IndyMac Bancorp Inc. (IDMC.PK), Thursday filed for bankruptcy protection with the United States Bankruptcy Court for the Central District of California, after the Federal Deposit Insurance Corporation seized the troubled Mortgage Lender early July. The action followed a massive deposit run by customers that left the bank cashless. The banking industry was expecting IndyMac's liquidation as it has been severely affected by mounting losses due to the housing market collapse and resultant foreclosures. While filing for bankruptcy protection, IndyMac said it expects the court to promptly appoint a bankruptcy trustee.
Pasadena, California-based IndyMac specialized in Alt-A mortgage loans to consumers who are more credit worthy than subprime borrowers but usually doesn't have complete documentation of income or assets required for availing prime-rate loans.
Early July, the Office of Thrift Supervision seized IndyMac following the bank's unsuccessful attempts to raise capital, marking the second largest closure in the U.S banking history. FDIC, in its fifth seizure this year, took over IndyMac and established a successor institution, IndyMac Federal Bank for running the business.
IndyMac, which had total assets of $32.01 billion and deposits of $19.06 billion as of March 31, 2008, joins Continental Illinois National Bank & Trust Co. and American Savings & Loan Association as failed financial institutions.
The bank in its petition with the court indicated assets ranging from $50 - $100 million, with liabilities of about $100 million - $500 million, and fewer than 50 creditors, whose claims have not been disclosed.
An unprecedented deposit run by customers is believed to have triggered IndyMac's collapse, which was boosted by an official public release by the Senator expressing concerns about the bank's viability. In the following days, depositors withdrew more than $1.3 billion from their accounts.
Closure of IndyMac, which had about $1 billion of potentially uninsured deposits held by nearly 10 thousand depositors, is expected to cost about $4 - $8 billion to the Deposit Insurance Fund, according to the FDIC. IndyMac had ceased to accept new loan submissions or rate locks in its retail and wholesale forward mortgage lending channels.
Prior to its closure, IndyMac eliminated about 3,800 jobs and projected a sequentially wider net loss in the second quarter. For the first quarter, the bank reported a net loss of $184.2 million or $2.27 per share, compared to a profit in the comparable quarter last year.
IndyMac was the second-biggest independent U.S. mortgage lender behind Countrywide Financial, which was recently acquired by Bank of America Corp. (BAC). Founded as Countrywide Mortgage Investment in 1985, IndyMac was spun off as an independent company in 1997. The bank came under fire recently when Senator Charles Schumer of New York commented that lax lending standards and deposits purchased from third parties left the bank on the edge of failure.
IDMC.PK is trading at $0.0760, down $0.0590 or 43.70%, on a volume of about 21.12 million shares. The stock has been moving in a range of $0.06 to $25.50 for the past twelve months, with a three-month average volume of about 6.46 million shares.
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