IndyMac: One More Lie For the Road…Consumers & Mortgage Brokers Beware

Posted on July 8th, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

In my breaking story Sunday afternoon about IndyMac  potentially going down on Monday July 7th, I was highly critical of IndyMac’s CEO Mike Perry. I said “last year when things fell apart seeing Perry immediately resort to what seems to me as stretching the truth, doing everything possible to manage the stock price and not the company, blaming short sellers, always guiding higher after earnings and missing, releasing fluff press releases in order to drive the stock price higher etc, it showed me his true colors.”  In the story I gave specific examples of these things.

Now, in one last attempt to spin the news, IndyMac has been caught in another half truth that significantly impacts consumers and mortgage brokers, the two constituencies that I try my hardest to serve. CONTINUED…

In Perry’s letter to stock holders  released today in which he tells the tale and likely fate of Indy, he says “We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks.” Many cheered IndyMac for ‘doing the right thing’.

IS THIS TRUE MIKE?

IndyMac will indeed fund all loans in its pipeline that qualify, which could be in excess of $1 billion. But it comes at a hefty price to the borrowers. In order to fund your loan there as they wind down their mortgage business, they are charging an extra 1% of the loan amount or 1 ‘point’. On a $417k Fannie Mae loan this is an extra $4,170.00. If you wanted to build that hit into your rate it could raise your rate as much as 1/2 percent.

Below is an excerpt talking about it. Please note that I do not know if this applies to retail but it sure seems like it applies across the board. This move make no sense to me, To me it means either they are a failed bank or committing extortion. (full email from IndyMac at bottom of page)

“In order to protect your rate locks, we will require a 1% cash deposit to convert these loans to mandatory delivery. All fees must be received by the end of business on Thursday, July 10th, or your rate locks are subject to cancellation. These fees are fully refundable in the event IMB declines the loan. This fee requirement is all inclusive. You must protect the entire pipeline as part of this process. If you do not submit the required fee for any individual loan as part of this process, all of your rate locks will be subject to cancellation.”

In my opinion, this looks awfully shady. As far as I have always known, ‘mandatory delivery’ comes at a BETTER rate that ‘best efforts’, therefore why ask for 1% to change to ‘mandatory’ from ‘best efforts’?  And why tell the brokers their ENTIRE pipeline must be paid for and not on a loan-specific basis?  Remember, they clearly state they ‘will only refund the amount if the loan is declined’.

Many of these loans have been in process for weeks and many are purchases. No doubt a large number of the purchase loans will have no choice but to close the loans there and take the penalty hit or risk losing their deposit and home. Refi’s can be moved to a different lender but that comes at the expense of having all the paperwork including the appraisal put into the new lenders name and taking down another rate lock at a potentially higher rate. The processing and paperwork change can cost roughly $750. A higher rate lock can cost $10s of thousands over the life of a 30-yr fixed loan.

This is absurd. WHAT A RIP-OFF! Is this even legal?!? This tells me either they just plan to stick it to everyone on their way out or really have no money or lines on which to fund these loans and someone else is putting up the funding capacity at a hefty price.

If they don’t have the funding capacity all of a sudden that begs to question whether or not IndyMac is really voluntarily shutting down its mortgage operation or is this how the FDIC and other regulatory bodies will operate from now on when banks fail.

If they would have come out with news today that IndyMac had been seized, that could have started a run on other regional banks with heavy Pay Option ARM, Alt-A or HELOC exposure, which are the very loan types that led to their demise.

As a matter of fact, this morning Schumer said ‘IndyMac’s troubles to not extend to other regional banks’. That also goes in-line with my theory this is simply an FDIC seizure cover-up.

I believe there is more to this story than we have been told. But despite that, charging borrowers 1 point to close a loan already in process that may need to close at the rate initially promised or it will cause significant financial hardship to the borrower, is nothing more than plain old extortion. -Best Mr Mortgage

BELOW IS THE FULL LETTER TO MORTGAGE BROKERS ACROSS THE NATION BY DREW BUCCINO, CEO OF THE MORTGAGE PROFESSIONALS GROUP AT INDYMAC BANK

This does not sound like a company who voluntarily is ‘winding it down’.

