April 26 (Bloomberg) -- IndyMac Bancorp Inc., the ``Alt-A'' mortgage company that says it's been mistaken for a subprime lender, posted its first profit decline in almost three years as defaults rose and investors paid less to buy its loans.
``Bids in the nonconforming mortgage markets, Alt-A as well as subprime, have collapsed,'' said Richard Eckert, an analyst at Roth Capital Partners in Los Angeles, who rates the stock ``hold.'' ``They could have some trouble, the shares could weaken, if market conditions deteriorate any more than they have.''
The company joins a growing number of Alt-A lenders that reported lower profits or losses amid rising mortgage defaults.
American Home Mortgage Investment Corp. earlier this month said first-quarter profit was about half what analysts expected because the Melville, New York-based company got lower prices for its loans in the secondary market, where they're traded by Wall Street firms and other institutions. Other Alt-A lenders who have cut forecasts or reported earnings declines or losses include Buffalo, New York-based M&T Bank Corp.; Vero Beach, Florida-based Opteum Inc.; McLean, Virginia-based Capital One Financial Corp.; and Columbus, Indiana-based Irwin Financial Corp.
Mortgages with little or no documentation of income -- known as ``liar loans'' because applicants can inflate their wealth -- defaulted at a 12.6 percent rate in February, compared with 1.5 percent of fully documented prime loans, according to San Francisco-based First American LoanPerformance.
About 80 percent of IndyMac's loans in the first quarter lacked full documentation, the company said in a press release last week.
IndyMac isn't beholden to Wall Street because it funds more than 80 percent of its loans with bank deposits and advances from the Federal Home Loan Bank of San Francisco, Lehman Brothers analyst Bruce Harting wrote in an April 3 report.
