IndyMac Decries Subprime Label, Gets Downgraded
Joshua Lipton, 03.15.07, 6:48 PM ET
IndyMac is frustrated. The Pasadena, Calif.-based company released a statement on its Web site on Thursday in which it argued that reporters who have descibed the company as a subprime lender have it all wrong.
"IndyMac has been inappropriately categorized by many media sources as a subprime lender, and we wish to clarify our position as predominantly a prime/Alt-A lender," the company announced.
IndyMac (nyse: NDE - news - people ) pointed out that its exposure to subprime mortgages is small: only 3% of IndyMac's $90 billion in mortgage loan production in 2006 was subprime. The company doesn't rank among the top 25 subprime lenders in the country.
IndyMac's PR efforts didn't stop Standard & Poor's Equity Research analyst Stuart Plesser from downgrading the company to "sell" from "hold" and cutting the target price by $6 to $26 on Thursday.
Plesser told his clients that the downgrade reflects his view that default rates will pick up significantly for Alt-A loans.
The company's 30-delinquincy rate for its Alt-A loans at Dec. 31, 2006 totaled 5.4% compared to 22.7% for subprime loans, the analyst pointed out.
Plesser thinks defaults on Alt-A loans, roughly 80% of IndyMac production, will rise significantly because of an inability for borrowers to refinance.
On Thursday, shares of IndyMac climbed 1.4%, or 40 cents, to $29.34.
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Note: IndyMac also produced some size in IO loans. |
