that failed in 2008 . for the current company see onewest bank . indymac bank former type savings bank federally owned bridge bank industry banking fate chapter 7 bankruptcy and seized by the federal deposit insurance corporation successors onewest bank founded 1985 1985 as countrywide mortgage investment defunct july 11 2008 july 11 2008 headquarters pasadena california united states products alt a mortgages and reverse mortgages total assets 32.01 billion at time of seizure by fdic subsidiaries indymac federal bank financial freedom new york mortgage company barrington capital corporation website www.imb.com indymac a contraction of independent national mortgage corporation was an american bank based in california that failed in 2008 and was seized by the united states federal deposit insurance corporation fdic . before its failure indymac bank was the largest savings and loan association in the los angeles area and the seventh largest mortgage originator in the united states . 1 the failure of indymac bank on july 11 2008 was the fourth largest bank failure in united states 2 and the second largest failure of a regulated thrift at that time . 3 it was heavily involved in alt a mortgages and reverse mortgages which in part resulted in its dramatic rise and has been suggested as the cause for its demise as large number of these questionable loans failed during the us subprime mortgage crisis of 2007 2009 . 4 the fdic put the assets up for auction and the bulk of the business was sold to imb holdco llc who turned this into onewest bank . the fdic kept some of the assets and liabilities that it could not sell in a holding entity known as indymac federal bank which would be slowly wound down . contents 1 history 1.1 growth and acquisitions 1.2 decline 1.3 turning point 1.4 collapse 1.5 us senator accused of causing run 1.6 backdating scandal 1.7 treasury department inspector general s investigation 1.8 other investigations 2 see also 3 references 4 external links history edit indymac bank was founded as countrywide mortgage investment in 1985 by david s. loeb and angelo mozilo 5 6 as a means of collateralizing countrywide financial loans too big to be sold to freddie mac and fannie mae . in 1997 countrywide spun off indymac as an independent company run by mike perry who remained its ceo until the downfall of the bank in july 2008 . 7 mac is an established contraction for mortgage corporation usually associated with government sponsored entities such as freddie mac federal home loan mortgage corporation and farmer mac federal agricultural mortgage corporation . indymac however had always been a private corporation with no relationship to the government . growth and acquisitions edit in july 2000 indymac mortgage holdings inc. acquired sgv bancorp the parent of first federal savings and loan association of san gabriel valley . indymac changed its name to indymac bank and became the ninth largest bank headquartered in california . 8 indymac bank operating as a combined thrift and mortgage bank provided lending for the purchase development and improvement of single family housing . indymac bank also issued secondary mortgages secured by such housing and other forms of consumer credit . indymac bancorp a holding company headquartered in pasadena california eventually acquired financial freedom an originator and servicer of reverse mortgage loans on july 16 2004 ; new york mortgage company an east coast mortgage bank on april 2 2007 ; barrington capital corporation a west coast mortgage bank in september 2007 . decline edit the primary causes of indymac s failure were largely associated with its business strategy of originating and securitizing alt a loans on a large scale . this strategy resulted in rapid growth and a high concentration of risky assets . from its inception as a savings association in 2000 indymac grew to the seventh largest savings and loan and ninth largest originator of mortgage loans in the united states . during 2006 indymac originated over 90 billion of mortgages . indymac s aggressive growth strategy use of alt a and other nontraditional loan products insufficient underwriting credit concentrations in residential real estate in the california and florida markets and heavy reliance on costly funds borrowed from the federal home loan bank fhlb and from brokered deposits led to its demise when the mortgage market declined in 2007 . indymac often made loans without verification of the borrower s income or assets and to borrowers with poor credit histories . appraisals obtained by indymac on underlying collateral were often questionable as well . as an alt a lender indymac s business model was to offer loan products to fit the borrower s needs using an extensive array of risky option adjustable rate mortgages option arms subprime loans 80 20 loans and other nontraditional products . ultimately loans were made to many borrowers who simply could not afford to make their payments . the thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market . indymac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria see the comment by ruthann melbourne chief risk officer to the regulating agencies . 