IndyMac Bank reaches out to nervous brokers reaffirming their commitment to wholesale mortgage lending

After IndyMac’s 3rd quarter earnings results and on the heels of the new IndyMac broker requirements many brokers were worried about their future with the company. IndyMac after all beefed up its retail team from double digits to over a thousand sales agents and said that they had ’sharpened the spear’. It seems to me (still) to be a play to up retail originations where quality concerns are less of an issue for investors vis a vis broker-originated loans. In an attempt to quell some of the jitters of the still-important broker community, Mike Perry CEO of IndyMac released this statement this evening.

From the Desk of Michael W. Perry
Chairman and Chief Executive Officer of Indymac Bank To our mortgage broker, mortgage banker and financial institution customers:I want to take this opportunity to emphatically assure you of our commitment to our mortgage broker, mortgage banker and financial institution customers and also to update you on Indymac’s financial strength during these challenging times.

Indymac’s Commitment to Our Broker, Banker and Financial Institution Customers

Let me just start by saying that our commitment to all of you as mortgage professionals runs deep. Indymac’s Mortgage Professionals Group (MPG), which services our mortgage broker, mortgage banker and financial institutions customers, has been the core earnings engine for Indymac throughout our history, and this group remains central to our plans to become a dominant player in the mortgage business. We remain fully committed to our MPG customers, while many other wholesalers have been pulling out of this market, most notably Bank of America in the last two weeks. As the ranks of mortgage wholesalers thin, your choice increasingly boils down to doing business with a stable and committed independent wholesale/correspondent lender like Indymac or a money center bank like B of A, whose commitment to this segment of the business could abruptly change at a moment’s notice.

While Indymac has recently established a retail presence, the reality is that it is nowhere near the size and scale of the money center banks. Importantly, there is no difference in the product line-up we have available to all of you versus what we offer our retail customers, and you get wholesale pricing on our products that should allow you to achieve attractive profit margins. In other words, our retail customers do not get pricing breaks that you can’t offer your own customers.

In a drive to serve you better, we’ve refined our MPG model in our 16 regions around the country. While other wholesalers are scaling back or centralizing virtually everything, we are further extending our decentralized structure and empowering our regions. Strong, decentralized leadership will be the center point to this new structure, as our regions will essentially operate as a collection of “self governing states” (balanced with a centralized oversight group), each led by an entrepreneurial-minded CEO with both strong business acumen and “best in class” mortgage knowledge. These regional CEOs will be…real CEOs. They will be Chief Executive Officers for their regions and have full responsibility for marketing, sales, operations and, at the end of the day, decision-making in a way that I believe will drive speed and service as a competitive advantage for both you and for Indymac.

Indymac’s Continued Financial Strength

While this week Indymac reported a third quarter loss, the bottom line is that no one in the mortgage business came out of the quarter unscathed (in fact, year-to-date over 170 mortgage companies across the country have failed), we performed better than almost every other company in the mortgage business, and our financial position remains incredibly strong. You can review our results in detail by clicking on the links below to our press release and investor presentation, but the bottom line is that:

Even with this quarter’s loss, we have earned $1.14 billion and an average return on our
shareholders’ equity of 13.5% over the 6 3/4 year period since we became a federally
chartered savings and loan through September 30, 2007.

We have $2.5 billion in bank regulatory capital, giving us a substantial 50% cushion, or $823
million, of “core” capital above the “well capitalized” regulatory standard.

Our federally insured thrift structure provides stable, diversified funding sources and strong
liquidity levels, enabling us to increase our total liquidity from $4.1 billion at the end of the
second quarter to a record $6.3 billion at the end of the third quarter, ensuring our ability to
fund loans without interruption.Importantly, we are starting to see our mortgage production volumes pick up. Our October rate locks of $8 billion are up 51 percent from September and our pipeline is back up to $9.8 billion as of October 31 from a low of $7.4 billion in September. The bottom line is that, while so much of the news out there is “doom and gloom”, there are loans to be done, and the toughest and fittest of you are here to do them…and Indymac is here to support you.

What More Can Indymac Do for You Today?

While more will be coming out soon on our new structure from my MPG management team and the new CEOs we already have in place in a number of regions, I want to reach out to you immediately to make sure that if we are not meeting your needs, we hear from you so we can take action and get the job done. If your issues with Indymac are not getting resolved to your satisfaction, you should escalate your concerns by contacting our representatives in the following order:

1. XXXX, your Indymac Bank Sales Professional

2. XXXX, your Regional President

3. Drew Buccino, newly promoted CEO of Indymac’s MPG
drew.buccino@imb.com
(480) 375-2201

4. Frank Sillman, CEO of Indymac Mortgage Bank
frank.sillman@imb.com
(626) 535-5216

5. Mike Perry, CEO of Indymac Bank
michael.perry@imb.com
(626) 535-5214

That’s correct…if all else fails, contact me directly!

While I admire the spirit of this letter better than some of the Countrywide letters I still remain skeptical about any company that ups their retail production, cuts wholesale availability and is clearly at the whims of the market (Perry even said he had no forecast for quarter 4) when it comes to making predictions about the future of the wholesale channel. I hope I’m wrong and that wholesale lending will live on in full force; but the wind just seems to be blowing the other direction.