IndyMac Bancorp, one of the largest independent U.S. mortgage lenders, said Friday that it might post a third-quarter loss as defaults rise and loan volumes decline, and its shares fell as much as 9.8 percent.
The Pasadena, California-based company said it might break even or post a loss of as much as $36.8 million, or 50 cents per share, according to a U.S. Securities and Exchange Commission filing. It said its forecast was "rough."
IndyMac made $86.2 million, or $1.19 per share, in last year's third quarter.
Analysts on average expected a profit of 45 cents per share, according to Reuters Estimates, although several forecasts predated much of the recent U.S. credit market turmoil. Three analysts who issued earnings projections in the last 15 days on average called for a loss of 18 cents per share.
IndyMac said it was focusing on "safety and soundness first and foremost" as it moves "to right-size costs to current production realities."
The company said its mortgage lending business "has been damaged as a result of the illiquidity in the secondary markets."
IndyMac made $48.1 billion of mortgage loans from January to June, ranking ninth nationwide, according to the Inside Mortgage Finance newsletter.
Long a specialist in "Alt-A" loans that fall between prime and subprime in quality, IndyMac is changing its business model to emphasize loans eligible for purchase by Fannie Mae and Freddie Mac, which investors consider safer.
Countrywide Financial Corp, the largest U.S. mortgage lender, has made a similar move.
IndyMac is also making more loans directly to borrowers, rather than relying on brokers. Last month, it said it would hire about 800 former employees of bankrupt rival American Home Mortgage Investment Corp. It took on 440 workers in April when it bought New York Mortgage Co.'s retail business.
IndyMac said it expected to sell 74 percent of loans it produces this quarter, and 76 percent in the fourth quarter.
That's down from 90 percent in the second quarter and 96 percent in the first quarter.
Dozens of mortgage lenders have cut back or stopped offering home loans this year as delinquencies and defaults increased, home prices stopped rising, and investors stopped buying home loans they no longer consider safe.
IndyMac shares were down $1.61, or 7.4 percent, at $20.05 in morning trading after falling to $19.53 earlier in the session. The company is expected to outline its strategy and outlook to investors later Friday.