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Failed IndyMac goes OneWest

FEDERAL Deposit Insurance Corp says it has completed the sale of IndyMac Federal Bank, one of the largest casualties of the housing bust, to OneWest Bank.

Pasadena, California-based OneWest, a federal savings bank formed by an investor group that includes billionaire George Soros and Dell Inc founder Michael Dell, agreed last December to purchase the failed California lender for US$13.9 billion.

OneWest will assume all deposits of IndyMac's 33 branches, which were reopening as branches of OneWest yesterday, with deposits continuing to be insured by the FDIC.

As of January 31, IndyMac had total assets of US$23.5 billion and total deposits of US$6.4 billion, about half the company's total at the time of its failure. OneWest has agreed to purchase all deposits and about US$20.7 billion in assets at a discount of US$4.7 billion.

The FDIC will retain the remaining assets for later sale.

Under the terms of the sale, the new investors will shoulder the first 20 percent of the bank's loan losses, with the FDIC agreeing to take on the majority of any losses thereafter. In return, OneWest will continue a closely watched home-loan modification program launched last August.

IndyMac booked losses of US$2.6 billion in the 2008 fourth quarter as the housing market continued to slump. The FDIC said its bank insurance fund stands to lose US$10.7 billion on IndyMac.

Jumbo mortgages

OneWest, which has US$1.55 billion in common equity injected by its new owners, will operate as a regional bank, focused on deposits and conforming and jumbo mortgage lending for its retail customers in Southern California. Over time the bank intends to expand its retail branch network beyond the 33 branches primarily located in the Los Angeles area. The bank said it doesn't plan to close any existing branches.

OneWest, led by former Merrill Lynch and Fleet Boston executive Terry Laughlin, also acquired and will continue to operate Financial Freedom, one of the nation's largest reverse mortgage businesses, as part of the deal.

IndyMac, which specialized in loans made with little down payment or proof of assets, was seized by the government in July 2008 after a run on the bank as the housing market collapsed in the United States.

The failure of IndyMac was 2008's second-largest, trailing only that of Washington Mutual Inc.


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