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Special Reports
Return of Subprime
Perry: IndyMac Emphasizes Hybrid Business Model
By Ted Cornwell
NEW YORK -- Michael Perry, like most mortgage banking industry CEOs, expects to
see a contraction in loan origination volume next year.
But that doesn't mean he expects his firm, IndyMac Bancorp, Pasadena, Calif.,
to have a down year.
IndyMac, a spin-off of Countrywide Financial Corp., now is the 20th largest originator
of home loans and the 23rd largest servicer in the nation, he said during a Friedman Billings Ramsey investors
conference here last week.
And because IndyMac focuses on niche and nonconforming loan products, it hopes
to maintain higher profit margins than most lenders that focus on prime, conforming loan products.
"Our model is really a hybrid thrift and mortgage banking business,"
Mr. Perry said. As a result of that approach, which mixes portfolio lending with secondary market sales, IndyMac
believes that it is positioned to maintain earnings growth even as overall loan origination volume declines.
"We may have a few quarters of flat-to-down earnings. The bottom line is
that by the fourth quarter of next year, we should be back up to record levels," Mr. Perry said.
Mr. Perry said IndyMac projects asset growth in the 17% range for next year, down
from 43% growth in assets this year.
And home equity lending may be one avenue for maintaining growth even as first
mortgage lending tapers off, Mr. Perry said. He sees home equity lines of credit as a particularly attractive area.
"We see the potential down the line of being able to scrape off the best
credit card customers with our own home equity card," he said.
Mr. Perry also touted the company's technology, which he said offers "one-door,
risk-based pricing" from a Web-based platform. It allows users to price a variety of loan products, including
jumbo loans, subprime mortgages and second mortgages, using one system. And it works on a tree that offers the
consumer the lowest rate or most affordable loan product for which they qualify, reducing the risk of "predatory
lending" claims.
Analysts also seem to like IndyMac's value proposition. Four of seven who participate
in a Yahoo!Finance survey rate the company as a "buy" or a "strong buy." None rate the company
as a "sell."
Paul Miller of Friedman Billings Ramsey calls the stock an "outperform"
choice, giving it a price target of $37. FBR raised its price target and EPS estimates. "Our improved EPS
outlook is predicated on a healthy mortgage purchase market, sustainable margin, balance sheet growth and increasing
market share," Mr. Miller said in his report.
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