Struggling Mortgage Lender Taken Over by Regulators
IndyMac to Reopen Monday Under Federal Control
Washington Post Staff Writer
Saturday, July 12, 2008; D01
IndyMac, one of the nation’s largest lenders, got caught in the mortgage meltdown that has led to a global credit crisis.
. . .
IndyMac, which is not related to mortgage giants Freddie Mac or Fannie Mae, thrived during the housing boom. It made Alt-A mortgages, which cater to borrowers who provide less documentation about income or employment than traditional loans require.
“Got caught in the mortgage meltdown” did they? Or was IndyMac a major cause?
(Wikipedia) There are numerous factors that might cause a mortgage not to qualify under the GSEs’ lending guidelines even though the borrower’s creditworthiness is generally strong. A few of the more important factors are:
- Reduced borrower income and asset documentation (for example, “stated income”, “stated assets”, “no income verification”)
- Borrower debt to income ratios above what Fannie or Freddie will allow for the borrower credit, assets and type of property being financed
- Credit history with too many problems to qualify for an “agency” loan, but not so many as to require a subprime loan (for example, low scores or serious delinquencies, but no recent charge-offs or bankruptcy)
- Loan to value ratios (percentage of the property price being borrowed) above agency limits for the property, occupancy or borrower characteristics involved
In this way, Alt-A loans are “alternatives” to the gold standard of conforming, GSE-backed mortgages.
(Wikipedia) It (Reich’s OTS) supervises holding companies as well as thrift institutions. This results in OTS providing consolidated supervision for such well-known firms as General ElectricAIG, Inc., Ameriprise Financial, American Express, Morgan Stanley, Merrill Lynch and Lehman Brothers.