With the closure of IndyMac Bank this week, it is time to take stock of the situation. I know people who work for IndyMac Bank and some who used to work there. It is easy as a media wonk to point fingers and say that this is just another case of an out of control lender getting what they deserved. For some, most notably the Financial Freedom employees, a softer landing is in store. And some in servicing and in the retail end may still land on their feet, too, as Prospect Mortgage looks to pick up some of the retail branches. Wholesalers--those who deal with mortgage brokers--are not as fortunate.
One of the forgotten tenets in all of the mortgage problems that abound is that old investment adage."The greater the risk, the greater the return." Some in Congress and the Federal Reserve are trying to remove the 'risk' part from the equation. Sometimes, investors just have to take their lumps. Otherwise, the prudent are punished. Indeed we see that today with some of the over-reacting underwriting guidelines. Hopefully, there will not be too much in the way of overlegislating either. Unintended consequences are sometimes worse than the problems that are being "solved".
In the meantime, there are a lot of families affected by this shutdown. There will probably be others down the road, too. And there will be more friends affected by the fallout.