IndyMac Posts $509.1 Million Loss as Slump Deepens (Update1) By David Mildenberg and Erik Holm Enlarge Image/Details Feb. 12 (Bloomberg) -- IndyMac Bancorp Inc., the second- biggest independent U.S. mortgage company, posted a fourth- quarter loss and suspended its dividend ``indefinitely'' as the housing slump entered its third year. The net loss was $509.1 million, or $6.43 a share, compared with a profit of $72.2 million, or 97 cents, in the same period a year earlier, the Pasadena, California-based company said today in a statement. The average estimate of seven analysts surveyed by Bloomberg was for a loss of $1.57 a share. After reporting the company's first annual loss in its 23- year history, Chief Executive Officer Michael Perry said IndyMac will tighten lending standards, curtail new home construction and lot financing and end most of its home-equity lending in an effort to remain independent. IndyMac has lost 80 percent of its market value in the past 12 months on concern it may not survive as a separate company. ``2007 was a terrible year for our industry, for IndyMac and for you, our owners,'' Perry said in a letter to shareholders today. The housing slowdown may be ``the longest and deepest since the Great Depression,'' he said. IndyMac closed down 3.2 percent yesterday at $7.60 a share in New York Stock Exchange composite trading. The largest independent U.S. mortgage company, Countrywide Financial Corp., has agreed to be bought by Bank of America Corp. for about $4 billion. `Good Shot' Perry said in an interview last month that IndyMac has a ``good shot'' at rebounding from losses in 2007 and posting a profit in the second half of this year. Falling interest rates on home mortgages may encourage homeowners to refinance and boost production of loans above previous forecasts, Perry has said. IndyMac's decision to curtail lending ``leaves us still with a pretty substantial and solidly profitable production model that we expect will produce over $40 billion in home loans,'' he said. The company expects to add $372 million in reserves for loan losses in 2008, down from $1.45 billion last year, Perry said. ``This is the key driver of our expected return to profitability,'' he said. Suspending the annual dividend of $1 a share and reducing IndyMac's balance sheet by 14 percent because of limited lending will ``free up'' $400 million of added capital, Perry said. The moves will avert the need for ``fire-selling either the entire company or our reverse mortgage business, which should be a tremendous long-term asset for our shareholders,'' he said. Atypical Mortgages IndyMac, which had been a specialist in atypical mortgages, curtailed home loans last year that didn't meet standards that would make them eligible for sale to government-chartered companies including Fannie Mae or Freddie Mac, the two biggest sources of mortgage money. IndyMac is also making and holding on to ``jumbo'' loans, which are larger than the $417,000 limit for mortgages that Fannie Mae and Freddie Mac will buy. Congress has debated raising that limit, which may benefit lenders including IndyMac. The company said it was suspending its common dividend ``in light of current financial performance'' and will pay 53 cents a share to preferred shareholders. That payment will be made on March 17 to shareholders of record March 3.