IndyMac will cover 50% of uninsured deposits as IndyMac Federal Bank.

The government is stepping in to support IndyMac. Having just changed its name from IndyMac Bancorp after it was seized Friday. The FDIC has assumed control saying it will cover 50% of uninsured deposits and fully insure all up to $100,000, which is normal.

John Bovenzi, the FDIC COO says there’s probably no bank in the country that has access to greater capital and liquidity than Indymac Federal Bank. He also states the FDIC expects to sell it in the next 90 days.

Because Charles Schumer has loose lips, IndyMac Bancorp became the second biggest federally insured financial company to be taken over by regulators.

One company in the news is IndyMac.

It heated up again yesterday, they are blaming comments from Senator Charles Schumer for big withdrawals and now the Senator is firing back saying they were on the rocks anyway.

Everyone questions that statement by Schumer, this is a big bank, $18 billion deposits.

What is the FDIC doing about this?

Proposed changes in accounting rules that could force Fannie Mae and Freddie Mac to move certain Mortgage Backed Securities (MBS) onto their balance sheets should not have a major impact on their capital requirements, according to the Government Sponsored Enterprise (GSE) regulator.

The Office of Federal Housing Enterprise Oversight is working with the Financial Accounting Standards Board on changes to FAS 140, OFHEO Director James Lockhart indicated.

The two government-sponsored enterprises already have a 45-basis-point capital charge on their guaranteed MBS, he noted. Investor concerns that an accounting change would trigger a dramatic rise in their capital requirements "makes no sense," Mr. Lockhart said.

Wall Street stock investors dumped Fannie and Freddie shares on Monday on fears that the GSE might have to raise $75 billion in new capital due to accounting changes.

In an interview on CNBC-TV, Mr. Lockhart stressed that Fannie and Freddie are adequately capitalized and have raised $20 billion in new capital over the past seven months.

Fannie Mae and Freddie Mac See Sell-Off

“IndyMac has announced they will no longer accept any new loan submissions or rate locks in either retail or wholesale, and are closing their “forward” mortgage business.”

Citing regulatory pressure to maintain its capital levels, IndyMac is shifting away from and shutting down much of its forward mortgage origination business to focus on its Reverse Mortgage unit, Financial Freedom, according to a letter from chief executive Mike Perry posted on IndyMac’s corporate blog.

IndyMac said as of July 7 it would no longer accept any new loan submissions or rate locks in its retail and wholesale forward mortgage lending channels, except for its servicing retention channel and would cut roughly half its staff of 7,200 over the next couple of months.

The company said it plans to honor all its existing rate locked loans and continue to fund them.

“While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets,” Mr. Perry said. “At the same time, these operations take up significant balance sheet capacity and ‘feed’ growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital.”

CRC: Borrowers Not Getting Modifications

The California Reinvestment Coalition says mortgage servicers and lenders are still not working with borrowers who need loan modifications in order to keep their homes.

In a third survey of California mortgage counseling agencies servicing homeowners statewide, CRC said it found that despite lenders’ promises to help borrowers, foreclosure is still the most common outcome for homeowners struggling to make mortgage payments.

“With little accountability, obligation, or oversight, home loan servicers are not doing enough to keep borrowers in their homes”, says Kevin Stein, CRC associate director.

“For some borrowers, this may mean that they will be doubly victimized by predatory lending practices on the front end, and now by unhelpful loan servicing practices that lead to foreclosure on the back end. We must work immediately and diligently towards solutions to avoid this result”.

CRC released the report “The Continuing Chasm Between Words and Deeds III,” at a press conference held at counseling agency in Stockton, Calif. The report analyzes a survey of 42 mortgage counseling agencies that served 11,062 borrowers in April 2008.

Massachusetts has some new tools to fight the foreclosure crisis. Twenty million, to be exact.

The state has just activated a 20 million dollar loan fund for community groups to buy foreclosed homes before they become neighborhood wrecking eyesores and worse.

Foreclosures are devastating both for individual homeowners and their families and also to communities.

The 20 million dollar fund will provide loans of 250 thousand to a million dollars to community groups.
That’s expected to buy 250 to 500 foreclosed homes and apartments, with the Boston, Brockton, Chelsea, Lawrence, New Bedford, Springfield, and Worcester areas.

Notably, it doesn’t use any state money. 17 million comes from private lenders in the Massachusetts housing investment corporation, 2 million from the Boston foundation, and 1 million from the Hyams foundation in Chelsea.

NEW YORK–(BUSINESS WIRE) CIT Group Inc. (NYSE: CIT), a leading global commercial finance company, announced today that it has agreed to sell its Home Lending business, consisting of $9.3 billion in assets and related servicing operations, to Lone Star Funds for $1.5 billion in cash and the assumption of $4.4 billion of outstanding debt and other related liabilities. The servicing centers, which employ approximately 300 people, are located in Marlton, NJ and Oklahoma City, OK.

In a separate transaction, CIT agreed to sell its approximately $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance, Inc. for approximately $300 million. Net cash proceeds from the two transactions are expected to be approximately $1.8 billion.

In the second quarter of 2008, CIT expects to record an estimated pretax loss for the Home Lending segment of approximately $2.5 billion ($2.0 billion after tax). This loss consists of an estimated $2.2 billion loss on sale and an approximate $350 million loss from operations during the period. Home Lending will be accounted for as a discontinued operation. The sale of the portfolios is scheduled to be completed in July, while the transfer of the servicing platform will be completed by the first quarter 2009. It is expected that the company’s proforma tangible equity to managed assets ratio at June 30, 2008 will be in excess of 9%, above the company’s current 8.5% target.

Shakeups at Washington Mutual and Wachovia. Roundtable Discussion with Andrew Seibert of Nextier Wealth Management and Forbes CEO Steve Forbes.

Washington Mutual shares are down after Kerry Killinger stepped down as chairman. Shares of Wachovia are falling below it’s lowest value in almost 13 years after Ken Thompson was ousted.

Chairman Lanty Smith has been appointed interim CEO. Is this new management what these companies need to get back on track? Are there more troubles for financials?

I think their values will go lower until they get a feel for who will take over. There are probably more Writedowns to come.

These banks have not gone beyond the problem of the Subprime Mortgage Industry and there is possibly another shoe to fall.

If the Credit Deterioration continues, there will be many more problems.

Wachovia has big news today. Shares of falling in the premarket after the company ousted CEO Ken Thompson.

Wachovia stated he is stepping down at the request of the board, saying no single precipitating event calls because the board to reach the decision, but a series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and performance. Perhaps you can call it an understatement.

Shares down 57% in the past 12 months.

Washington Mutual , hard-hit by the mortgage and credit crises, will replace Chief Executive Kerry Killinger as chairman of the board.