IndyMac Bancorp, one of the largest independent mortgage lenders, reported a third-quarter loss of $202.7 million due to bad loans, five times bigger than company forecasts in December.
The Pasadena, Calif.-based firm cut its stock dividend by half on Tuesday.
The company had a strong focus on Alt-A loans, which are an alternative for A-rated borrowers who don't meet requirements for regular prime mortgages.
The losses were due to growing loan delinquencies, late payments on loans and a lack in investor demands for its mortgage-backed bonds, as well as expectations that the downturn in home prices would continue. The bank says it is now focusing loans approved by government-sponsored mortgage enterprises Fannie Mae and Freddie Mac.
Indymac posted a loss of $2.77 per share, compared with a year-ago profit of $86.2 million, or $1.19 a share. During the third quarter, Indymac increased its credit reserves by $441 million to $1.39 billion.
Shares of Indymac fell $0.28, or 2.19 percent to close at $12.49 on the New York Stock Exchange.