Dear Indymac Mortgage Banker or Broker,A few months ago, when WaMu made the decision to exit wholesale lending, we wrote to let you know that we were committed to all of our mortgage professional customers, and that we were working hard to rebuild our business model. Since then, our employees have worked tirelessly and professionally to rebuild our production model and I am very thankful for their service and their unwavering commitment under the most difficult of circumstances. We have successfully transformed ourselves into a competitive Agency and Government lender, and for this we should all be very proud.

However, with the continued very difficult and challenging environment, we are taking steps to continue to protect Indymac’s safety and soundness, and have made the difficult decision to cease production of new mortgages, which includes exiting the third-party lending business altogether. Going forward, Indymac will be focused on operating its Southern California retail banking business, offering reverse mortgages through Financial Freedom and operating our home loan servicing and opportunistically growing these groups over time as market conditions permit.

Our decision to exit third-party lending is effective immediately, however, the following timeframes and guidelines are in effect:

Effective immediately we will no longer accept any new rate locks.

Effective immediately we will no longer accept new credit package submissions (either in physical form or through e-FlowSM functionality) for loans that do not have a valid rate lock.

The last day to fund refinance transactions will be July 31, 2008.

The last day to fund purchase transactions will be August 15, 2008.
Important Message About Protecting Your Rate Locks:

In order to protect your rate locks, we will require a 1% cash deposit to convert these loans to mandatory delivery. All fees must be received by the end of business on Thursday, July 10th, or your rate locks are subject to cancellation. These fees are fully refundable in the event IMB declines the loan. This fee requirement is all inclusive. You must protect the entire pipeline as part of this process. If you do not submit the required fee for any individual loan as part of this process, all of your rate locks will be subject to cancellation.

Please understand that all of our regional operating centers will be closed. Your regional mortgage production team will be in contact with you to ensure a smooth transition over the coming weeks and facilitate timely processing of your loan pipeline. Additionally, we will keep our Pasadena regional office open for a limited time, until we have cleared out our entire pipeline of loans.All of these actions are necessary and are designed to keep Indymac Bank as an institution safe and sound; we believe they are the necessary steps we must take to ensure the company’s survival during this turbulent period.

On behalf of the roughly 800 employees of Indymac’s Mortgage Professionals Group, I want to thank you for your business and support of Indymac Bank over the past 15 years.
Sincerely,

Drew Buccino CMB
CEO Mortgage Professionals Group
Indymac Bank

Other Related Mr Mortgage Stories

IndyMac: Significant Seizure Chatter…Is the End Near? Finally!

The Pay Option Implosion – Subprime’s Big Brother

Look Out! Here Comes the ALT-A Implosion!

Mr Mortgage on Mortgage Modifications – You May Qualify!

Mr Mortgage: Mortgage Modifications Part 2 – Being Forward Thinking

 

 

 

 

 

 

 

 

 

 

 

37 Responses to “IndyMac: One More Lie For the Road…Consumers & Mortgage Brokers Beware”

  1. Sounds to me like YOU are stretching the truth. The way I read it the 1% deposit is an advance fee that is refundable or credited to the closing. You only lose it if you cancel. It doesn’t sound like it’s a change in pricing.

  2. WOW. I have seen a number of lenders make the borrower pay additional point(s) to keep a loan locked after a program or product has been discontinued. I have never seen a lender require the money upfront and/or for the entire pipeline. I’d be SHOCKED if more than 3% of the loans in the pipeline end up funding. With their crazy rules, they could see very close to 100% of the loans being cancelled.

    Why can’t they be honest and just say, “We won’t be able to fund the loans in the pipeline.”?

  3. Simply stated–if you have a loan in the Indymac pipe, whether locked or not, bend over.

  4. What does he mean “We plan to honor” that is not so strong as “we will honor”

    You either have a “rate lock” or you don’t. Do you now need to buy “insurance” on your application with the bank? This must be a whole new line of unexploited bank fees. Let’s translate this into what is really being said.

