IndyMac Bancorp Inc. is laying off 400 employees around the nation after second-quarter loan volumes fell 12 percent from the previous quarter.
“The reality is that the mortgage market continues to be very tough right now, and we recognize that we must take action in order to protect our business and remain competitive,” Chief Executive Officer Mike Perry said in an e-mail to employees that was posted on the company’s official blog.
The layoffs represent 4 percent of the company’s workforce, and are taking place mainly in operations and enterprise process and technology (EPAT). Some employees in centralized and regional mortgage operations where IndyMac has excess capacity are also losing their jobs, Perry said, in positions ranging from customer account managers to funders and post closers.
IndyMac has a “generous” severance package that will provide the laid-off workers with two weeks to 12 months of pay, he said. The layoffs will save IndyMac $30 million a year after a $6.5 million charge in the third quarter.
In a Securities and Exchange Commission filing, the Pasadena-based lender said it had completed the sale of a branch office in that city for $116 million, and signed a 10-year lease agreement with the new owner. The sale and leaseback will produce a $60 million gain for IndyMac over the term of the lease, the company said.
IndyMac is expanding a home loan servicing center it leases in Austin in order to increase staffing from 200 people to 395, the Austin Business Journal reported Wednesday.
IndyMac, which specializes in Alt-A lending, saw the volume of loans made drop 17 percent after eliminating 80/20 piggyback loans in favor of first-lien loans with mortgage insurance and higher loan-to-value ratios, Perry said. Piggyback loans require the processing of two loans in each transaction, and IndyMac is seeking to cut its costs of funding each loan.
The layoffs and efficiencies gained by new technologies will allow IndyMac to cut operating costs per funded loan to $776 per loan by the end of the year, compared with $918 today. The goal is to drive the cost per funded loan to $572 by the end of 2008.
“These cost savings will both be passed on to our customers, which is critical for us to remain competitive in the mortgage business, and also help to restore our profitability, which has suffered in the current downturn,” Perry said.
In April, IndyMac said only 4 percent of total loan production in the first quarter of 2007 involved borrowers with FICO scores of less than 620 — generally considered “subprime” — and loan-to-value ratios on most of those loans was at or below 80 percent.
But recent worries that problems with delinquencies and defaults among subprime loans will spread to Alt-A lenders prompted a Lehman Brothers analyst to downgrade IndyMac’s stock.
In April, IndyMac reported that only 20 percent of the loans it made in the first quarter of 2007 were “full documentation” loans in which it verified the borrower’s income, employment, assets and credit history.
IndyMac said it had analyzed 84 percent of its loan production for the period using Standard & Poor’s LEVELS model, which predicted 2.43 percent of loans produced in the first quarter of 2007 would end up in foreclosure. The analysis excluded second-lien, home equity line of credit, and reverse-mortgage loans.
At the time, the lender said credit losses related to loans held for sale increased to $24.1 million during the first quarter, compared with $17.7 million in the fourth quarter of 2006.
The company will report results for the second quarter on July 31.
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