Bad Loans have put many of the subprime and Alt-A lenders under the bankruptcy train as it has rolled through the mortgage industry in the past 6 months. The carnage has been extensive, but leader IndyMac is trying to hold on throughout the turmoil to it’s loan portfolio.

What typically happens is that hedge funds buy up the non performing loans for pennies on the dollar and try to arbitrage them into a healthy income. IndyMac is trying to hold on to the bad loans and get their money out of reworking them or in the forclosure process. If they have the stamina and reserves to hold out it will be a much better strategy as the return will be higher.

However, if cash gets crunched they may have too much inventory to drop on the market in a short period and hurt themselves even more.

During an April 26 conference call with analysts, Perry said the company didn’t sell a single dud loan in the first three months of the year because no one wanted to pay what he thinks they’re worth. No way is IndyMac selling to a hedge fund for “pennies on the dollar,” Perry said.
In that time, IndyMac’s sour loans and foreclosed real estate ballooned 75 percent to $324 million.
“We are not going to fire-sell when we have the intent and ability and expertise to work through those loans and sell them ourselves,” he said.
But Indymac and others who deal in Alt-A loans, such as Impac Mortgage Holdings of Irvine and Downey Financial of Newport Beach, may not have time to wait. The same problems shaking up the subprime market are now emerging in the Alt-A industry. via the OC Register

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