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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (106876)	2/26/2008 3:58:16 PM
From: Cal Amari	Respond to of 306849

Look for IndyMac bank to take it on the chin going forward IMO. biz.yahoo.com Can IndyMac's Profit Forecast Hold Up? Friday February 15, 3:50 pm ET Analysts Skeptical of IndyMac's Prediction It Will Turn a Profit in 2008 NEW YORK (AP) -- An extraordinarily tight credit market. Gloomy assessments from economic policy makers about the state of the housing sector. A possible contraction in the nation's economy. Faced with those daunting obstacles, struggling mortgage lender IndyMac Bancorp still says it can turn a profit this year. Many analysts are skeptical. "With rapidly rising credit problems and an economic recession looming, we see little reason to be hopeful that earnings pressure will subside for IndyMac over the near term," said RBC Capital Markets analyst Jason Arnold. IndyMac, the ninth-biggest mortgage lender in the U.S., lost more than $600 million during a "terrible" 2007. The company expects a big loss in the first three months of 2008, but believes a recovery in the second half will lead a reversion to profitability. [yeah, right!!!] Chief Executive Michael W. Perry said the lender's plan to cut $1.1 billion in costs and issue loans only eligible to be purchased by government-sponsored companies like Fannie Mae and Freddie Mac leads the company to forecast a $13 million profit this year. "I believe that we have a realistic shot of achieving this goal," he said. The Pasadena, Calif.-based company's predictions in the past year, however, have been overtaken by the severe shifts in the credit markets. In the middle of last year, when problems with subprime mortgages became full blown, the company said it expected to remain profitable. It ended up losing more than $6.40 per share. At midyear, the company said it expected to remain profitable. In September, with a little more than three weeks remaining in the third quarter, IndyMac predicted it would lose no more than 50 cents per share for the three-month period. It lost more than five times that much. [Denial ain't just a river in Egypt.] Some analysts say IndyMac has underestimated how sketchy credit will be this year and overestimated how much profit it can wring from its expected $40 billion in new loans in 2008. As the slumping housing market straitjacketed borrowers' ability to repay their debts, IndyMac set aside $2.4 billion to cover bad loans. About 4.6 percent of IndyMac's loans are not being repaid, and the company expects that rate to swell to 7.7 percent this year. Friedman Billings Ramsey analyst Paul Miller Jr. doubts IndyMac can turn a profit this year. With home prices slipping and more homeowners defaulting on their mortgages, he thinks the lender will incur more credit costs than it expects. "How high losses climb, no one knows," he said. IndyMac's stock rallied when the Federal Reserve slashed interest rates twice in an eight-day period but has retreated somewhat since. The stock has lost more than three-quarters of its value in the past 52 weeks. Because of the abrupt and volatile gyrations in the mortgage industry in the past year, many of the market's participants have issued forecasts for a recovery that have proven premature. Countrywide Financial Corp. initially predicted it would earn at least $3.80 per share for 2007, and lost more than $2 per share. In the early stages of the subprime crisis, the Calabasas, Calif.-based lender asserted it would be a beneficiary of the shakeout in mortgage lending. The company last month agreed to sell itself to Bank of America Corp. for about one-sixth what Countrywide was worth a year earlier. Homebuilders were nearly unanimous in late 2006 predicting a rebound in the housing market for 2007. Instead, home sales fell almost 13 percent last year, according to the National Association of Realtors. Executives at Bear Stearns Cos. and Citigroup Inc., hit with billions of dollars of mortgage-related writedowns during the summer, adopted a more optimistic tone in October, saying the market had begun to stabilize. November in turn was one of the worst months in Wall Street's history. Throughout much of last year, Federal Reserve Chairman Ben Bernanke repeatedly stated he believed the subprime crisis would remain "largely contained," a prediction disproved by hiccups at a range of companies from Bristol-Myers Squibb Co. to United Rentals Inc. Another beleaguered lender predicting profit this year is GMAC Financial Services, the lending arm of General Motors Corp. now majority-owned by Cerberus Capital Management. GMAC lost $2.3 billion last year. Analysts say it is plausible the company's insurance and car-lending businesses can earn enough to recoup losses at Rescap, GMAC's mortgage unit. "We believe GMAC could be profitable in 2008," Deutsche Bank analyst Rod Lache wrote in a report. "But barely."