Mortgage Lender Brushes Off “Doomsday” Talk
IndyMac Bancorp, a large Southern California mortgage loan specialist, Thursday said first-quarter profit fell by 34 percent, as it continues to be hurt by tougher conditions in the home loan market.
Net income for the Pasadena, California-based parent of IndyMac Bank fell to $52.4 million, or 70 cents per share, from $79.8 million, or $1.18, a year earlier. Return on equity was 10.5 percent.
Revenue fell 1 percent to $302.1 million, despite a 27.5 percent increase in home loan production to $25.93 billion. IndyMac said that its mortgage industry market share rose to 3.92 percent from 3.19 percent.
Analysts on average forecast profit of 67 cents per share on revenue of $292.4 million, according to Reuters. IndyMac said it expects “similar” earnings performance in the second quarter, with a return of about 10 percent.
Analysts reported an average expected profit of 79 cents per share. The mortgage company expects second-half return on equity of around 13.5 percent, down from its prior forecast of at least 15 percent.
“We are disappointed with these results,” CEO Michael Perry said.
“Our earnings must be considered solid in light of the challenging conditions we faced.”
IndyMac, which is also one of the largest banks, specializes in “Alt-A,” or “Alt-A mortgage loans,” which fall between “prime” and “subprime” loans in quality.
That sector has suffered as rising defaults among subprime (often called simply “bad credit mortgage“) borrowers prompted fears of a “contagion” that might spread to lenders that make higher-quality loans, and has made it tougher to sell loans to investors.
Last week, IndyMac said it raised its minimum borrowing standards, and cut back on lending to people with lower “FICO credit scores or who cannot fully document income or assets.
“Some are predicting a ‘doomsday scenario’ for the housing and mortgage markets,” Perry said.
“Although we believe this to be unlikely, if that were to occur, our financial performance could worsen materially from what we are currently forecasting.”
SOURCE: Reuters