According to reports out on Monday, IndyMac Federal Bank (OTC:IDMCQ) is being sold to a hedge fund and a group of private-equity firms in a deal that the US Federal government are partly funding.

Hedge fund Paulson & Co along with private-equity firms Dune Capital Management and J.C. Flowers & Co will buy IndyMac that was seized by the Federal Deposit after it declared insolvent in July.

IndyMac, which branches throughout California and had $32 billion in assets was the second biggest bank failure this year behind the collapse of Washington Mutual in September.

According to the reports the deal could be announced on Monday, which could include Dune Capital buying IndyMac for about $14 billion, it’s also likely that the FDIC could cover certain losses as part of the deal by working out a loss sharing agreement.

Former Goldman Sachs Group Inc partners Daniel Neidich and Steven Mnuchin founded Dune Capital in 2004, and another former partner of Goldman Sachs, J. Christopher Flowers leads J.C. Flowers.

Source: Bussinessweek

Citigroup is set to receive a huge rescue bailout from the US Federal Government in a bid to shore up the banking giant after shares tumbled further last week. The plan was announced by the Feds on Sunday.

The Citigroup Federal bailout has two main features, First, the Federal Deposit Insurance Corporation (FDIC) and the US Treasury will backstop various losses against more than $300 billion in troubled assets, Second, The Treasury will invest another £20 billion into Citigroup, the bank has already had $25 billion pumped into it as part of the Federal Governments $700 billion bailout package.

The US government will receive $7 billion compensation for the loan guarantees, $20 billion for its direct investment and another batch of preferred shares. The Feds will also have the right to buy the value of $2.7 billion in shares of Citigroup in the future. The dividend rate on the shares will be 8 percent payable by Citigroup.

Citigroup will also have to use similar procedures that were implemented by the FDIC on IndyMac to adjust mortgages for troubled borrowers.

Citigroup shares fell lower than $4 on Friday’s close of trading, shares in the bank have fallen 87 percent this year.

Source: moneycnn

Half of the nations’ home mortgages are now owned or guaranteed by the federal government after the Fannie Mae and Freddie Mac take over, and now we will all be after a mortgage break courtesy of the taxpayer, well, if it’s good enough for Uncle Sam.

But could this be were all the problems will start, how will the government decide who they will and who they won’t help with their mortgages, this could see us going down the slippery slope. Four days after the take-over of Freddie and Fannie, four Senate Democrats asked the companies’ new overseers to halt foreclosure proceedings on loans in their portfolios 90 days or more.

It was reported by New York Sen. Chuck Schumer’s office, that giving this extra time will give the two companies time to modify the troubled loans, similar to what the Federal Deposit Insurance Corp. is doing with loans that are in trouble owned by IndyMac Bank.

This could work out very well for homeowners who have fallen into trouble with their mortgage payments, but doesn’t seem to do anything for the people who have struggled to keep up their monthly payments. Is this really fair? Please share your thoughts on this subject with us.

Read full article sfgate

On August 20 The Federal Deposit Insurance Corporation said it would help thousands of distressed homeowners with their loans through the former IndyMac Bank to avoid foreclosures.

This week IndyMac Federal Bank will send 4,000 modification proposals to homeowners with bad IndyMac orignated mortgages, offering them better terms to rehabilitate their loans, and thousands more modification proposals to those in seriously bad debt and default in the coming weeks.

The modification would cap eligible sustainable mortgages permanently at the current Freddie Mac survey rate for conforming mortgages, and will keep payments at a 38 percent housing debt-to-income ratio of principle, interest, taxes and insurance.

In July the FDIC was named conservator of failed IndyMac Bank which was re-named IndyMac Federal Bank.

Source: Bizjournals

Is it time for us all to run to our bank, withdraw our money and stash it under the mattress? Some people are doing exactly that, the IndyMac’s failure caused chaos with customer queuing outside the bank demanding their money.

Customers are being reassured that their money is safe from bank and federal officers, analysts are being sued for reporting certain banks are the next in line to go. So where does that leave all us, with rumours flying around isn’t it better to know what is happening. The Treasury Secretary Henry Paulson to bureaucrats at the Federal Deposit Insurance Corp. have run to the media to reassure depositors their money is safe since the IndyMacs failure.

The federal guaranty behind every deposit up to $100,000, even in cases where a bank collapses. Joint accounts, retirement accounts, and trusts are also insured, up to a limit to send the message to their depositors that they do not need to worry.

