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FDIC slashes estimate of IndyMac's uninsured deposits

August 12, 2008 |  6:04 pm

From Times staff writer E. Scott Reckard:

It’s looking like substantially fewer big depositors will end up losing money in failed IndyMac Bank.

John Bovenzi, who was named to head the Pasadena bank when the Federal Deposit Insurance Corp. took control of it July 11, said in a memo to the staff today that "it now appears that there were about $600 million in uninsured deposits" when the government seized the lender.

That’s 40% less than the FDIC’s original $1-billion estimate.

Bovenzifdic An FDIC spokesman said the reduced figure stemmed from the agency’s work since July 11 to identify jointly held accounts, trust accounts and other ways that customers had structured their deposits to stay within FDIC insurance limits.

IndyMac had about $19 billion in total deposits when it was declared insolvent.

The FDIC has paid uninsured depositors 50% of their money upfront. Whether they get back more will depend on what the agency can get for the bank’s assets as it sells them.

The FDIC originally estimated that IndyMac’s failure would cost the insurance fund $4 billion to $8 billion. Bovenzi didn't provide an updated estimate.

Two other highlights from his memo:

-- IndyMac is offering holders of home equity credit lines a rebate of 2% of their line of credit’s maximum, up to $1,500, if they pay off their unpaid balance and close down their line of credit. IndyMac has 27,000 such customers, Bovenzi said.

-- The bank has followed through on promises from FDIC Chairwoman Sheila Bair to stop foreclosure proceedings for owner-occupied homes pending a review of whether the loans can be modified to mutually benefit the borrower and the FDIC. More than 60,000 borrowers with loans serviced by IndyMac are 60 or more days behind on payments, according to Bovenzi, who said he would provide more details on the modification program soon.

Photo: IndyMac CEO John Bovenzi. Andrew Gombert / European Pressphoto Agency