    “Remember what we promised? If you pay us we will keep our promise to you.”

    At this point you should not pay them a penny for the simple reason they may not be around even if you pay the fee. Unless they are willing to disclose who is underwriting the guarantee other than Indymac itself, I do not see them in a position to make any such insurance claim.

    If you were to buy any such “insurance” you certainly would not pay anyone less than another entity willing and able to assume the risk and at this point in the game, I am not sure who that might be.

  5. Frank, The fact is they refer to it as a fee, not a refundable deposit. The fee is to buy a rate lock which is refundable only if the loan does not go through. Otherwise they would refer to it as a deposit and not a “fee”.

  6. Any borrower, broker or lender who sends perfectly good money in to a company like Indy Mac that is bankrupt and changing the rules in mid-stream is foolish. There’s a good chance you can kiss that 1% deposit goodbye. Since they’re ostensibly only willing to protect your whole pipe or none of it, you need to consider whether your whole pipe is at better-than-current-market rates or not. If not, then certainly move it all. If so, then it might make arithmetic sense to pay the deposit to Indy, but only if you believe that they will fund the loans. I wouldn’t. As far as brokers being captive to their lenders’ turn times: don’t kid yourself that you’ll get better service from Indy than by moving the files to an entirely new lender. How hard do you expect Indy employees to work on your files while they’re weeping, wailing, gnashing their teeth & looking for new jobs?

  7. It says ‘THE ONLY WAY YOU GET IT BACK IS IF THE LOAN IS DECLINED’. You lose it if the loan funds, meaning they are charging 1% to protect a forward lock commitment. I bet they have relocked their entire portfolio elsewhere/someone is funding it for them.

  8. Horrible info here. It is not a 1% FEE, it is a mandatory lock, there is no extra charge to the borrower, the money is credited towards the closing.

    All wholesale and correspondent channels offer mandatory lock options, you agree to be on the hook if the loan doesn’t close and you get a slightly better price.

    I wouldn’t advise paying the fee in this distressed circumstance, I’d take the pipeline elsewhere. But Mr. Mortgage needs to get the facts right.

  9. This is just more of the same from a desperate lender on their way out. My question is HOW MUCH does Perry make on the way out the door? Historical precedence says quite a lot!!!

    Another question is how does this NOT extend to other banks? They are all in this together and someone looses big here in the end. Who is holding what paper that does not get paid back now? What secondary note holders are now left holding the empty bag?

    I think there is a whole lot more due to come out from this story. We are only at the beggining… the announcement. When it all gets unraveled over the coming months we will see what is truly there and I am certain it will not be pretty…

  10. The charge is not clear. It is referred to as both a deposit and as a fee. Which is it!

    Also, “You must protect the entire pipeline as part of this process. If you do not submit the required fee for any individual loan as part of this process, all of your rate locks will be subject to cancellation.”

    Which means if you have multiple loans with IMB you must pay for all of them or lose the rate locks on all of them. What broker is going to pay that out of his pocket? Your loans are toast if just one of your borrowers declines the deposit.

    As rates have been falling for the past few days the net effect of this policy will be to flush the IMB pipeline, since other lenders will have more attractive rates. Reminds me of BofA’s 8% jumbo product a while back. Yeah, we do jumbos, no problem. 😉

  11. Why would you pay a fee to guarantee, to someone who is failing and on the ropes???? If they fail, does not the FDIC only cover “deposits”? I don’t see this qualifying as a deposit.

    Unless they disclose the insuring party, in which case your agreement would need to be with them because at this point you could be buying nothing but hot air.

    Only suckers would fall into this kind of trap and be out additional funds. Bottom line…It’s over.

  12. Hello All, since this is happening it will not be the end of indy mac… Who here has heard of PennyMAC? Check it out> Also, what is Mozillo up to these days?? FDIC is not closing them down. That’s not the way this works!! They will go back to private money, no sale and no closure. Anybody in this biz knows look at wamu. IMB in not significant enough to make a hole in the market. Mozillo’s plan is already taking place. This is just a hiccup if you believe different, think again. Who controls the market? Who controls the FED RESERVE? IT’S NOT BERNANKE……JUST HANG EVERYONE THE RIDE IS JUST BEGINNING…………..
    GOD BLESS US ALL.

