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World's Largest Mortgage Providers Teeter On The Brink Of Collapse

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From Wednesday


NEW YORK (Reuters) - Standard & Poor's on Wednesday slashed its ratings on IndyMac Bancorp Inc (IMB.N: Quote, Profile, Research) deeper into junk, citing the mortgage lender's mounting nonperforming assets and impaired creditworthiness.

S&P cut IndyMac's counterparty credit risk rating to "CCC," just a few steps above default, from "B," the fifth highest junk level, and said it may cut them again.

"We took this action because we believe that IndyMac's weakened financial profile and exposure to deteriorating housing markets leaves its creditworthiness severely impaired," S&P analyst Robert Hoban Jr. said in a report.

IndyMac, the largest independent publicly traded U.S. mortgage lender, said on Tuesday that depositors had been withdrawing cash at an "elevated" pace since a key U.S. senator questioned its ability to survive the housing crisis.

The lender had specialized in "Alt-A" loans that often go to people who cannot document income or assets. It ran into trouble when the market for nontraditional loans evaporated.

IndyMac on Monday said it would eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well capitalized."

IndyMac's nonperforming assets had already risen to $2.1 billion as of March 31, 2008, only slightly less than the company's adjusted total equity plus reserves, and they are expected to increase, according to S&P.

"We are concerned that the size and pace of credit deterioration and increasingly high charge-off levels have greatly impaired the thrift's ability to overcome its still-mounting asset-quality problems," the rating firm said.

S&P said it currently sees "little upward momentum" to IndyMac's ratings and said further downgrades could be triggered by the lender's worsening financial position, any regulatory actions or further deterioration in the housing and mortgage markets.

The outlook, which indicates the likely direction of the rating over the next two years, could return to stable if credit loss levels abate and the company returns to a modest level of profitability and maintains adequate capital and liquidity levels, S&P added.


America's regulators were last night shoring up the country's financial defences, after one of the biggest bank failures in US history sparked fears about the viability of the world's largest mortgage providers.

The Northern Rock-style collapse of California's Indymac Bank, which had assets of $32bn (£16bn), came amid speculation that regulators are also preparing to step in to save the two federally-backed finance houses known as Fannie Mae and Freddie Mac, which together have commitments of $5 trillion, amounting to half of America's mortgage book.

Government officials closed down Indymac late on Friday, citing a massive run on deposits by worried customers. All 33 branches of the Pasadena-based bank closed three hours early, locking out hundreds of jittery investors hoping to withdraw their savings before it went under.

Amid chaotic and often angry scenes, it emerged that Indymac will reopen tomorrow as Indymac Federal Bank. According to a two-page notice taped to branch doors, it had been in an "unsafe and unsound condition" and was unable to meet continued demand by customers for their deposits. The Federal Deposit Insurance Corporation, a government regulator, will guarantee all deposits of up to $100,000 – a commitment that may nonetheless leave more than 10,000 savers out of pocket

Indymac, known ironically as a "thrift" bank, becomes the second-largest savings firm in US history to go under, after the Continental Illinois National Bank and Trust Company, which collapsed in 1984. The latest failure was caused by massive losses in the so-called "foreclosure crisis", which has seen huge numbers of property owners defaulting on mortgages taken out at the height of the property bubble.

Many sub-prime borrowers unable to meet their mortgage payments had their homes reclaimed by the banks, who sold them off to the highest bidder. When the housing market was rising, this allowed banks to recoup their losses. But with house prices now down between a quarter and a third from their peak – and still falling as the market becomes flooded by bank-owned properties – the markets are not far from full-scale panic.

IndyMac (according to the article) specialised in Alt A, HBOS has a 7.2bn Alt A exposure (March 2008, http://www.telegraph.co.uk/money/main.jhtm...ukbanks118.xml)

Not sure if they have the geographical split of that 7.2bn ( IndyMac- California http://business.timesonline.co.uk/tol/busi...icle4319910.ece )

Edited by Ash4781

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I did a search on back posts for IndyMac.

Car crash waiting to happen.



Greenspan says ARMs might be better deal

By Sue Kirchhoff and Barbara Hagenbaugh, USA TODAY

WASHINGTON — Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.

In a standing-room-only speech to the Credit Union National Association meeting here, Greenspan also said U.S. household finances appeared generally sound, despite rising debt levels and bankruptcy filings. Low interest rates and surging home prices have given consumers flexibility to manage debt, he said.

"Overall, the household sector seems to be in good shape," Greenspan said.

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