Indymac Bancorp
ndyMac Bancorp said Monday that it would abandon most home lending and would lay off more than half its 7,200 employees in a shuddering acknowledgment that its attempt to reshape itself as an old-fashioned lender had failed.
The Pasadena-based savings and loan said it was acquiescing to federal regulators who had booted it from the list of well capitalized banks and required a change in business strategy. The bank lost $184 million in the first quarter of this year and said its second-quarter loss would be still bigger. It lost nearly $615 million last year, the first annual deficit in its 23-year history.
Often lending to borrowers who didn’t documents their incomes, IndyMac grew its workforce to more than 10,000 and was the second-largest independent mortgage company before it began cutting back in late 2006 amid early rumblings of the avalanche of defaults that has buried the business.
IndyMac Chief Executive Michael W. Perry said attempts to work with investment bankers to raise capital, announced in March, had been unsuccessful. IndyMac shares, which traded above $30 last July, closed at 71 cents Monday, up 4 cents. IndyMac waited until the close of regular trading to make its announcement; the stock was moving lower in after-hours trading.
IndyMac will have just 3,400 workers when it is through shutting nine regional loan offices, including four in California, that made loans through independent brokers, and about 150 direct-to-customer retail offices in the West and Northeast. It wouldn’t break out where the job cuts would be.
“While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets,” Perry said.
Remaining employees will include about 1,100 loan-servicing employees handling billing, collections and foreclosures from Kalamazoo, Mich., and Austin, Texas. An additional 350 employees in Irvine and Kansas City, Mo., will continue to refinance loans for existing customers.
Financial Freedom, a reverse mortgage unit operating mainly from Irvine, Sacramento, and Atlanta, will continue to employ about 800, IndyMac said, while 400 more will stay on with the company’s Southern California retail and Internet banking operations. In addition, 500 employees will remain in portfolio management and administration, largely in Pasadena.
Perry also announced that IndyMac would reduce its generous severance program, which had provided one month of pay and continued health insurance coverage for each year of service. Instead, IndyMac will provide 30 days to 60 days of severance, he said. Affected employees with five or more years of service will receive a minimum of $20,000 in severance, he said.
IndyMac was started by Countrywide Financial Corp. founders Angelo Mozilo and David Loeb in 1985. It announced its cuts less than a week after Countrywide, the largest independent home lender, was taken over by Bank of America Corp., which in January stepped in as reports swirled that Countrywide might have to file for bankruptcy protection.
In his farewell address to shareholders last month, Mozilo predicted that the days of the independent mortgage specialist were at an end after more than 100 years. IndyMac is one of the last of such “monoline” home lenders, companies that once dotted Southern California, including a host of sub-prime lenders such as Ameriquest, Argent and Option One in Orange County, and Fremont, Aames and Ownit in Los Angeles County.
The few remaining Southern California mortgage specialists in business are struggling under rising defaults and shrinking capital cushions against loss, including Downey Financial Corp. in Newport Beach and FirstFed Financial Corp. near Playa Vista.