  13. Dow up a ton now – talk about delusional thinking..

    What a joke.

  14. Come to think of it, nobody other than purchases that must fund now will pay this. This is simply an attempt for Indy to shut it down as quickly as possible.

  15. Mr. Mortgage, you are right on the mark and any broker with experience knows it in his gut. Only a fool would leave a pipeline at indy. Only a fool would pay the fee or fee, but some will. The Men in black are at their doors, but don’t tell anybody.

  16. Think you review is a bit harsh and unfair. Considering the market, Indy will suffer a loss on the locks honored. Previously lenders closed and did not honor the locks – Indy will manage the pipeline with insurance, hence the deposit. These times call for new measures or measures that most of the mortgage public had not experienced. This is a common practice from the past and could be adopted in the near future. Indy bet on the market returning and they were wrong. They did show guts while others ran for the hills long ago.

  17. Emergency lending by the FED till the end of 2009.
    Hey free money for everybody ! Open bar. The drinks are on me. See there is no problem. Benie Bernanké boy to the rescue. Hip hip hourra ! This news is horrible. Moral hazard. What a joke !

  18. Let’s look at it this way. By the close of Thursday, they will know what their commitment level is and how much staff they will need to retain to service any remaining commitments.

    By Friday AM, they will likely issue remaining pink slips based on Thursday’s number. This looks to be something to define remaining staffing required as they shut down operations.

  19. it is confirmed that the 1% is a fee that is not refundable. however, they have sent out dentials on all loans that we had submitted. 100% of files were denied for collateral.

  20. Funny how these short term facilities offered by the FED are now becoming the norm. Moral Hazard is right.

    I thought the FED only was mandated to defend the dollar against inflation. Hmm.. I’m guessing the next move will be video rentals (with no late fee) and (Zionist) beef burritos.

  21. from Bloomberg: IndyMac Blames Senator’s Comments for Withdrawals..

    bwwaa haa haa..

    I’m sure those pesky short sellers weren’t helping either..

  22. OMG–And the FDIC and FED wonder why consumer confidence in our financial systems is completely gone!! LOL– They are all slithering around like snakes at this point, nothing is transparent, they are all lying to cover their last lies, and just when you think it can’t get any uglier, IT DOES!

    The FED and FDIC are trying to stop panick selling, but learning more about how they are doing things only me makes me LOSE ALL TRUST for them!!

  23. Lies aside, it’s incredible how a bunch of white collar thugs brought down the company that was feeding thousands of families. You may not like Indymac but truth to be told it was employing thousands and the C-level greed has ruined their lives now. Just my 2c. Cheers, Engleski Rjecnik

  24. Look, the truth is that this has been a long time coming. The professional Polishing of turds is what this organization has become over the last year plus. They sold it to their sales folks, who bought it, and pushed it on the street to honest, hard-working brokers that don’t deserve such dishonesty. The turds were polished from the top down and there are golden parachutes awaiting the masters of the turd-polish operation.

  25. those at the bottom of the turd polishing foodchain (ie. frontline sales force) are left with a petrified turd in their hands and they have no choice but to share the turd with the customers (brokers) that they worked so hard to earn business & loyalty from. That letter is the last in a long line of turds polished to resemble sincerity as the golden parachutes are prepared. That’s the brutal, sad, deceitful truth.

  26. Mr. M., you are right, Chinese stocks shoot up these days… I am going to accumulate a lot of shorts for the coming fall.

  27. Mr. M, I am new in the stock market, do you still remember suckers’ rally in the bear market? How long would it usually last?

  28. http://www.minyanville.com/articles/index.php?a=17914

    Just wondered ? What’s that ? The rise of the 3rd Reich at the FED ? Pure national-socialism at the FED. It the next step. Nationalisation of Freddie Mac and Fannie Mae. Wow ! Banking socialism at its best like in Old Red and Brown Europe. It’s real funny. Sometimes you really have the impression that yeah the next step will a king of 3rd Reich controlled by the bankers. Surprise ! You will soon be on the hook for all the Fannie’s and Freddie’s junk !

