Struggling mortgage lender IndyMac Bancorp saw its credit rating cut to “junk” by Fitch Ratings just a day after Moody’s Investor Services said it was dropping coverage entirely.
Fitch cut its long-term issuer default rating on IndyMac two notches to “BB” from “BBB-“, citing ongoing weakness in the residential mortgage market, while leaving the door open for future downgrades with a negative outlook.
The rating agency said the downgrade reflected the “virtual absence of a private, secondary mortgage market” and the expectation that a near-term return to profitability would be difficult.
A week ago Moody’s cut IndyMac’s credit rating to “B1” from “Ba2”, indicating that the lender’s credit was “highly speculative.”
“We expect IndyMac to lose market share and struggle to be cost-competitive as an agency-only originator in 2008,” Moody’s said in an accompanying statement, referring to the fact that the company could only sell conforming loans within the current market.
And yesterday, Moody’s said it had withdrawn coverage on the company, citing “business reasons” for the withdrawal.
But it wasn’t long before the Pasadena, CA-based mortgage lender responded to the news, claiming it was completely voluntary.
“Our Moody’s rating recently came up for renewal and as we look to reduce costs (we will save roughly $350,000 annually including the elimination of one employee in our staff reductions), we concluded that maintaining ratings with all ratings firms, does not make business sense and their continual downgrades created more perception risk than reality,” Communications Director Grove Nichols said in a statement on the company’s blog.
“Since our relationship with Moody’s was approximately a year old, we chose to terminate this relationship.”
“As we have stated many times, we have over $6 billion in total liquidity, and virtually all of our deposits are federally insured,” he concluded.
In a bit of good news, an IndyMac employee said the lender had a huge day yesterday, locking upwards of $1 billion worth of mortgage loans, eclipsing typically strong lock days that range between $300-350 million.
Shares of IndyMac were up 62 cents, or 14.22%, to $4.98 in early afternoon trading on Wall Street.