IndyMac Bancorp Inc., the California mortgage lender seized last month by the Federal Deposit Insurance Corp., says it filed for Chapter 7 bankruptcy protection.
In a July 31 filing with the Securities and Exchange Commission, IndyMac says it expects the court will appoint a bankruptcy trustee promptly. A Chapter 7 bankruptcy case usually seeks to liquidate the assets of a company.
Once the nation's second-largest independent mortgage lender, IndyMac now has liabilities that are estimated between $100 million and $500 million, according to the Chapter 7 filing Thursday in U.S. Bankruptcy Court in Los Angeles. The bank holding company also noted it has less than 50 creditors.
Alston & Bird is representing IndyMac in the bankruptcy case.
A run on the bank, in which depositors withdrew $1.3 billion, began when a June 26 letter from Sen. Charles Schumer, D-NY, to the Office of Thrift Supervision and FDIC was made public. In the letter, the senator voiced concerns about the soundness of IndyMac.
IndyMac was seized by regulators on July 11 and customers lost whatever amount they had in the bank over the $100,000 per account insurance limits. About 10,000 of IndyMac's 275,000 accounts contained uninsured sums, and uninsured money made up about $1 billion of the bank's $19 billion in deposits. The FDIC proposes paying these depositors an "advance dividend" equal to half the uninsured amount.
The FDIC is running a successor institution, IndyMac Federal Bank, and regulators have said they intend to eventually sell the seized bank. The bankruptcy filing noted that the company currently has $50 million to $100 million in assets.
While banks are prohibited from filing for U.S. bankruptcy protection, bank holding companies aren't.
IndyMac racked up almost $900 million in total losses in the past year as the housing market tanked and foreclosures in California hit records. Much of its business was built on Alt-A single-family mortgages, often issued to borrowers with poor credit. The thrift's loose lending practices were blamed for much of its troubles.
Pasadena, Calif.-based IndyMac was the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC. The failure will cost the federal deposit insurance program that repays customers when a bank fails about $4 billion to $8 billion, the FDIC said in a statement last month.
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