IndyMac: A Case Study In Rise & Fall Of America’s Mortgage Market?

A June 30, 2008 report issued by the Center for Responsible Lending ("CRL") states that an investigation they have conducted "has uncovered substantial evidence that IndyMac Bank and its parent, IndyMac Bancorp, engaged in unsound and abusive lending during the mortgage boom, routinely making loans without regard to borrowers’ ability to repay. These practices left many deep in debt and struggling to avoid foreclosure."

Their report begins with the following introduction:

• IndyMac’s story offers a body of evidence that discredits the notion that the mortgage crisis was caused by rogue brokers or by borrowers who lied to bankroll the purchase of bigger homes or investment properties. CRL’s investigation indicates many of the problems at IndyMac were spawned by top-down pressures that valued short-term growth over protecting borrowers and shareholders’ interests over the long haul.

For the CRL report, see IndyMac: What Went Wrong? (How an "Alt-A" Leader Fueled its Growth with Unsound and Abusive Mortgage Lending).

For two examples of homeowner lawsuits IndyMac faces as a result of their alleged lending practices (available online courtesy of the Center for Responsible Lending):

• Simeon Ferguson v. IndyMac Bank, U.S. District Court for the Eastern District of New York, filed February 14, 2008 (His attorneys claim a mortgage broker steered 86-year old Mr. Ferguson, who was suffering from dementia, into an IndyMac "stated income" loan program for retirees. IndyMac made no effort to verify retirees’ income, attempting to duck accountability "by deliberately remaining ignorant of the borrower’s ability to pay the mortgage," his lawsuit says ),

• Elouise Manuel v. American Residential Financing, Inc., et al, Superior Court of Gwinnett County, State of Georgia, April 3, 2008 (In the case of Elouise Manuel, a 68-year-old Decatur, Georgia retiree, IndyMac instructed the mortgage broker to send copies of her Social Security award letters with the dollar amounts expunged: "Need copy of SSI letter blacked out for the last 2 yrs w/no ref to income", according to the lawsuit),

• Willie Lee Howard v. Countrywide Home Loans Inc. et al., U.S. District Court for the District of Columbia, March 25, 2008 (According to CRL, Mr. Howard’s allegations echo those in other legal claims against IndyMac. Lawsuits accuse IndyMac of working with independent mortgage brokers to land borrowers into predatory loans. Several of the lawsuits claim that borrowers were bamboozled by brokers who promised low, low rates that would last a year or even five years. Instead, the lawsuits say, the teaser rate evaporated within one or two months. Along with IndyMac and Countrywide, other lenders named as defendants include Washington Mutual Bank and WMC Mortgage Corporation).

The following class action lawsuit attempts to take IndyMac to task with respect to their allegedly deficient lending practices:

• Tripp v. IndyMac Bancorp, Inc., et al. (3.44 MB).