Feds to freeze IndyMac's home-equity credit lines

The Federal Deposit Insurance Corp. today provided more guidance for IndyMac Bank customers who are awaiting the bank’s reopening on Monday, after it was declared insolvent on Friday and seized by the government.

Some key points from a news conference the FDIC held today, as relayed by Times staff writer Kathy M. Kristof:

--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.

--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.

--Customers of IndyMac’s reverse-mortgage subsidiary will continue to have access to their funds. Reverse mortgages provide elderly homeowners with either regular payments or a line of credit secured by their homes.

--For insured depositors, the bank will continue to honor existing terms on accounts, meaning the interest rates on outstanding certificates of deposit will be whatever IndyMac promised.

But that won’t apply to so-called brokered deposits -- funds brought in by Wall Street firms or other middlemen. Those deposits stopped accruing interest Friday, and once the FDIC identifies all the uninsured depositors the brokered deposits that are within insurance limits will be returned to their owners.

--Depositors with funds over the FDIC’s insurance limits will have access to 50% of the uninsured sum beginning on Monday. Whether they get any more of that money back will depend on how much the FDIC recovers in selling IndyMac assets in the next few months.

Comments

[JJ]

Wow.......the loss of wealth for employees and customers is staggering.

[bankerforyears]

This is what happens when a company answers to its shareholders (who demand unrealistic short term profits to pad their own wallets) instead of the community that they intended to serve.

[TegoV - Albuquerque Real Estate]

I am a Realtor and we saw this coming 3-4 years ago. So many bad loans were made… it’s sad that the bad decisions by a few are hurting so many people.

[gerry]

Never before has the United States been in such a dire predicament: endless war in Iraq, the stock market collapsing, the cost of food staples, gasoline and electricity skyrocketing and the banking and real estate industry imploding in slow motion.

At this rate, Bush will be leaving Obama the withered shell of the balanced budget economy Bush took over in 2001. There are no quick fixes now, as even Mother Nature seems to be angry at the USA, with massive floods in the Midwest, wild fires in California lightning strikes everywhere.

What next, storm caused tidal surges wiping out homes in the Hamptons?

[Ex-realtor]

I was a realtor for over 20 years. What has gone on these past few years is shocking. When buyers pay nothing at all at closing
they have nothing to anchor them to that property other than the hope of keeping their good credit. It is like a rental.
When banks allow this type of deal they are asking to be landlords.
Guess the taxpayers will end up being the landlords at this rate.

[Mark]

gerry, your ignorance is blatant. You presume way too much!

[Chris]

These sure are scary times .... I think anyone with money in ANY bank should watch on with great interest as to how the FDIC handles this.... i.e., to see if those people with insured deposits are fully compensated.

I have seen so many nasty comments on other boards .... People basically laughing at the plight of the depositors at Indymac -- comments like "well that's what they get for banking at an institution that dealt with risky mortgages" ...." Yeah, like this can't happen to other banks....

Heaven help us that this is an isolated incident and not the start of a domino effect....

[Jim]

No, this is what happens when the government in their "feel good" mentality says (insists) that these banks loan money to people that CAN'T AFFORD THEM!!

We have people taking loans and buying property that in the old days wouldn't be loaned $10K, let alone $500K.

[tragic]

I have been so over my head in all this mortgage mess and I don't even hold a position that is directly related to the mortgage industry. But yet I am losing jobs, clients (Indymac being one of them) and hope to all this. On top of it...wishing sometimes I never even owned a home in this hellish situation.

[D.Woodward Van Nuys.]

WELL!As the old saying goes,Youv'e got to pay the piper sometime.HA!HA! Thank you Mr Bush.

[Sean Harrington]

I was the market intel manager for IMB and left in July of '05. I currently live in Pasadena where IndyMac is headquartered. Just to quell a lot of the ignorant comments I see on these boards and mainly from the "Realtors", the mortgage markets are much more complex than listing a home on the MLS and receiving multiple offers over the asking price. The management at IndyMac is one that all employees of corporations could pick and point fingers at, yet the press fails to mention that the bank was a very socially conscious institution and was not focused on creating risky mortgages.

When the loan environment dictates the competitive stance other lenders were taking, there wasn't much of a tussle from the government on what could be offered to borrowers.

At one point, I was working on a loan program which was designed for undocumented citizens! More concerning than that, I was modeling the possibility of the program after several other small lenders had already began originating the loans. Contrary to popular belief, undocumented citizens are better borrowers than most of the borrowers with 700+ FICOS! Today, as in the 14th of July, an undocumented person can open a checking account at several large banks, and that just shows another hole in the system. If the banks can provide the ability to send money out of the country for them, then why do we need western union?! How does Western union make so much money...undocumented citizens sending hard earned money into the pockets of it's CEO. Don't agree...look up ITIN #'s and how easy it is to get one before you comment in your head.

As for Sen. Schumer's comments, what an idiot. I'm sure he hasn't had the career he intended and now he's all the rage! Really, his effect on the demise of IndyMac is saddening. Mike Perry, former CEO of IMB, is a brilliant mind and very capable business man who maybe was unable to revive the bank but now his name is tainted with failure instead of a Countrywide style acquisition due to some retard in government. Where did he originate his mortgage?!