  29. Well in the real world it’s called monetization of the debt and its really inflationnist. But Bernanké and his bunch have managed to pass a measure that is pure monetization without calling by its name. “Ingnorance is knowledge.” “Peace is war.” “Lies are truth.”

    http://www.minyanville.com/articles/index.php?a=17914

    If quacks like a duck, flis like a duck and walk like a duck, it’s a duck. Taxpayers will be on the hook for how much with this measure ? They will wait after the election to nationalize.

  30. This all sounds like the poor man crying. lets remember one thing indy is dead they ran out of capital,,they tanked my stocks its worthless and guys just move on,,crying here is like trying to scoop up spilled milk

  31. I don’t think it will be a problem to post this but if it is please remove it.
    \
    Here is actual rate lock policy for Indymac. This was emailed to me yesterday by a CAM since I do..better said did have a pipe there…
    =================================================================
    Indymac Bank Rate Lock Policy & Request Form

     Only loans that have valid, non-expired rate locks can be underwritten.

     In order to maintain rate locks, a 1% Rate Lock Fee (based on the total rate lock pipeline of the Seller’s / Broker’s rate locked pipeline) must be received by 7/10/2008, 5PM EST.

     If a loan is declined or funded, the Rate Lock Fee specific to the funded loan (1% of mortgage amount) will be credited back to the Seller/Broker.

     If a rate lock expires prior to funding for any reason, the Rate Lock Fee collected specific to the loan (1% of mortgage amount) will be retained by Indymac Bank.

     The last funding date for all refinance transactions is 7/31/2008. Rate Lock Fees collected for locked refinance loans that do not fund on/before this date will be retained by Indymac Bank- NOT refundable

     The last funding date for all purchase transactions is 8/15/2008. Rate Lock Fees collected for locked purchase loans that do not fund on/before this date will be retained by Indymac Bank- NOT refundable

     No rate lock extensions will be granted- no exceptions. Expired locks will go to current market pricing and the Rate Lock Fee will be retained by Indymac Bank.

    To request continuance of your rate locks, a Rate Lock Fee check and a signed copy of this document should be sent to-

    Indymac Bank, FSB
    Attention: Len Israel
    1Banting
    Irvine, CA 92618

    Checks should be payable to- Indymac Bank, FSB. from the Seller/Broker, NOT the Borrower.

    Provide the following information for your rate locked loans-

    Seller Company Name IMB Seller #
    Contact Name Phone
    Address
    City/State/Zip

    IMB Loan Number Borrower Last Name Loan Amount (include MIP) Lock Expiration Date per eMits 1% Rate lock Fee Amount $
    $ $
    $ $
    $ $
    $ $
    $ $
    $ $
    $ $
    $ $
    Total Locked Pipeline $ Fee Paid $

    Acknowledgement and Acceptance

    I understand and accept the terms and conditions outlined herein. I have enclosed the rate lock fee required; please maintain the rate locks indicated above.

    Seller/Broker-

    Name (printed) Title

    Signature Date
    Indymac Bank-

    Name (printed) Title

    Signature Date

  32. Thanks Tails!,

    That pretty much sums it up. We at IMB don’t really want your business, but if you insist then pay us upfront. Oh, and if after paying us you need an extension, forget it. The money is ours!

  33. Bottom line tonight?? Friday night –Headlines SCREAM—FDIC takes over IndyMac!!

    This is just a total sign of the modus operandi of the FDIC….they would like to give the impression of an orderly unwinding, so they might not go in for the kill for a week or so after first rumors hit.

    Once again, GREAT job on your stories and advanced scoop Mark!! Ml-Implode is one of the first places I visit every morning when checking the news. You are to be commended for your un-varnished approach!!

  34. […] IndyMac: One More Lie for the Road! Consumers and Brokers Beware […]

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  37. […] IndyMac: One More Lie for the Road! Consumers and Brokers Beware […]

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