What do Criimi Mae and IndyMac have in common, aside from being real estate investment trusts and having names that invoke the government- sponsored mortgage agencies?
Very little, insists Michael W. Perry, president and chief operating officer of IndyMac Mortgage Holdings Inc., Pasadena, Calif. "We're as close as companies as Walt Disney is to us."
Mr. Perry contends his company has been unjustifiably tarred with the same brush as Rockville, Md.-based Criimi Mae, which filed for bankruptcy protection Monday. IndyMac's stock price plummeted for a second straight day Tuesday, closing at $10, down $6 on the day and $9.3125 from Friday's close.
"It's frustrating to watch in two days half of your market capitalization go away over these fears," Mr. Perry said.
Shares were off 87.5 cents, to $9.125, in early trading Wednesday.
As mortgage REITs, Criimi Mae and IndyMac invest in loans and securities and pay out most of their income in dividends. Both borrow money from Wall Street, pledging those investments as collateral. Both run conduits, which originate loans with securitization in mind.
The similarities end there. Criimi Mae bought risky, lower-rated tranches of commercial mortgage-backed securities offerings, whereas IndyMac focuses on residential mortgages, and mostly prime-quality loans at that.
Since late August the commercial mortgage-backed market has gone south, and the subordinated bonds Criimi Mae owned were hit hardest. When its lenders made margin calls recently, the company had to file for protection from creditors.
Residential mortgages have also suffered, but not as much, and remain more liquid than the lower-rated bonds Criimi Mae owned, said Daniel Martin, an analyst at Standard & Poor's. When IndyMac had margin calls recently, it met them "easily," Mr. Perry said.
Nevertheless, Fitch IBCA Tuesday placed its BBB rating for IndyMac on review for possible downgrade. "Any efforts by lenders to protect their positions with additional collateral or a further deterioration in the market value of IndyMac's portfolio could put further pressure on the company's resources," Fitch said.
S&P intends to maintain its BBB- rating for IndyMac, Mr. Martin said, noting that IndyMac has committed bank lines of credit. "They have a liquidity backstop."
IndyMac was founded by Countrywide Credit Industries Inc., the nation's second-largest mortgage lender, and the two companies still have close ties.
Before this week, IndyMac's stock was trading at about 1.6 times book value, while other mortgage REITs were trading below book. "Some short- sellers have been putting tremendous pressure on our stock to drive us down closer to book value," Mr. Perry said. Criimi Mae's filing "gave fuel to the short-sellers."
Someone calling himself "Mr. Pink" has been posting messages critical of IndyMac on the Yahoo! message board, Mr. Perry said. FirstPlus Financial Group, Dallas, recently said a critic using the same moniker was sabotaging its stock.
"That's the terrible thing about the Internet," Mr. Perry said. "These guys can hide behind a pseudonym."
