Indymac( NDE) surged 5% after the lender protested it's being unfairly tarred with the subprime brush.
"It is no fun to have this current level of turmoil in the mortgage business and have our earnings and stock price decline, causing stress and anxiety for our shareholders and employees," said CEO Michael Perry. "And, while we don't wish any of our competitors ill, the current 'firestorm' in our industry is exactly what is needed to restore rationality and discipline to the mortgage business, and this will ultimately be very positive for strong companies like Indymac."
He said only 3% of loan production last year was subprime, adding that Indymac tends to focus on prime and so-called Alt-A mortgages. Alt-A mortgages are those made to borrowers without full income documentation, though Indymac stressed those people tend to "qualify for the loan based on their strong credit history, liquid cash reserves and home equity level."
The news comes as shares across the mortgage business have been hammered by the collapse of
, a subprime mortgage real estate investment trust that whose New York Stock Exchange listing was suspended after the company disclosed criminal investigations of its accounting and securities trading. Banks pulled their funding, effectively putting the company out of business.
Indymac took pains to point out that it's not a REIT but a federally chartered thrift, which it said gives it better access to funding even in tough times.
The company said it expects nonperforming assets to rise to 1.5% to 2% this year from its 0.63% year-end level. It added that it expects loan repurchases to double this year but hasn't gotten any margin calls and believes credit costs will remain in control.
"Clearly, the mortgage market and, in particular, the secondary market for mortgages are in a state of irrational panic right now, making it virtually impossible to predict short-term loan production and sales volumes or earnings with any reasonable precision until things settle down," said Perry. "With that said, at this point our view that in the first half of 2007 Indymac would earn around a 10 percent ROE and in the second half ... as our credit tightening and pricing changes take affect and hopefully the markets settle down ... could earn around a 15 percent ROE still looks, roughly speaking, right."
Shares rose $1.35 to $30.29.