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Panic Conditions May Lead to IndyMac First Quarter Miss


IndyMac said today that it in light of recent events, the value of mortgage securities it holds will likely need to be marked down, causing the mortgage lender to miss its first quarter earnings target.

“As has been widely publicized, the capital markets in recent days have taken another turn for the worse with credit spreads widening significantly due to panic market conditions caused by uncertainty in the U.S. housing and mortgage markets, renewed margin calls by Wall Street repo lenders on mortgage REITs and hedge funds, and other economic and financial uncertainties,” the company said in a statement.

The Pasadena, CA-based Alt-A lender noted “that there are virtually no new non-GSE mortgage securities issuances and the only resale activity is a handful of distressed sales,” and that IndyMac’s MBS portfolio will take a hit as a result.

But the company believes the potential negative impact is unwarranted as the recent trouble in the market has nothing to do with the quality of their actual holdings, and for that reason, should be reversed when the market stabilizes.

“As of December 31, 2007, approximately 17% of the MBS portfolio is classified as ‘Trading’ and any potential unrealized write-down on this portion of the portfolio will directly affect earnings and capital. None of Indymac’s AAA non-agency (Alt-a prime jumbo) MBS (over 86% of our total MBS portfolio) has been downgraded, and the performance of these securities has been reviewed several times in the past year by the major rating agencies.”

“Lastly, Indymac has the intent and ability to continue to hold these assets to recovery as a result of funding its balance sheet with deposits, FHLB advances, long-term debt and equity.”

Analysts covering the stock currently anticipate a loss of 93 cents for the first quarter, according to Thomson Financial.

Shares of IndyMac rose 58 cents, or 12.34%, to $5.28 on news that the Fed planned to provide $200 billion in capital to boost liquidity in the ailing credit markets.

(photo: krystin)

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