IndyMac to cut 4% of workforce

July 20th, 2007, 7:58 am · 1 Comment · posted by Mathew Padilla, Reporter

IndyMac Bancorp in Pasadena, the largest Alt-A lender in the nation, said it is laying off 400 employees, or roughly 4% of its staff. The cutbacks are another sign the mortgage correction is hitting hard companies beyond subprime.

Mike Perry, chief executive, notified employees yesterday via email, which was posted on the company’s blog. He said most of the affected workers were let go Thursday.

IndyMac is the dominate player in the mid-range credit category known as Alt-A. It made a record $90 billion in loans last year. It has two units based in Irvine, though it’s unclear how much they will be affected, if at all.

The email says layoffs will be in the “Operations and Enterprise Process & Technology (EPAT) groups in various offices around the country.”

In the company’s 2006 annual report it said operations in Irvine include: “Web & Direct Mail Headquarters; Mortgage Bank Operations; Financial Freedom Headquarters, Legal/Administration.”

Perry wrote:

“This action is all the more painful given our longstanding and openly stated philosophy of being opposed to layoffs. Most companies in the mortgage industry employ layoffs as standard operating practice, staffing up in good times and letting people go as soon as loan volume falls off. I have never been a fan of this practice, and we have done our best to avoid layoffs in the past by growing our business and prospering even in down markets and through hiring freezes and natural employee turnover.”

IndyMac will take a pretax charge of $6.5 million in the third quarter, which will be “more than offset” in the second half of the year. It expects to save $30 million annually.

Perry also wrote:
“Industry loan volumes and profit margins continue to be under pressure, and our dollar loan volume was down 12% in the second quarter compared to the first quarter. Furthermore, our volume in terms of loan units was down by 17% because we have eliminated the 80/20 piggyback product (which requires the processing of two loans in each transaction) in favor of first lien higher-LTV programs with mortgage insurance. While recently our pipeline has been recovering, we concluded that we needed to both “right-size” our workforce to our current volumes and also be very “hardnosed” in redesigning our processes in our drive to become “the” low cost provider in the mortgage industry, while at the same time ensuring that we maintain our high standards for customer service and credit quality.”

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