Free counseling Saturday for troubled IndyMac borrowers

When Pasadena's IndyMac Bank sent letters to 35,000 borrowers who had missed mortgage payments, offering a chance to rework the loan terms to make them affordable, it got an initial response from fewer than half the borrowers, as The Times reported Oct. 31.

The savings and loan, a specialist in "stated income" loans that was seized by federal regulators in July, is now hoping the borrowers will be more willing to talk over their options with loan counselors from nonprofit agencies.

IndyMac and the Federal Deposit Insurance Corp., which is now running the thrift, said today they are planning public sessions with such independent counselors for borrowers in the Los Angeles area and the Inland Empire. The counselors, including Spanish speakers, will be able to discuss IndyMac's aggressive effort to modify loans. IndyMac employees will be at the sessions as well to get the actual workout process rolling.

The first session, with counselors from the Neighborhood Housing Services of Los Angeles, is scheduled for 10 a.m. to 3 p.m. Saturday at the Van Nuys Civic Center, 6262 Van Nuys Blvd. The second will be in Riverside on Dec. 6.

To receive counseling, borrowers should bring paychecks or other documentation of their incomes, as well as documents itemizing their expenses and assets.

IndyMac spokesman Evan Wagner said the bank is mailing 4,000 invitations to this weekend's event to L.A. County borrowers who have missed mortgage payments. Borrowers who are current on their loans but are afraid of falling behind are welcome to discuss their situations as well, although their options are more limited, IndyMac said.

The modification program is designed to lower payments on first mortgages to 38% of borrowers' incomes by reducing interest rates, extending loan terms and, in some cases, charging zero interest on part of the loan balance.

Given the lack of documentation on typical IndyMac loans, it's probable that many borrowers are afraid of getting in trouble because their loan applications overstated their earnings. But Wagner said not to worry: "At this point, we don't care about that."

Borrowers unable to attend the sessions can obtain more information by calling (877) 908-HELP.   

-- E. Scott Reckard

       

   

Cost of IndyMac bailout: Worse than the worst-case scenario

When the federal government seized IndyMac in July, it estimated the failure would cost the FDIC's insurance fund somewhere between $4 billion and $8 billion. Yesterday the FDIC said the cost will be even worse than its previous worst-case-scenario estimate: $8.9 billion. 

That's pretty significant -- banks and thrifts are regulated, they are not supposed to be mysterious; and now we learn the IndyMac failure will be even more expensive than the government's most pessimistic estimate, which was made just six weeks ago.

From this morning's L.A. Times: "That figure increased after the agency, which now runs the bank, performed its own valuation of IndyMac's assets and also discovered that more deposits than initially estimated were covered by insurance, said Diane Ellis, the FDIC's associate director of financial-risk management."

The IndyMac news is contained in a larger story, the FDIC's report that "the number of troubled U.S. banks shot up 30% in just three months."

Analysis: The news flow on banks, bad loans, and the availability of mortgages remains very negative. It is hard to cobble together a case for a stabilizing housing market during a time of continued deterioration in the financial industry. In three words, money is tight. True, it is always darkest just before the dawn, but sometimes it is dark because it is the middle of the night. I think Sheila Bair, the head of the FDIC, is correct: "We don't think this credit cycle's bottomed out yet."

-- Peter Viles
Your thoughts? Comments?
Photo credit: Associated Press

FDIC: New 3% mortgage rates for some IndyMac borrowers

The FDIC today announced plans to help thousands of IndyMac borrowers modify mortgage loans, in some cases at remarkably generous terms. LATimes.com: "The regulators operating failed IndyMac Bank said Wednesday they would try to modify about 25,000 troubled mortgages by slashing interest rates to as low as 3% for five years, extending payments over 40 years and in some cases charging interest on only part of the loan balance."

The New York Times reports the FDIC's modification plan is "a model it hoped other banks and collection companies would adopt to stem a wave of new foreclosures in the nation’s weakened housing market."

Noting that the program is for borrowers who are behind in their mortgage payments, Calculated Risk observes, "This seems to provide an incentive for IndyMac borrowers to stop making their mortgage payments until they are 'seriously delinquent or in default'. Then the borrower -- especially Alt-A borrowers who stated their income originally -- would apply for a loan modification based on their actual income. The borrower could then receive an interest rate reduction and principal forbearance."

--Peter Viles
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Bloomberg News

Federal grand jury in L.A. probes 3 local lenders

Lender woes continue to mount.

Richard Schmitt reports today that a federal grand jury in L.A. has started probing three fallen hometown lenders and their subprime loan activities.

Subpoenas have been issued in recent weeks and months to Countrywide Financial Corp., which is now part of Bank of America, New Century Financial Corp., which is under Bankruptcy Court protection and IndyMac Bank, which was seized by federal regulators two weeks ago.

The question seems to be whether fraud and other crimes contributed to the national mortgage debacle. But several sources quoted by Schmitt suggest that the complexity of building cases against the companies may be very difficult for the feds to make.

"What they may find is a lot of incredibly sloppy practices that are not necessarily criminal," says Bert Ely, a Virginia-based banking consultant.

A Business section feature on Newport Beach-based Downey Savings & Loan sets up the thrift's dismal news today of another quarterly loss and a growing number of bad loans on its books. The results sent the CEO and board chairman packing.

Some lenders seem to be dealing with their builder clients as they are their home-loan customers. The Times' Peter Hong talks to some local builders who say that banks are making it difficult for them to work out their faltering loans, which could lead to defaults and bankruptcies.

Many builders will go under, [Barratt American president Mick] Pattinson said, because "banks aren't supporting businesses that supported them for decades."

Maybe the building industry will need its own congressional rescue similar to the one the White House has now agreed not to veto. The House housing rescue bill approved yesterday would stave off foreclosure for hundreds of thousands of homeowners.

