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Feds close down IndyMac Bank

Event is fifth and biggest bank failure this year

By Matt Carter, Friday, July 11, 2008.

Inman News

In the biggest bank failure of the housing downturn to date, federal banking regulators today closed IndyMac Bank FSB, naming the Federal Deposit Insurance Corp. as conservator.

The FDIC said it will transfer insured deposits and "substantially all the assets" of IndyMac Bank, to a newly created successor, IndyMac Federal Bank, which will be operated by 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. Depositors of IndyMac Federal Bank FSB will have no access to online and phone banking services this weekend, but will regain access to them on Monday.

IndyMac was one of the nation's largest independent mortgage lenders, and had been hard hit by delinquencies and foreclosures. Parent company IndyMac Bancorp Inc. announced Monday that it was no longer considered "well capitalized" by regulators and had stopped making most mortgage loans (see story).

In a statement, OTS Director John Reich said the immediate cause of the closing of IndyMac Bank FSB was a run on deposits that began when a June 26 letter Sen. Charles Schumer, D-N.Y., sent to federal bank regulators voicing concerns about the thrift's "financial deterioration" was made public. Schumer said IndyMac posed "significant risks to both taxpayers and borrowers" (see story).

In the 11 business days following the public release the letter, Reich said depositors withdrew more than $1.3 billion from their accounts.

“This institution failed today due to a liquidity crisis,” Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process.”

OTS said IndyMac is the largest thrift it regulates to fail and according to FDIC data is the second largest financial institution to close in U.S. history.

IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, including 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.

The FDIC will pay uninsured depositors an advance dividend equal to 50 percent of the uninsured amount. Based on preliminary analysis, the estimated cost of the resolution to the Deposit Insurance Fund is between $4 billion and $8 billion.

In a statement, American Bankers Association president Edward Yingling called it "a sad day for IndyMac" but said insured depositors "should know that their money is safe. The FDIC insurance fund is huge, with more than $52 billion in assets to protect bank depositors. In this year alone, the fund will add an additional $5 billion from assessments on banks and interest earnings."

The FDIC said IndyMac Bank is the fifth FDIC-insured failure of the year. The last FDIC-insured failure in California was the Southern Pacific Bank, Torrance, on Feb. 7, 2003.

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 p.m. to 9 p.m. (PDT), and then daily from 8 a.m. to 8 p.m. thereafter, except Sunday, July 13, when the hours will be 8 a.m. to 6 p.m. Customers also may visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/IndyMac.html for further information.

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Submitted by Ginny McGonigle on July 11, 2008 - 4:25pm.

Wow! Is the first thing that comes to my mind right now. I think we are in for very rocky times ahead in the lending industry. It is already very tough to find to find qualified buyers loans - I don't know where this is all headed.

Ginny McGonigle
http://Westsidehomefinders.com

 
Submitted by on July 11, 2008 - 4:55pm.

That was fast.

 
Submitted by on July 11, 2008 - 4:57pm.

And the "Great Correction" continues.

http://TheGreatCorrection.com

 
Submitted by chis eliopoulos on July 11, 2008 - 5:01pm.

To ones that wonder where this going the answer is no where.
Several banks will fold (rightfully so) the politicians will impose a bunch of worthless "consumer protection regulations"to look that are doing something,as none of them has the guts to take on the banking industry,(FDIC has more than 52 Billions in place to bail them out),and in about ten years from now we will be in the same place again.
Have you had any experience making a short sale with any of these great institutions?
Have you had any experience placing an offer on a property they own?
They have no clue how to deal with it all they care is,that the huge paper work load (that covers them) is done.
Sorry if you don't like what I'm writing here but it happened many times in the past.The reason is, that no matter what the tax payers are footing the tab therefore who cares (the taxpayers don't seem to care).

 
Submitted by on July 11, 2008 - 5:06pm.

"Have you had any experience making a short sale with any of these great institutions?"

Did two short sales with IndyMac. But they were no more (or less) excrutiating than short sales with any other clueless bank.

Jay Thompson
Broker / Owner
Thompson's Realty

Blog: www.PhoenixRealEstateGuy.com

.

 
Submitted by Robert Aloysius on July 11, 2008 - 5:14pm.

This is the begining of the transition to a new currency, "The Ameros" as outline in the ("NAFTA") North American Free Trade Agreement. This will also include the highway through the center of the United States to Canada from Mexico. They will also iradicate our 'borders' and make us all one BIG happy family.

 
Submitted by Michael Espiritu on July 11, 2008 - 5:26pm.

This should not be a surprise to anyone. This has to happen and more will follow.
What is the big shock????
Michael Espiritu
Broker
Copeland Wealth Management

 
Submitted by on July 11, 2008 - 5:41pm.