There are 90 (out of 8,494) banks that are on shaky grounds according to the FDIC watch list of troubled banks. The banks are assessed on the quality of its assets, capital position and its management team, its liquidity position, its earnings, and the bank’s sensitivity to broader market forces.

It’s said that due to the stresses we have on the market place the list of troubled banks will grow. Lajuan Williams-Dickerson a spokes women for FDIC said that “they could not discuss the names of the banks on the list as it would be unfair to expose them publicly; it would also raise undue alarm, for any of them to fail would be unlikely”.

Although it seems that the FDIC are contradicting their stated goal, saying that they want to create customer awareness and then hold vital information back from the consumer, but the FDIC say that they are making enough information available to the customer to let them determine if their bank is healthy and indeed to let them see if they feel safe with depositing money there.

There have only been 7 banks that have failed in this downturn, hundreds failed back in the late 1980s and 1990s.

businessweek.com

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It seems that troubled IndyMac just can’t keep out of the news, just last week the U.S. banking regulators had to seize control of the mortgage lender.

The FBI has not yet commented about the IndyMac investigation; however a spokesman did say “The FBI’s probe of corporate fraud in the subprime lending industry had risen to 21, from 19 in April.” No further details were added.

It seems that since the U.S. have been going through a bit of a mortgage crisis; there have been a number of subprime related complaints.

It seems that brokers and lenders have been doing all they can to try and boast the number of mortgages they can sell, and some will go to any length to try and supply a mortgage to a customer.

Despite the recent collapse of IndyMac, analysts still maintain that the banking system is still in better shape than it was during the S&L crisis.

CNN Money has said that there won’t be nearly as many bank collapses as there were in the late 1980s and early 1990s. In 1989, 534 institutions failed, this was just before the peak of the savings & loan crisis. In that period over 1,000 institutions had shut up shop.

IndyMac is just the fifth bank to fail this year, so it shows that things are nothing like they were back in the 1980s and early 1990s.

However; one thing that we have to remember, the failure of IndyMac is the largest collapse of an FDIC-insured institution since 1984. The bank had assets of $40 billion and with the current Fannie Mae and Freddie Mac problems; this current period is set to be an expensive one.

This all started back on June 27, when Senator Chuck Schumer’s office had released a letter to various bank regulatory agencies, in which he called into question about the viability of IndyMac, he urged them to take steps to prevent the collapse of the troubled bank.

The public disclosure of this letter from Schumer resulted in an eleven day run on IndyMac; as a result more than $1.3 billion had been withdrawn. It was this action that John Reich believes gave the bank a heart attack.

Senator Chuck Schumer, fired back at the comment saying that the blame of the collapse of IndyMac was down to regulators turning a blind eye to the “fast and loose lending practices” until it was too late.

Reich then conceded that IndyMac, who had been plagued by mortgage loan defaults, might have failed on their own even without such comments from the Senator. IndyMac is now under the supervision of the Federal Deposit Insurance Corp.

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As we mentioned in an earlier post, IndyMac will open for business as usual on Monday, but under the new name of, IndyMac Federal Bank. The failure of this bank that had assets of $32.01 billion as of the end of March 2008, means that the U.S. taxpayer will now have to bail them out.

Most of the business that IndyMac had made up was in the Alt-A single family mortgages, this was ideal for those who had bad credit, or could not prove their earnings. Earlier in the week serious questions were being asked as to the viability of IndyMac, after the bank had reported that regulators had found that its business was no longer “well capitalized.”

IndyMac has now had to agree to a new business plan with those regulators, one of these plans includes halting all new mortgages, in the hope of shrinking the bank’s balance sheets. IndyMac will also have to cut at least half of its workforce.

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The bank will reopen on Monday under a new name, IndyMac Federal Bank. In a statement from the OTS, they said that “Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks.” They also added that “Online banking and phone banking services will be available again on Monday.”

As we mentioned above, IndyMac’s failure is the second largest in the U.S. the largest goes to Continental Illinois Bank, when the bank went under in 1984 they had assets worth $40 billion.

For customers who bank with IndyMac, the FDIC has opened a toll-free phone number, 866-806-5919. The operating times are 3 p.m. to 9 p.m. PDT for today, then daily at 8 a.m. to 8 p.m.

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