Indymac Bank today announced they are closing down their loan operations and laying off 3800 people. While this is certainly bad news for the lending industry as a whole, it's also bad news for buyers on two fronts. First, and most obviously, fewer lenders means less liquidity.
The ripple effect though will impact foreclosures already on the market--many of which are owned by Indymac. Two effects here that I can see right off the bat: first, Indymac requires offers to be submitted by an Indymac pre-approval letter (I hate this practice whenever a lender does it...but that's another post.) I assume this requirement will be lifted now that Indymac is no longer underwriting? Or will buyers be in an endless loop because they can't get an Indymac letter but somebody in the REO department has a checklist somewhere and that box isn't checked?
Second, if you thought it took Cubicle Joe in Idaho a long time to get you an answer on your foreclosure/short sale before, how much longer do you think it will be now that he's worried his employer might go out of business? My guess is he'll spend a lot more time at the water cooler gossiping, saying goodbye to his friends in underwriting who got let go, and polishing his own resume. Your timing risk just increased exponentially.
Buyers, lower your expectations when making offers on Indymac properties, and make sure you have a back up plan.
Sellers, if your buyer's lender is Indymac, ask for a new lender letter asap; or be prepared to re-list your home.
Readers: Are you learning about these developments from me via this blog instead of from your own agent? Shame on your agent for not being plugged into the market. You might want to explore the possibility of finding a new agent.