No shock here but I agree with fellow bloggers, the banks HAVE to come up with a plan to work on short sales. It is impossible to get them done. I recently presented a contract to Countrywide that was almost 80 cents on the dollar under short sale and they turned us down. Countrywide then foreclosed and now has the property listed at 50 cents on the dollar. I find this to be unbelievable. The inmates are running the asylum. No one can make a decision and when they do...it is wrong. Investors should revolt.

 
Submitted by Pasadena Real Estate Agent on July 11, 2008 - 5:43pm.

It its incredible what is happening to Countrywide and now IndyMac I think this is one of those times where the goverment has to interfiere and put the green backs into circulation. Is this one of those times when the powers that be transfer wealth in a mass scale?

Pasadena Real Estate | Pasadena Realtor | Pasadena Homes for sale | Pasadena Foreclosures

 
Submitted by Chuck Corriere on July 11, 2008 - 6:41pm.

It boggles my mind to remember that this all started by media telling the public the chicken little story...the sky is falling!

The banks are also reducing HELOC's and lowering credit card limits. which produces credit card holders with maxed out cards that lower their credit scores. Lower scores mean fewer buyers so we're not done with this crunch by a long shot.

It will take massive new funding for buyers to purchase the inventory that's on the market now. The government is the likely provider of that funding...even as much as I hate to see government get involved I'm resolved that it's the best option at this time.

Catch my show live streaming on www.ChuckDealMaker.com Saturday's 10am to 11am AZ Time (Pacific Time) I'll be taking your calls tomorrow about this very subject.

 
Submitted by on July 11, 2008 - 9:04pm.

After a shocking day on Wall Street and the fears of Fannie and Freddie - this is very big news.
Choosing today to make it happen after the news this morning with Hank Paulsen and President Bush news conference. Wow - do you think Schumer (D-NY) has any second thoughts for all of the comments about the bank over the last 11 days?

If you locked your mortgage rate yesterday you got a great deal. Many investors had their rates change about 5 times today. Chase moved at least 4 time and the latest move was large at .75 bps worst after the new hit about IndyMac.

I got this news flash at 4:36 pm and Chase made another rate change by 4:52 pm.

Due to an unfavorable market, effective 6:00 PM, there will be an immediate re-price, for the worse, of approximately .75 to 1.125. Keep in
mind, the change is approximate and may vary based on product and note rate.
The newly revised rate sheets will be available shortly. Any new locks will receive revised pricing.

Monday could be an interesting day for financial stocks.

http://www.goliveloans.com

 
Submitted by Sam Chapman on July 12, 2008 - 4:14pm.

I understand paying the insurance up to $100,000, but what is the 50% thing about? The feds subsidize farmers, waste money on pork right ane left and they are providing assistance to people who got loans when they should not have. The taxpayers in the end are going to get slammed by all of this.

Site Austin real estate.
Learn about Lake Travis real estate
Blog Austin Real Estate Blog

 
Submitted by Michael Taylor on July 13, 2008 - 4:27am.

Monday should one heck of a day for Wall Street and interest rates. I am pretty sure this was all but expected, but I am sure there will still be some very strong reactions.

Mike Taylor

Indianapolis Homes | Indianapolis Foreclosures

 
Submitted by Yvonne Jones on July 13, 2008 - 11:58am.

This was definitely a "manufactured crisis" in order to usher in the New World Order!!! Create a crisis and destroy the middle class, open the borders, and bring down the dollar!!!

The author of "The Age of Turbulence: Adventures in a New World" (oops...he forgot to say the word - "Order") What other "New World" is he referring to?

hummmmmmmmmmmmm, YES, HE "IS" THE AUTHOR OF THIS NEW AGE OF TURBULENCE!!!!! Yeah, he's a "genius" all right - not!

Here is dumb-ass greenspan's quote in his own words: "augment immigration of skilled labor, we pay the highest skilled labor wages in the world. If we would open up our borders to skilled labor far more than we do, ah, we would attract a very substantial quantity of skilled labor which would suppress the wage levels of the skilled because we skilled are being essentially subsidized by government meaning our competition is being kept outside the country, but if we bring in a number of workers to suppress the level of wages relative to the lesser skilled, we will reduce the degree of inequality, as I point out in the book....the level of real income of people is not what determines whether they are happy or not, it's the pecking order in the society...that's what we are, whether we like it or not"

http://www.booktv.org/program.aspx?ProgramId=8661&SectionName=&PlayMedia...

Greenspan has destroyed the American Dream; the American Economy! HE ALONE RAISED THE INTEREST RATES 17 TIMES before he retired - finishing his reign of destruction!!!!

