbreport.com, Chief Executive Michael Perry said the Pasadena, California-based company will no longer accept most applications or lock rates on retail and wholesale mortgages. IndyMac plans to honor existing commitments, he said.

Perry said IndyMac has complied with orders from regulators to submit a new business plan to improve its capital levels.

IndyMac said it plans to focus on its Financial Freedom unit, which provides "reverse" mortgages to older Americans, as well as its 33-branch IndyMac Bank unit, which has about $18 billion of deposits.

The job cuts amount to 53 percent of IndyMac's 7,200-person work force and will be made over the next couple of months, Perry said. IndyMac said it ended last year with 9,907 employees.

In addition, IndyMac expects its second-quarter loss to be larger than the $184.2 million, or $2.27 per share, it lost in the first quarter. Analysts on average expected a quarterly loss of 96 cents per share, according to Reuters Estimates.

IndyMac is the largest independent, publicly-traded U.S. mortgage company, following last week's roughly $2.5 billion purchase of Countrywide Financial Corp by Bank of America Corp . It joins more than 100 mortgage companies to curtail lending since the start of 2007.

IndyMac long specialized in making "Alt-A" home loans, which fall between prime and subprime in quality and which typically go to borrowers who cannot verify income or assets.

While IndyMac typically sold many loans it made, it was hit hard as mounting delinquencies and defaults caused the market for most nontraditional home loans to disappear.

IndyMac shares closed up 4 cents at 71 cents, New York Stock Exchange data show. They traded as high as $31.32 on July 9, 2007. The company announced the cutbacks after U.S. markets closed.

(Editing by Andre Grenon)

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