IndyMac Bancorp Inc. said Tuesday it would cut 24 percent of its staff — some 2,403 workers — and forecast that 2008 loan volume will fall to $43 billion, or less than half the business the alt-A lender did two years ago.
IndyMac said it will close regional wholesale mortgage centers in Tampa, Philadelphia, Boston, Columbia (S.C.) and Kansas City (Mo.) by the end of the quarter, consolidating their operations into 11 other regional centers around the country.
In an e-mail to employees, IndyMac Chief Executive Officer Mike Perry said another 500 to 1,000 layoffs could be required in the first half of the year in order to return the company to profitability. IndyMac must limit growth its balance sheet because it is unable to sell many of the prime, jumbo loans it originates on the secondary market, he said.
“The private secondary market remains virtually frozen,” Perry said, and the market suffered another setback in November when Fannie Mae and Freddie Mac tightened guidelines for loans they will purchase or guarantee (see Inman News story).
IndyMac’s loan pipeline fell 28 percent in December, to $7.7 billion, and the company is forecasting 2008 loan volume will decline by about 45 percent from last year, to $43 billion. That’s down from $92 billion in 2006, when housing markets had begun to cool but lenders were still able to sell loans in the secondary market.
Among the 1,881 workers facing immediate layoffs are 1,440 IndyMac employees and 441 workers at outsourced or temporary vendors located mainly in India, Perry said.
Another 470 members of the sales staff the company believes “will not be able to succeed and earn sufficient income” are slated to leave by March, and 52 other workers have already resigned since Jan. 1.
The IndyMac employees facing immediate layoffs include 366 sales staff who accepted a voluntary severance offer. The remaining 1,074 facing immediate dismissals are workers who turned down a similar offer in September, when IndyMac announced plans to cut 1,000 employees (see Inman News story).
Because those workers had been offered the voluntary severance program last fall, “we saw no utility in offering this program again,” Perry said.
The laid-off workers are eligible for severance packages that include one month of pay and one month of COBRA insurance coverage for each year of service. Permanent, non-sales staff will receive average severance and COBRA insurance payments totaling $18,358, plus unused vacation averaging $1,600 per employee, Perry said.
“How you act in times of adversity and how you treat people as they leave your company says a lot about what kind of a company you are and what your true values are,” Perry said of the severance packages, which, together with other expenses related to the layoffs, will cost IndyMac $25 million.
In the long run, IndyMac expects to save $136 million a year through the layoffs, or 14.8 percent of annual expenses at the rate of spending seen during the fourth quarter of 2007.
“What we see happening in our industry today is the direct result of our capitalist, market-based, free enterprise system, where resources (people, capital, etc.) are constantly being redeployed from industry to industry, often in an abrupt and gut-wrenching way,” Perry said. “The bottom line is that there have been too many resources deployed to the housing and mortgage markets for too long, and the markets are forcing these human and capital resources to be abruptly redeployed to other industries.”
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