Ahead of its July 31 earnings call, IndyMac Bank reported last week that it’s seeing a pretty big jump in delinquencies and foreclosures, as per the company’s blog:
… 30+ day delinquencies for our servicing portfolio in the second quarter of 2007 were 5.35 percent, up from 4.10 percent a year ago and 4.37 percent last quarter. Foreclosures also increased to 1.15 percent in the second quarter, up from 0.89 percent in the prior quarter.
That’s a 29 percent jump in foreclosure activity in one quarter — IndyMac didn’t disclose its year-ago foreclosure totals, but I’d assume the magnitude on a YOY basis is even greater. And in a bit of unintentional comedy, or perhaps foreshadowing, company PR director Grove Nichols painted the numbers as not altogether worrying because — are you ready? — they’re in line with what’s taking place at Countrywide:
While our delinquency rates have increased, they are comparable to Countrywide Financial Corp. … On July 16, 2007, Countrywide reported a 30+ day delinquency rate in their servicing portfolio of 4.77 percent for the period ending June 30, 2007. Indymac’s modestly higher delinquency rate can be attributed to the fact that Countrywide carries a much higher mix of agency/conforming loans in their servicing portfolio relative to Indymac.
Triple ouch. For one, IndyMac’s delinquency rate is more than 12 percent above Countrywide’s reported rate — I’m not sure how that gets characterized as “modestly higher.” For another, we all know where Countrywide’s most recent earnings report landed. And IndyMac is relatively more exposed than Countrywide to non-conforming loan products? Nichols also makes another unintentional point, suggesting the worst lies ahead:
We also want to point out that 40% of this quarter’s delinquencies are on products that have been discontinued with the guideline tightening initiated by Indymac in the first quarter of 2007.
I’m sure he’s trying to point to a bright future for IndyMac, something that’s certainly not in question here. (IndyMac says it retains credit exposure on only 10 percent of the loans it services). But his point also suggests that a massive percentage of currently delinquent borrowers will ultimately lose their homes to foreclosure in the back half of this year — precisely because there is no longer a loan product available to them that they can qualify for.