IndyMac Changes May Be Significant

August 7, 2007 No Comments »

IndyMac recently announced that there would be changes in their lending practices as a result of the recent credit woes that have shook the financials markets worldwide.

Although the CEO of IndyMac didn’t specify, I have heard from inside sources that the changes will be quite significant.

According to a few people I’ve spoken with, the mortgage lender is said to be focusing on conforming loans, those with more restrictive guidelines which can be purchased by Fannie Mae and Freddie Mac.

It makes a lot of sense right now because conforming loans are a lot easier to unload on the secondary market than low-documentation loans, combo loans, and jumbo loans.

While I can’t yet confirm this yet, the focus to conforming loans will likely weed out a number of programs in the IndyMac portfolio, including stated loans, jumbo loans, second mortgages, and more.

With such a rocky secondary mortgage market, conforming loans are the only loans that are guaranteed to sell.

Everything else is a crapshoot at this point, with both the subprime and Alt-A mortgage market severely rattled.

Conforming loans that are sold off to Fannie and Freddie must also be full documentation files, that is, they must document income (unless deemed very low risk).

The result would be the banishment of stated loans, which over the past five years have made up a very large majority of all closed loans market-wide.

I also believe IndyMac is getting rid of their option-arm mortgage program, the high-risk 1% payment option loans that should clearly bear some blame for the current state of events.

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