IndyMac – from player to putz with low standards

Check out this statement from Paul Miller, a Friedman, Billings, Ramsey & Co analyst regarding IndyMac: “Given continued home price declines, management’s higher loss estimates, recent ratings agency downgrades on the company’s mortgage-backed securities and the company’s decision to stop new mortgage originations, we do not believe that there is any value left for common shareholders,” Miller wrote. Once a major player in the Alt-A market, IndyMac is being hit from all sides and mortgage blues continue to pound the company.

Unfortunately Alt-A does not get the publicity that we see with subprime, but the Alt-A market is also pounded by foreclosures, the high cost of repairs and maintenance, and transportation costs. Supplies are going up and fuel surcharges are taking a toll on investors with Alt-A mortgages. IndyMac said it has $18 billion of deposits, of which more than 96 percent are insured by the Federal Deposit Insurance Corp.

Customers withdrew about $100 million of deposits late last month after Sen. Charles Schumer, a New York Democrat, raised questions to regulators about whether IndyMac could survive.

“IndyMac was one of the banks that was using relatively weak underwriting standards on the basis that housing prices would continue to rise in value,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco, in an interview. “With prices coming down, that became the bottom card in the house of cards built by these lenders.”