According to a recent article from Bloomberg, IndyMac CEO Michael Perry mentions that the company is considering selling part of its reverse mortgage business. IndyMac bought Financial Freedom in 2004 for $125 million and Perry estimates the current value at $300 million to $500 million. Since acquiring Financial Freedom, IndyMac has recouped $135 million in profits from the business.
In early November, the second- largest independent U.S. mortgage lender, reported a loss five times bigger than the company forecast in September as foreclosures and late payments rose to a record. Most of IndyMac’s recent credit problems stem from loans to home builders, home-equity lines of credit and subprime loans to the riskiest borrowers, Perry said. The #1 Alt-A lender in 2006 has stopped virtually all of that lending, and is only originating conforming Fannie & Freddie paper. Conforming A-Paper is a great business but it’s all about price and from my experience IndyMac has never been competitive in that arena.
I’m curious why IndyMac doesn’t focus all of their resources on the reverse mortgage market when they see the success that FF is having? Maybe they are… Recently IndyMac AE’s started calling to get us signed up to sell them reverse mortgages… not conforming A-Paper. It’s funny, when I tell them we are already signed up with Financial Freedom it’s obvious that they are embarrassed and they politely ask me not to tell our FF AE’s that they called.
It’s obvious that IndyMac is struggling right now but is it worth selling your most profitable line of business to keep your boring A-Paper wholesale business? If you have $300 – $500 million laying around it sounds like Michael Perry might want to hear from you.