PASADENA, Calif. — A week after opening IndyMac Federal Bank to worried customers and a media frenzy, John Bovenzi sat in his sixth-floor chief executive's office laying out what the battered mortgage lender can still offer potential buyers.
The lines of depositors were gone, though customers continue to show up at the main office and 32 satellite branches, some for prescheduled appointments to discuss the status of their funds.
Despite the return to a comparative normality, the Federal Deposit Insurance Corp.'s stewardship of the failed IndyMac Bancorp has only begun.
In an interview in the office formerly occupied by CEO Michael Perry, Mr. Bovenzi, the FDIC's chief operating officer and chief executive of IndyMac Federal, counts off the thrift's advantages: an established branch network, a large servicing portfolio, and a reverse mortgage business.
"The loans may not get full value, but they're still going to get value," he said. "Some parts of the portfolio may not get 100 cents on the dollar, but we'll see the best way to market and try to get that value back."
The more money the FDIC realizes from the sale of IndyMac — either as an entity or in pieces — the less its failure will cost the Deposit Insurance Fund. The greater the hit to the fund, the higher premiums banks will face.
Obtaining a good price will be difficult because IndyMac's specialty, alternative-A mortgages — including a chunk of payment-option, adjustable-rate mortgages — are fetching low prices during the housing crisis.
The FDIC also already owes the Federal Home Loan Bank of San Francisco $10 billion for advances that were taken out before IndyMac's collapse. Mr. Bovenzi said the Home Loan bank has agreed to gradual repayment as assets are sold.
But the agency has already begun trying to preserve the thrift's value for a later sale. To that end, the FDIC-run institution is paying competitive rates on certificates of deposit in order to bolster a deposit network that spans Southern California.
"We may pay something that's in the middle of the market that can retain those customers," said Mr. Bovenzi, who flew into the region on July 10 and has remained. "The branch network will be attractive to the extent there's a steady pace of loyal customers who find it convenient. So we're … trying to encourage them to stay here and do business. With everything going on the first week, it takes a little while to get to that point."
He also mentioned IndyMac's $185 billion servicing portfolio and its reverse mortgages subsidiary, Financial Freedom.
"That has been an attractive part of the organization," Mr. Bovenzi said of Financial Freedom. "There may be buyers for that, either as a separate entity or as part of the overall organization. … There's certainly value there."
No final decision has been made on whether to sell the bank as a whole or in pieces, he said.
"Whether all the assets of the bank go along with the retail banking franchise or not, we'll see," he said. "But as many of the pieces that can be sold off either together or separately [remain] intact, that preserves jobs and preserves value."
It is clear, though, that the $15 billion loan portfolio poses challenges.
Last week, FDIC Chairman Sheila Bair, an outspoken advocate of working out troubled loans to keep borrowers in their homes, said foreclosures by IndyMac would be suspended as the thrift pores over mortgages on a case-by-case basis to identify those that can be restructured into more stable loans.
Daniel Walker, a manager in the agency's division of resolutions and receiverships who is overseeing the FDIC's handling of IndyMac's portfolio, said such suspensions are standard in a resolution, though not usually made public.
Halting repossessions is particularly important in IndyMac's case since so many loans are at risk of foreclosure, he said, and would be more valuable to a potential buyer if modified into a better-performing product. He estimated about 1,400 mortgages on single-family, owner-occupied homes were near foreclosure before the FDIC suspension. In addition the thrift owns 1,300 properties it had repossessed before failing.
"If you can take a borrower that's distressed and is in trouble and you can make it so they can afford to make the payments on a predictable basis, then you've not only helped the borrower, but you've now taken a loan that had a higher degree of risk in it and made it more predictable in cash flow," he said. "The investor can see that the odds are better that they will get repayment under the contract terms."
In addition, about 600 properties financed by IndyMac had been abandoned, he said.
"No one wants to repossess real estate because it loses so much value," he said. "We try to work with borrowers to keep them in their home if we can. We'd rather modify than foreclose."
The sale of the institution appeared a lower priority last week than quelling a frenzy among the heavy stream of IndyMac depositors who wanted to withdraw their money. They tested the FDIC and thrift management's resources by showing in the first part of the week. Customers withdrew more than $1 billion last week.
Though agency and thrift officials had expected a spike in customer demands the Monday after the thrift reopened, the response was unprecedented, some said.
"Normally in a purchase and assumption, we have another bank that takes over, and [depositors] know that name. In this case, I really don't know how to explain it. I had never seen that in my entire career," said Frank C. Campagna, the FDIC's closing chief in the IndyMac resolution.
Mr. Campagna can track branch activity throughout the thrift's network on a computer camera hookup in the Pasadena headquarters. He said officials began the appointments plan on Monday (July 14) when crowds began to gather. Canopies, water, and granola bars were provided at branch sites.
On Tuesday, when double-booked appointments led to some discord at the Encino branch, Mr. Campagna said an IndyMac vice president — experienced at keeping order in branches — was dispatched along with law enforcement people that the agency had already contracted to respond if disturbances occurred.
Both Mr. Campagna and Mr. Bovenzi said they had spoken with some customers individually at the Pasadena branch.
"I talked to a lot of people that Monday, and there was a bit of shock effect," Mr. Bovenzi said.
Other branches reported a similar feeling of anxiety among customers. "Most branches were impacted real heavily, especially Monday through Wednesday. It started to calm down Thursday; Friday was a little better. Saturday was normal, as is today," Charis Buonarti, the San Marino branch manager, said on July 21.
"We knew that we would have a huge impact because we have a huge deposit base, but we didn't realize that there would be such a knee-jerk reaction so immediately."
Mr. Bovenzi has kept up a steady schedule of interviews with local media outlets, and he says that repeating that the agency can backstop any depositor under the insurance limit is paramount to keeping branch activity under control. "It's an opportunity to try to keep saying the message that: 'Your money is insured, don't worry,' " he said just after giving a radio interview. " 'You don't need to try to determine whether the bank is healthy. Just focus on the insurance coverage, and you'll be fine.' Clearly, it's a message we need to get out more."