9 10 11 turning point edit may 12 2008 in a small note in the capital section of its what would become its last 10 q released before receivership indymac revealed but did not admit that it was no longer a well capitalized institution and that it was headed for insolvency . indymac reported that during april 2008 moody s and standard & poor s downgraded the ratings on a significant number of mortgage backed security mbs bonds including 160 million of those issued by indymac and which the bank retained in its mbs portfolio . indymac concluded that these downgrades would have negatively impacted the company s risk based capital ratio as of june 30 2008 . had these lowered ratings been in effect at march 31 2008 indymac concluded that the bank s capital ratio would have been 9.27 % total risk based . indymac warned that if its regulators found its capital position to have fallen below well capitalized minimum 10 % risk based capital ratio to adequately capitalized 8 10 % risk based capital ratio the bank might no longer be able to use brokered deposits as a source of funds . indymac further warned that if its level of deposit liquidity was reduced in this way the bank anticipated that it would reduce its assets and most likely curtail its lending activities . 12 this statement was comparable to those adopted by other southern california banks that were experiencing liquidity problems such as pomona first federal pff and vineyard bank . 13 senator charles schumer d ny would later point out that brokered deposits made up more than 37 percent of indymac s total deposits and ask the federal deposit insurance corporation fdic whether it had considered ordering indymac to reduce its reliance on these deposits . 14 with 18.9 billion in total deposits reported on march 31 15 senator schumer would have been referring to a little over 7 billion in brokered deposits . while the breakout of maturities of these deposits is not known exactly a simple averaging would have put the threat of brokered deposits loss to indymac at 500 million a month had the regulator disallowed indymac from acquiring new brokered deposits on june 30 . indymac had suffered its third consecutive quarterly loss . the bank reported that nonperforming loans totaled 1.85 billion as of march 31 increasing 40.56 % from just the previous quarter . in the 10 q filing the company stated it expected to have an even higher level of non performing loans in the future due to the continued market disruption . 16 indymac was taking new measures to preserve capital such as deferring interest payments on some preferred securities . dividends on common shares had already been suspended for the first quarter of 2008 after being cut in half the previous quarter . the company still had not secured a significant capital infusion nor found a ready buyer . 17 18 according to indymac s 10 q the bank s risk based capital ratio had dropped to 10.26 % as of march 31 from 10.81 % the previous quarter . this ratio which factors in asset quality and loan loss reserve coverage needs to be at least 10 % for an institution to be considered well capitalized under regulatory guidelines . indymac reported that the bank s risk based capital was only 47 million above the minimum required for this 10 % mark . but it did not reveal some of that 47 million it claimed it had as of march 31 2008 was actually a fiction . collapse edit wikinews has related news indymac bank placed into conservatorship by us government when home prices declined in the latter half of 2007 and the secondary mortgage market collapsed indymac was forced to hold 10.7 billion of loans it could not sell in the secondary market . its reduced liquidity was further exacerbated in late june 2008 when account holders withdrew 1.55 billion or about 7.5 % of indymac s deposits . 19 this run on the thrift followed the public release of a letter from senator charles schumer to the fdic and ots . the letter outlined the senator s concerns with indymac . while the run was a contributing factor in the timing of indymac s demise the underlying cause of the failure was the unsafe and unsound manner in which the thrift was operated . 9 on june 26 2008 senator charles schumer d ny a member of the senate banking committee chairman of congress joint economic committee and the third ranking democrat in the senate 20 released several letters he had sent to regulators which warned that the possible collapse of big mortgage lender indymac bancorp inc. poses significant financial risks to its borrowers and depositors and regulators may not be ready to intervene to protect them . some worried depositors began to withdraw money . 21 on july 7 2008 indymac announced on the company blog that it had failed to raise capital since its may 12 2008 quarterly earnings report ; had been notified by bank and thrift regulators that indymac bank was no longer deemed well capitalized ; indymac announced the closure of both its retail lending and wholesale divisions halted new loan submissions and cut 3 800 jobs . 22 on july 8 2008 indymac announced the sale of its retail lending group to prospect mortgage company llc . 23 that day the bank s shares closed at 0.44 in trading on the new york stock exchange a loss of over 99 % from its high of 50 in 2006 . 24 additionally analyst paul j. miller jr. cut his price target on indymac to 0 from 1 rating the company s share price underperform . 25 on july 9 standard & poor s cut indymac s counterparty credit risk rating to ccc just a few steps above default from b the fifth highest junk level and said it may cut them again . 26 the following day the bank s shares reached a 52 week closing low of 0.31 . 27 on july 11 2008 citing liquidity concerns the fdic put indymac bank into conservatorship . a bridge bank indymac federal bank fsb was established to assume control of indymac bank s assets its secured liabilities and its insured deposit accounts . the fdic announced plans to open indymac federal bank fsb on monday july 14 2008 . until then depositors would have access their insured deposits through atms their existing checks and their existing debit cards . telephone and internet account access would also be restored on monday when the bank reopened . 28 29 30 the fdic guarantees the funds of all insured accounts up to