IndyMac Bank Cuts Jobs, Stops Offering New Mortgages

Mon, 07 Jul 2008 20:48:30 +0000
Mitchell Jaworski - AHN Reporter

Pasadena, CA (AHN) - IndyMac Bank said Monday they will cut 3,800 jobs and stop accepting new loan applications for most of its mortgage lending products.

The cut will reduce the banks workforce more than 50 percent, resulting in a 60 percent reduction in operating expenses, said Chief Executive Michael Perry in a statement to shareholders and employees.

"In light of the current environment and related deterioration of our financial position since last quarter, we have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping IndyMac safe and sound through this crisis period," Perry wrote.

The move stems from feedback by U.S. regulators working with the bank, who have deemed the company as no longer being well capitalized. Regulators directed the company to put a new business plan in place, Perry said.

On the heels of the most drastic staff cuts in company history, Perry said he asked the board to cut his $1 million base salary in half, along with financial performance bonuses.

IndyMac said it will still honor rate-locked loan commitments but will not accept most applications for wholesale and retail mortgages.

The bank expects second quarter losses to exceed the first quarter loss of $184.2 million or $2.27 a share. On average, analysts expect a loss of 96 cents a share, according to Reuters.

"IndyMac still has a sizable book of poorly performing loans. That's its biggest problem," said Jason Arnold, an analyst at RBC Capital Markets in San Francisco, according to Reuters. "Our best guess is that IndyMac winds up in receivership."

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