The Housing Bubble and Indy Mac Bank

The Indy Mac bank collapsed in July 2008 is regarded as the most expensive failure in the history of US. Indy Mac Bank exclusively dealt in Alt-A mortgage loans which were considered to have the highest credit rating and was safer than the subprime loans. However during the boom period Indy Mac bank provided loans to the customers without much documentation or verification of their income strengths. Indy Mac was and its profitability was rising considerably due to increasing disbursing of loans. The property prices were high, so if the customers failed to pay the loan back, the possession of the house or property was taken and sold to investors for pooling the money, but this bubble busted and the price of the houses fell considerably. Moreover, many borrowers could not pay the loan back, as the bank did not check the authenticity of the borrower before disbursing the loans. So the bad loans accumulated with the bank. The bank had no such provision to sell the property and pool money because the purchasing power of the buyers in the market had reduced considerably and no one was willing to buy property. This was the situations which like the other bank Indy Mac Bank also faced, which led to its failure. Finally it was acquired by FDIC and Indy Mac became Indy Mac federal Bank.

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