-- Annette Haddad

Photo credit: Mark Boster / Los Angeles Times

Questions? Comments? Email annette.haddad@latimes.com

WaMu wary of IndyMac cashier's checks

More strange doings tonight surrounding the failure and federal takeover of IndyMac: some rival banks are refusing to honor cashier's checks written by IndyMac -- even though those checks are backed by the federal government.

John Bovenzi, the FDIC official now running IndyMac, tells the Los Angeles Times today he is "deeply troubled by reports that there are financial institutions that are refusing to honor or are placing excessive holds on IndyMac Federal checks."

On latimes.com tonight: "Sheryl MacPhee, 46, said she liquidated a certificate of deposit at IndyMac's San Marino branch Tuesday morning after a two-hour wait. She then took the cashier's check to a Washington Mutual branch in South Pasadena to deposit. 

"MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told."

More: "WaMu spokeswoman Olivia Riley declined to discuss details of the bank's check policies. 'We have a check hold policy that takes into consideration a variety of factors,' she said. 'WaMu is accepting checks from IndyMac customers; however, depending on the specifics, funds will be subject to an extended hold period.'  Wells Fargo said it too was placing extended holds on many IndyMac checks as a precaution.

"Officials at the Office of Thrift Supervision, WaMu's chief regulator, are investigating the complaints about the checks, OTS spokesman William Ruberry said." 

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News
 

AP: FBI investigates possible fraud at IndyMac

Breaking news from the AP: "The Associated Press has learned that now-defunct IndyMac Bancorp Inc. is under investigation for possible fraud in connection with home loans made to risky borrowers.

More: "It was not immediately clear how long the FBI's probe of the bank has been ongoing. The investigation is focused on the company, which was taken over last Friday by the FDIC, and not individuals who ran it, according to a law enforcement official who was not authorized to speak publicly about the investigation."

-- Peter Viles

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Photo: Employees of Federal Deposit Insurance Corporation leave the IndyMac Federal Bank headquarters in Pasadena on Monday. Credit: Associated Press

Run on IndyMac turns tense in Encino

From LATimes.com this morning: "Los Angeles police were dispatched to an IndyMac branch in Encino this morning when customers waiting to withdraw money became agitated after several people tried to cut in line on the second day of the failed institution's federal takeover. Police told customers to remain calm or face arrest as they tried to withdraw their money."

The story says people lined up at the Encino branch of IndyMac Federal at 1:30 a.m. today.

Bloviation: These are unusual times -- police called to maintain order at a failed bank in a relatively wealthy section of Los Angeles?  Think of the events of the last 10 days or so -- the death of IndyMac as a mortgage lender, its failure as a bank, the run on the bank yesterday and today, the crisis of confidence in Fannie and Freddie, the Fed's new rules banning certain mortgage products. These are not consistent with bringing confidence, and buyers, into the housing market. These are consistent with caution and financial fear.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: L.A. Times

A morning run on IndyMac Federal

This is Santa Monica this morning, where about 100 customers were lined up when the IndyMac Federal branch on Wilshire opened for its very first day of business. Judging by what I saw and heard, a number of customers have decided not to do their banking with the federal government.

"We're gonna close a couple of accounts," Jack Freed, of Stevenson Ranch, told me. "We're just nervous. Not that any other bank would be any better, but as least they haven't been taken over by the FDIC."

The line looks shorter than it is -- it takes a left turn and snakes back into an alley, which at least offers some shade. I spoke with four customers, all were cleaning out their accounts. One guy figured he would lose $50,000 -- he says a teller had told him his money would be safe as long as no single account held more than $100,000.  The guy holding the umbrella and sitting down near the left says he was first in line -- at 3:50 a.m.

Click here for more on nervous customers pulling cash out of IndyMac.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: L.A. Land

Feds freeze HELOCs at IndyMac

A news item from Tom Petruno's Money & Co. blog: The new government management at IndyMac has frozen all home-equity lines of credit, as well as lines of credit to commercial contractors.

From Money & Co.: "Customers with home-equity credit lines will have their accounts frozen and 'reviewed on a case-by-case basis,' according to the FDIC. That’s a move by the agency to make sure its losses on the bank’s loan portfolio don’t balloon from the FDIC’s current estimates."

More: "Lines of credit to commercial construction contractors also will be frozen pending a review, but construction loans made to individual consumers won’t be affected."

Analysis from master of the obvious: The many readers who have complained here about similar HELOC freezes by other lenders will find the government's action disappointing. It's a pretty clear government endorsement of the practice of freezing HELOCs.  The readers on the other side of the argument, who have applauded banks for freezing HELOCs, will wonder: Why hadn't IndyMac's previous management already frozen these lines of credit?

Your thoughts? Comments? E-mail story tips peter.viles@latimes.com.

Photo credit: L.A. Land

Feds cite Schumer in collapse of IndyMac

An important angle in the IndyMac failure that may get lost in ominous headlines tonight and tomorrow: federal regulators pointedly cited U.S. Sen. Charles Schumer, D-N.Y., in explaining the bank's failure. In simple language, federal regulators blamed Schumer for a run on the bank.

Here's from the press release issued by IndyMac's regulator, the Office of Thrift Supervision: "The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositors’ demands in the normal course of business and is therefore in an unsafe and unsound condition. The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.

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

Schumer's response? In an e-mail quoted by Bloomberg News, he says: "If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today ... Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''

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E-mail story tips to peter.viles@latimes.com.
Photo Credit: www.schumer.senate.gov; Note: This replaces an earlier photo showing Sen. Schumer with his New York colleague, Sen. Hillary Clinton; many readers found the choice of the photo inappropriate.