I feel Schumer had a personal agenda which included bad blood with either Mr. Perry of possibly the board at IndyMac. Maybe we'll never know but it is important to get some of the very important issues about the mortgage meltdown out into the open. What I do know is, IndyMac was a beautiful example of innovation, growth, and well respected for the contributions to our armed forces (largest donation of calling cards for our troops), major contributors to United Way, and ultimately a leader in it's industry.

As a former employee of IMB, Countrywide, and BofA in my career, my advice to the government is to pull your head out of your ass because you let the lenders provide these loans and YOU ARE TO BLAME! We're paying ourselves with our own money and will be for several years to come as we bail out of our own bailout.

I say sell Alaska to China and use that cash! In current value based on the GDP and the1867 purchase of Alaska, we could sell it for the equivalent of the Fannie and Freddie disaster alone, $1.4 trillion!

[pearl2k]

"This is what happens when a company answers to its shareholders...."

Bankerforyears, you're blaming shareholders for bad management? C'mon. Blame yourself.

[Nikki]

This is terrible and I feel for those people that will not get all of their money back. What as slap in the face for those of us that actually DO SAVE. I'm glad that I didn't have money at this bank, but I do at other banks and it could've easily happened to any of me. It's wake up time folks.

I don't see how anyone could get happy from the current market conditions. We are all going to pay one way or the other, be it by higher taxes, higher cost for goods or job losses.

[Vito]

This isn't hard to figure out: Anything related to real estate is in the toilet.

Caused by folks buying things with borrowed money rather than from their own paycheck. It was like everyone in the US had a job that paid $500,000 a year.

I am really glad this is happening. Folks like me that are used to paying cash and not borrowing can finally or will be in the future, able to find affordable houses and cars and trucks.

Too bad the banks were greedy. The few folks who have not borrowed money but who have cash to invest are also getting screwed.

Glad the Bush administration is securing Freddie and Fannie. If this were not the case, folks would literally have to pay all cash for their houses. Wonder what the housing prices would be then? As far as I am concerned, Bush gave folks low interest rates and the banks and consumers got greedy and really screwed it up. Now BIG GOVERNMENT has to come in and bail everyone out. Interest rates should have always been 10-15 percent. But folks would have screemed at that also.

Again, good news here. At least my kids will be able to afford new houses.

Vito

[Henry]

This is the result of pure greed. Mortgage lenders allowing buyers to get into properties without any cash injection proof of income or verification of financial data provided, mortgage loan companies submitting fraudulent loan packages to earn commission, people siging loan documents on houses they know they cannot afford to pay for in the hopes of "flipping" it and earning equity dollars. This is just the first round folks. If you bought your home after 2005, 75 out of 100 homeowners now owe more than it is worth. I see at least two more rounds of foreclosures before we are done. Don't start looking for ewuity increases in you house before 2010 or later.

[Francisco]

I have a mortgage loan on a vacant lot, which was supposed to follow up with a construction loan (Dream Home Program).... This means that my dream home tumbles????....
hopefully the Feds will provide a similar program...

[August]

Thank Gawd you have those wonderful homeless shelters everywhere that meets the needs of all you dead beats! Wait until you have to go through their programs and you will know why the homeless veterans are blowing their brains out!

[Ivan]

Lets review the list of people who got us into this trouble:

(1) Republicans who believe the best kind of government is the one that interferes with the affaires of hard working citizens the least and doesn't burden them with unnecessary regulations.

(2) Crooks who believe the best kind of government is the one that interferes with the affaires of hard working crooks the least and doesn't burden them with unnecessary regulations.

(3) Crooked Republicans who believe the best kind of government is the one that interferes with the affaires of hard working crooked Republicans the least and doesn't burden them with unnecessary regulations.

[anonymouse]

Maybe, just maybe, house prices will become reasonable, we'll start building stuff, get our own energy from our own resources, and stop sending money off to people that hate us.

I'm sorry to see IndyMac fall, but they did have a major role in screwing the system up and we'll all be paying for it for many years. I suspect there will be many more with house prices diminishing so quickly.

[MattJ]

Can anyone explain why, if this is going to cost the FDIC 4-8 billion dollars as estimated, uninsured deposits are getting anything back at all?

[Tombstone Realty]

Well, I've lived within my own means, have no debt, but in no way do I think I'll ever be able to afford a house or anything like that.

First - it's been proven time and time again that those who play by the rules get nowhere, while my tax dollars go to bail them out. Including tax dollars paid on my 'savings'. I'll never get anywhere in this country if I keep reading the fine print.

Second - the dollar will be nearly worthless anyway. That's why there's no point in stuffing your mattress with them - unless of course you need to balance out that one dip in the mid upper corner.

[Gary]

When are people going to learn? Commercial banks have been biting the dust for decades. Look at the early 1980s. Ever heard of an established federal credit union going under because of bad loans & lousy management? It just doesn't happen. Credit Unions offer better rates across the board, don't nickle & dime account holders with multiple fees, and only care for their field of membership (read: customers). I haven't used a bank in over 35 years and have saved/gained thousands of dollars.

