The Whittier Daily News is reporting that The Federal Deposit Insurance Corp. has hired Lehman Brothers Holdings Inc. to devise a strategy to sell IndyMac or its separate parts. “We don’t want to look like we are endorsing (Lehman Brothers), but because of the size and the complexity of this bank – it’s a $30 billion bank – we wanted to bring in an investment firm,” said FDIC spokesman David Barr regarding the decision to use New York-based Lehman Brothers.
FDIC officials hope to sell the bank’s assets to private companies by the middle of October, but the FDIC is capable of running the bank for years if necessary, Barr said. “It’s not a magic number,” he said. “If we miss it, it doesn’t mean everything is going to shut down. We can run IndyMac for a couple of years if we have to.”
The FDIC hiring Lehman is an interesting choice considering their history with IndyMac’s reverse mortgage subsidiary Financial Freedom. Lehman purchased the reverse mortgage company in 2001 and sold the company three years later to IndyMac for around $80 million in cash.
Most analysts will agree that Financial Freedom is the most valuable asset the failed bank has, but it’s unclear how much companies are willing to pay for it. Last year Genworth purchased Liberty Reverse Mortgage for $50 million but the terms of the most recent reverse mortgage acquisitions haven’t been disclosed. The good news for IndyMac is that there are plenty of companies looking to enter the reverse mortgage business. The bad? It’s doubtful they will receive anywhere near the $80 million they paid to acquire the company.
It’s no secret that IndyMac’s problems caused lots of Financial Freedom employees to leave. When IndyMac laid off over 2,000 of its employees in January, most of their top Account Executives left and brought their business with them. If you take a look at last months HUD endorsement numbers, their HECM production is down 50% YTD and their market share is 52% lower than last year. The longer they put off a sale of Financial Freedom the more they risk losing other employees and more of the companies value.
So, will we see a deal for Financial Freedom get done quickly? Since Lehman has already bought and sold the company in the past… I’m betting on “Yes”.