And, then in February '07 the first lender- Freemont crashed along with everyone else!

Greenspan destroyed the dollar by creating a manufactured crisis in order to USHER IN THE NEW WORLD ORDER! He alone destroyed the middle class!

Greenspan's OWN WORDS (the last 15 min) - listen to it yourself on C-span 2 Book TV! He wants to "SUPPRESS THE AMERICAN WAGES"!!!

 
Submitted by Hanh Brown on July 14, 2008 - 4:37am.

Hanh Dang Brown

http://www.investorsloungeonline.com/

With record oil and commodity prices, declining home prices, a poor stock market, the uncertainty over the upcoming election, and continuing military operations in the Middle East, it is natural for the average citizen to be in an extremely foul and gloomy mood.

Compounding this by the Country Wide mess and now the IndyMac mess, over-stimulated and unwise lending practices for consumer borrowing, rejecting sound "short sale offers" ... geez dig your own grave and bring the consumers down with you.

 
Submitted by John Sabia on July 14, 2008 - 5:04am.

I think the short sale process is ridiculous - it should be handled like an REO. 2-4 months to wait for an answer? How many buyers have walked away on sales that could have been closed?

Fort Lauderdale Real Estate | Fort Lauderdale Condos For Sale

 
Submitted by Mark Bustamonte on July 14, 2008 - 5:29am.

Is Fannie and Freddie next? to concur with other posters, i dont understand the thought process for the short sale market in dealing with these lenders. we had great offers on the table only to have the lender deny them then turn around and sale the property for less then the original offer!!

 
Submitted by Benjamin Dona on July 14, 2008 - 5:58am.

The banks are not letting the properties go because they have already taken the write-offs on their books and are just waiting for the government (re: US taxpayers) to bail them out.

Florida Real Estate | Southwest Florida Blog

 
Submitted by Richard Dale-Mesaros on July 14, 2008 - 5:58am.

I know I'm preaching to the choir here and there must be THOUSANDS of investors who have experienced the very same scenario with Countrywide and other banks when doing a short sale. This is when the bank won't discount any less than 80c on the dollar, then sells it MUCH later through a Realtor at 50c on the dollar.

I've even said to a loss mitigator who was refusing my offer: "OK, why don't we follow this through, all the way to the final sale with a Realtor (after the auction, several months of holding costs and a commission)and see how your bank made out compared to my original offer?" The loss mitigator responded with "I don't care... once it becomes an REO, it's out of my department."

To give a real example, Countrywide were owed $220,000 on a house that was worth really around $159,000 in its' current condition - I had a retail buyer willing to pay $179,000 on a short sale and the bank refused it. I followed the property to final sale once the bank had taken it back at auction, listed it with a Realtor for several months and finally sold it through the Realtor for $96,000. Unbelieveable.

Here we are in 2008 and this type of madness is still occurring - the government should listen to investors who are out there seeing this stuff first hand!

Yours in disbelief,

Richard :)
Chief Deal Weaver
www.BlackWidowNetwork.com

 
Submitted by Steve Simon on July 14, 2008 - 6:21am.

The thoughts of Steve Simon, www.stevesimon.us

Well the system is working so far, but this is, as far as I can see, just the beginning of some very rough times.
I doubt if this period in our history, "The Great Real Estate/ Mortgage Crash", will be short lived!
The fires that rage in california are fueled by underbrush and warm winds; the fuel for this crisis was very poor lending practices, speculation at stupid levels, and worst of all a non-existant energy policy exposing us to the worst type of commodity price manipualtion ever seen.
I don't think we are doomed, or that this is the end of the Free World, but I do think we are facing a few years on the rocky bottom of economic pain. It will take multiple factors to bring the US economy out of this condition; legislation, determination and technology. Some of these things are many months away, some years away...
In the meanwhile one might as well learn about real estate and finance so that they can take advantage of these areas when the opportunities return!

 
Submitted by on July 14, 2008 - 10:49am.

There is no surprise that all these banks are going under. They were lending to anyone who had a pulse. It was crazy!!

I am not sure all the blame should go to the banks. The consumers are just as guilty in this one as well. Many were lying on there loan applications and inflating there income just to get a home they could not afford in the first place. I think there is plenty of blame to go around. Hopefully, both the consumers and lending institutions will be a little smarter next time around.

Jeff Manson
American Dream Realty
46 Hoolai St.
Kailua, Hawaii 96734
808-792-7040
Personal: Hawaii real estate agent
Company: Hawaii real estate search

 
Submitted by on July 17, 2008 - 5:58pm.

A smart person learns from their own mistakes. A wise person learns from others.
Time to be wise.

Your Friend,
Utah Dave

www.UtahDave.com