IndyMac Sputters to Loss

IndyMac's troubles come as Countrywide Financial(CFC Quote), another independent lender, is facing headwinds in its efforts to close a deal to sell itself to Bank of America(BAC Quote).

Standard & Poor's earlier this month downgraded Countrywide's debt to junk status and Charlotte, N.C.-based BofA said in a regulatory filing that it is reconsidering whether it will take on all of Countrywide's debt in the deal. Analysts increasingly are questioning whether the $4.1 billion deal can get done under the current terms.

IndyMac wrote down $160 million in the value to mortgage-backed securities in the first quarter and increased its provision for loan losses by $132 million.

The company has been converting its loan production from primarily securitized loans to loans that can be either held in its portfolio through its bank subsidiary, sold to one of the government-sponsored enterprises such as Fannie Mae(FNM Quote) or Freddie Mac(FRE Quote), or those that qualify under guidelines by the Federal Housing Administration. While these loans tend to be better in quality, production at many lenders has been severely curtailed due to the lack of investor demand in the secondary market to buy securitized loans.

Other lenders, including Washington Mutual(WM Quote) and Wachovia Bank(WB Quote) also have been hit hard by securities tied to mortgages in the housing downturn and credit crunch.