IndyMac Bankcorp, the Pasadena, Calif.-based mortgage lender and savings and loan bank, announced Monday that it will no longer accept most loan applications and plans on cutting its workforce by more than half in the coming months.

IndyMac is no longer "well capitalized," according to federal banking regulators, and must create a new business plan for regulators to approve, one that improves capital and liquidity. Under normal circumstances, the company could sell its assets to improve its financial situation; but in the current environment, it cannot.

"Either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide; 'fire-selling' assets would actually deplete capital further," IndyMac CEO Michael Perry said in a statement. "As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset is to curtail most new loan production."

IndyMac plans to cut its employee count to 3,400 from its current level of 7,200 over the next few months, the company said in a statement. Employees with more than five years with the company will receive a minimum severance of $20,000, the company said.

The company's business model includes continuing its reverse mortgage and payment collection operations, as well as keeping open a series of retail banks in Southern California, which have roughly $18 billion in deposits, IndyMac said in a statement.

Perry, in the bank's statement, also said that he has asked IndyMac's board of directors to reduce his base salary by 50 percent.

Tuesday, IndyMac bank sold 60 retail mortgage bank branches to Prospect Mortgage, in Northbrook, Ill. Prospect Mortgage also picks up roughly 750 bank employees in the transaction, the financial terms of which were not announced.

With industry analysts seeing little way out for the troubled Pasadena lender, IndyMac found its way onto a list of lending companies that have recently faltered, where it is the 265th lending company to flounder in the wake of the housing bust.

Ethan Butterfield is senior editor, business, for BUILDER magazine.

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