Regulators chalk out plan to sell failed IndyMac by end of year

By Alan Zibel  |   2008-12-26  |     NEWSPAPER EDITION

FEDERAL regulators in the United States are moving to sell the remnants of failed IndyMac Bank before year end, mopping up from the second-largest bank failure this year.

It was unclear on Wednesday whether the government would sell off IndyMac as a whole or in pieces.

The Pasadena, California-based lender, which specialized in loans made with little down payment or proof of assets, went under in July as the US housing market bubble collapsed.

IndyMac had about US$32 billion in assets when it was seized by the Federal Deposit Insurance Corp and renamed IndyMac Federal Bank. Its collapse is expected to cost the federal bank insurance fund US$8.9 billion.

Final bids for IndyMac's assets were due December 15. The company has 33 bank branches in Southern California with about US$6 billion in deposits, about half of the company's total at the time of its failure.

Other assets include a US$176 billion loan servicing business, which collects mortgages and distributes them to investors and a reverse mortgage company, known as Financial Freedom. "We are expecting to announce a deal before the end of the year," said IndyMac spokesman Evan Wagner.

IndyMac was the second-largest bank to fail this year, which has seen the collapse of 25 federally insured financial institutions amid the tumult of the mortgage crisis and the recession.

Seattle-based thrift Washington Mutual Inc in September became the biggest bank to collapse in US history, with around US$307 billion in assets. It was acquired by JPMorgan Chase & Co for US$1.9 billion.

FDIC Chairman Sheila Bair has sought to make IndyMac a model for the rest of the mortgage industry, launching an effort to modify about 60,000 delinquent loans to more affordable payments. So far, about 7,500 IndyMac borrowers have received modifications.

Bair has called for the federal government to direct US$24 billion from the US$700 billion financial bailout to give lenders financial incentives to modify more loans and help more borrowers keep their homes.