FDIC decides to Sell IndyMac

Pasadena, California, January 3: The Pasadena, Calif.-based IndyMac Bank seems to have come full circle. The belligerent mortgage lender collapsed in July last year thereby necessitating the need for the government to take charge of it. Barely six months down the line, the Federal Deposit Insurance Corp, has agreed to sell IndyMac back to a group of private investors.

IndyMac was destabilized by enormous losses on its portfolio of home mortgage loans. The mounting losses led to its collapse in July 2008, making it the second -largest bank failure in United States, that year. Since then, the FDIC has operated the bank as a government subsidiary, steadily closing down its operations.

The FDIC has already modified (read reduced) the interest rates of mortgages for 8,500 IndyMac customers. This entails a relatively easier monthly repayment for them. Another 9,500 adjustments are in process, as per the agency sources. Moreover, close to 28,500 borrowers are entitled and can benefit from such modifications.

A pleased John Bovenzi, the FDIC's chief operating officer said, "The FDIC and IndyMac staff accomplished a tremendous amount of work in a short period of time to help thousands of struggling homeowners stay in their homes."

The buyer IMB HoldCo may not be from the banking industry, but it sure has some big names associated with it. Steven Mnuchin, a former Goldman Sachs executive is leading the group. Veteran banking investor J. Christopher Flowers, computer maker Michael S. Dell and hedge fund manager John Paulson feature in the who’s who of the company.

FDIC claims that it got "considerable initial interest from potential bidders". According to the agency, IMB was “the least costly” to taxpayers, hence the choice. In fact, the entire banking industry finds itself in a quandary; therefore the private investors are seen as a chief source of needed money.

IndyMac had $32.0 billion in assets and $19.0 billion in deposits when it collapsed. As on date, the deposits are to the tune of about $6.5 billion. Whatever little value remains, lies in its network of 33 branches in the Los Angeles area, the reverse-mortgage unit and a $176.0 billion loan-servicing portfolio.