Indymac Bank today said that it will eliminate 24 percent of its existing workforce, or 2,403 workers, as the former Alt-A powerhouse continues to reel from a downturn in the mortgage and housing markets. CEO Michael Perry announced the cuts in an email to employees that was posted on the company's corporate blog this afternoon [emphasis added]:
When I discussed the results of the voluntary resignation and severance program in an email to all of you on October 12, I stated, “I believe that we are largely done with staff reductions at this time except for some small, targeted layoffs over the next 30 days … unless, of course, the mortgage market takes another turn for the worse.� The reality is that since October 12 conditions have gotten worse in our industry. The private secondary market remains virtually frozen, and the market suffered another setback in November, as the GSEs reported large losses and indicated that they are capital-constrained, with the result that they had to further tighten their own guidelines.
Perry said that Indymac's production pipeline fell off dramatically to close last year, from $10.7 billion at the end of November to $7.7 billion by the end of December. The majority of the cuts come out of the thrift's mortgage production business, with 1,272 employees in that area of the business impacted. Very few of the cuts will impact Indymac's servicing operations, it said. Indymac also will close regional wholesale mortgage centers in Tampa, FL; Philadelphia; Boston; Columbia, SC; and Kansas City by the end of this quarter. "What we see happening in our industry today is the direct result of our capitalist, market-based, free enterprise system, where resources (people, capital, etc.) are constantly being redeployed from industry to industry, often in an abrupt and gut-wrenching way," Perry said in his email to employees. "The bottom line is that there have been too many resources deployed to the housing and mortgage markets for too long, and the markets are forcing these human and capital resources to be abruptly redeployed to other industries." Indymac has seen foreclosures jump in its loan portfolio, with foreclosures increasing 14 percent in November, the most recent period data has been made available. The Pasadena-based thrift reported a net loss of $202 million during the most recent third quarter, and losses are expected to continue when Indymac reports its fourth quarter results on Feburary 12. The move must come extremely hard for some former employees of now-bankrupt American Home; in late August of last year, Indymac touted its hiring of more than 600 former retail mortgage employees. It's unclear how many are affected by today's layoff announcement. My best wishes to those affected.