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Tuesday, July 31, 2007

Alt-A Update: IndyMac Reports

by Tanta on 7/31/2007 08:20:00 AM

I post this with some trepidation. Our general interest in these matters on this blog involves the effects on housing, credit markets, and the general economy of deteriorations in the residential mortgage book and the availability of residential mortgage credit. In other words, we aren't trading IMB. You know.

What I got from IndyMac's report: things are not good in Alt-A land. Indy's Non-Performing Assets were up 342%, from 0.46% to 1.63%. Repurchases of loans are slowing down, but are still winding their way through the food chain:
A positive to note is that loan repurchases, while high at $219 million for the quarter, declined from $224 million last quarter. Importantly, repurchase demands received, which peaked at $527 million in the first quarter, fell to $221 million for all of Q207, with May and June coming in at $44 million and $43 million, respectively. This indicates that the guideline tightening we did earlier this year has had the desired impact of improving the credit quality of our loan production, which should materially improve our credit costs in this segment of our business in the second half of the year.
Credit guideline tightening is slowing new production; on the other hand, slower prepayments are helping with income for servicers (like IndyMac). My own sense of this report is that if Indy weren't a thrift, it would be in the middle of a serious "liquidity crisis" like C-BASS or AHM. Certainly nothing I've seen suggests that the worst is over for anyone in the Alt-A space who hasn't already "deleveraged."