Big IndyMac Loss, Lower Volume

Third quarter residential originations were 16,816 loans for $16.8 billion, falling from $22.5 billion the prior period and $24.0 billion a year earlier, according to a Securities and Exchange Commission filing today.

“We entered the third quarter as predominantly a non-GSE lender operating at near-record volume levels, and this business model disappeared virtually overnight.” Chairman and Chief Executive Officer Michael W. Perry said in the statement. “We have retooled our business model and become a viable GSE lender in just 90 days.”

More than half of the latest period’s activity was mortgage broker business, according to the report. Conduit production was $2.4 billion — sinking from $9.1 billion a year earlier, while the correspondent channel was responsible for $1.9 billion and Financial Freedom represented $1.1 billion. Other channels included retail, consumer direct and servicing retention.

Subprime, home equity lines-of-credit and second lien volume added up to $1.2 billion, falling from the prior quarter’s level of $1.6 billion, IndyMac said. The report did not reflect Alt-A metrics, but it did mention that virtually all credit risk for 2005 and 2006 Alt-A loans was laid off in non-investment grade and residual securities.

The Pasadena, Calif.-based company said its pipeline was $7.4 billion on Sept. 30, just over half the level on June 30.

The servicing portfolio ended the latest period at 192,629 loans for $173.9 billion, climbing from $167.7 billion on June 30, the filing indicated. Loans held for investment were $8.6 billion on Sept. 30. Subprime holdings were $0.1 billion at quarter’s end and the HELOC portfolio had a balance of $4.1 billion.

Delinquency of at least 30 days but excluding foreclosures was 6.77 percent at the end of the quarter on its portfolio, soaring from 5.23 percent at the end of the second quarter and 4.02 percent a year earlier.

Off balance sheet transactions related to mortgage securitizations were $76.4 billion at the end of September.

IndyMac said it employed 1,900 retail lending employees — up from 13 a year ago. Average full-time equivalent employees were 9,890 — higher than a year earlier.

A third quarter loss of $203 million was reported, starkly contrasting earnings of $45 million during the second quarter and $86 million a year earlier.

“While this loss is substantially higher than we had been forecasting, it was clearly not unexpected given the magnitude of the losses being reported by others in our industry and the recent decline in our stock price,” Perry said. “No one in the mortgage industry came away unscathed in the quarter, and we took $575 million, or $4.79 per share, in combined credit costs and spread widening charges.”

Perry admitted IndyMac could have avoided some of the fallout from the subprime crisis had it “not followed our major competitors and expanded so significantly during the housing boom, especially with respect to seconds, HELOCs and piggyback loans.”