[Nick]

This is only the beginning. The FHA is still insuring 100% LTV loans which are certain to default. The housing market still needs to fall at least 15% nationwide, and more in stronger bubble areas. House prices are still far above comparable income rates. There's still at least $500 billion in bad loans in off balance sheet vehicles of investment banks (probably closer to a trillion). The government is still pushing bailout measures to prop up the market, which will be paid for by taxpayers when the market falls more. There are still many, many banks with enough bad loans to sink them, and the CRE collapse is still in process. Inflation has only begun to catch up with out of control spending, and we don't even have a socialist president yet.

What we're seeing now is literally the tip of the iceberg.

[John]

We are lower middle class family. Maybe we can afford a bigger or better house but we are happy with what we have. Maybe we could buy fancier cars but the one we have serve their purpose well. Maybe we could afford to send our daughter to private school but instead she attends public school and the money saved are being saved for her college. We cut expenses so we can save and invest in the future. Look at us now! The sacrifices we made are all for nothing. We are not gonna have big savings in the future, our house is worth what is was when we bought it, our investments are lower than what we put in. Let's be honest! This country is not for savers and responsible individuals. This country is for crooks, liars and criminals. And that's because we continue to re-elect career politicians instead of people who should represent our interests. I am done! Stick a fork in me! I am cashing out and moving all my money out of this sick country. Never again I'll put a 1 dollar into American institution. When I see government falling over themselves to help losers, I start packing. I hope I would be still a young man so I could start all over again, but I am not, and I am stuck here and on daily basis I see stupidity pushing more stupidity. I can't take it any longer.

[Bob]

IndyMac was spun off Countrywide to handle riskier Alt-A loans. The government and everyone who has read their 10Q knows they have been in trouble for over a year but did not do anything.

This article is from March 2007!

http://findarticles.com/p/articles/mi_m5072/is_13_29/ai_n24321498

Quote: "IF the subprime meltdown spreads into higher loan classes, Los Angeles-area lending giants Countrywide Financial Corp. and IndyMac Bancorp Inc. stand to get hit by what one lending expert calls the "law of reverse gravity.""

[Ivan]

Does a beaten cow really give more milk ?

If there is a moral to this whole real estate meltdown, then it is that when you beat down workers, the only real creators of wealth in a society, then they eventually stop "giving milk".

For the past 7 years, the Republicans have exported American worker's jobs to other countries, imported workers both "legally" and illegally to compete against them, destroyed unions, put health care out of their reach, put the cost of vacations out of their reach by doubling the price of gas, doubled the cost of food, not offered pensions and then destroyed their 401Ks when they unintendedly invested in crooked companies and a rigged market that converted bad mortgages into stocks that ended up in 401Ks through mutual funds -- when you do all that, then all those workers suddenly can't afford the one thing that they could previously afford -- a house.

AND NOW THE REPUBLICANS, WHILE FIGHTING AN INCREASE IN TAXES FOR THE RICH, ARE GOING TO HAND, THROUGH THE FEDERAL TAX SYSTEM, THE BILL FOR ALL THIS TO ORDINARY AMERICAN WORKERS AND FURTHER DESTROY, IN A VICIOUS CIRCLE, THEIR ABILITY TO MAINTAIN THE MARKET VALUE OF REAL ESTATE ?!!!

This is completely nuts !

[Vito]

Ivan:

Seems you do not like Republicans with your rant. Maybe you need to take a chill pill.

Just remember that it was Bush that kept interest rates low so that folks could buy houses, SUVs and big screen TVs. Folks as well as lenders got greedy and lent and bought more than they could afford. This is Bush's fault?

How so. Did he make you go out and buy that SUV that gets 10 mpg. Did he force you to take out that Liars Loan and state that you made 1M dollars a year when you only made 25k? To blame Bush is utter stupidity.

Folks were greedy and they got burned. Learn to live with it. If you had lived below your means and built a savings account, you would not be having any problems.

Vito

[John]

> Are you kidding? They got burned? They bought a house with a ZERO down payment then got a loan up to 125% of their house value, some of the money went to down payment some to buy a Hummer. Now, they walk away from their responsibility leaving the rest of us with worthless equities and their bills. We'll pay their mortgages, credit card bills and other car loans. How did they got burned?

[Kathy]

With 1/2 a million foreclosures already for the year..what are the banks doing to help others from ruining and devaluing communities...start with preventative medicine...look at the ARMS that are going to adjust in the next few years and freeze them..to bad for the lenders if you qualified that person at 3%, too bad for the investors if they don't get a return on their money..why should my tax dollars pay to bail them out? Let the lenders suffer with less money back..you enjoyed attaching pre payment penalities, you enjoyed "bribing" mortgage brokers with back door point payments, you enjoyed bundling up crap loans with good ones and selling them off to raise capital..now take your meds..I don't want my money paying for the greed of Wall Street...

[christian loriau]

This has been a long time in the making. How come the govt only intervenes now?
Christian Loriau