IndyMac May Sell Stake in Reverse Mortgage Servicer

IndyMac Bancorp's board of directors has authorized management to evaluate and plan for a potential sale of a minority stake in its reverse mortgage subsidiary, Financial Freedom Senior Funding, through an initial public offering.

As NMN reported last week, IndyMac chairman and CEO Michael Perry discussed the possible IPO during a conference call with analysts and investors after the company released first-quarter earnings.

IndyMac said it would consider selling "approximately 20%" of the ownership in Financial Freedom in an IPO.

Financial Freedom originated $1.1 billion in reverse mortgages and earned $8 million in the first quarter of 2006, up from $507 million in origination volume and $4.2 million in earnings for the first quarter of 2005.

IndyMac estimates that Financial Freedom's market share is 56% of the reverse mortgage origination sector and 53% of the reverse mortgage industry's outstanding servicing volume.

As of March 31, Financial Freedom had 984 employees.

IndyMac said in an announcement that a public company structure could drive growth opportunities, align Financial Freedom's management incentives with performance, allow IndyMac to monetize its initial investment in the company while maintaining a controlling interest, make it easier for investors to identify the value of Financial Freedom and provide a template to attract entrepreneurs to IndyMac.

The decision to proceed with an IPO is subject to future board approval and other factors, such as market conditions, IndyMac said.

IndyMac also said it remains committed to becoming a top six mortgage lender by 2010 and maintain annualized earnings-per-share growth in excess of 15%.

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