The reverb from the so-called “Subprime Meltdown” continues today. I received this email about an hour ago.
Today, Indymac Bank is announcing the suspension of residential Construction- to-Permanent (CTP) loan production effective February 1, 2008. As you may know, Indymac has been committed to the CTP product for 13 years, and it has been and continues to be a well-performing product for us, both in terms of profitability and credit performance. However, given our need to carefully manage our balance sheet and preserve our strong capital position (in light of current market conditions), we need to limit our loan production almost exclusively to products that are immediately saleable into the secondary market and, therefore, have independently decided that this is a prudent step to take at this time. Importantly, we are not being compelled to curtail CTP lending due to any performance issues or external pressures; when industry conditions ultimately stabilize, we look forward to restarting CTP production.
More fallout from the Subprime Meltdown to come. As evidenced by this email, investors are having a hard time selling any non-agency loans off. Right now, if it’s not a Fannie or Freddie loan, it’s going to stay on the books for awhile.