SCHUMER conmrees JOINT ECONOMIC Wnited States Senate weeny June 26, 2008 Ronald Rosenfeld Dean Schultz Chairman President and Chief Executive Officer Federal Housing Finance Board, Federal Home Loan Bank of San Francisco 1625 Eye Street NW 600 California St, #2 Washington, DC 20006 San Francisco, CA 94108 Dear Chairman Rosenfeld and President Schultz, Iam writing to you out of concem for the safety and soundness risks posed by IndyMac Bancorp, Inc., one of the largest independent mortgage lenders in the United States. I am concemed that IndyMae’s financial deterioration poses significant risks to both taxpayers and borrowers, and that the regulatory community may not be prepared to take measures that would help prevent the collapse of IndyMac or minimize the damage should such a failure occur. ‘There are clear indications that IndyMac may have serious problems with its current loan holdings, and could face a failure if prescriptive measures are not taken quickly. IndyMac’s stock price has dropped almost 95 percent in the past year and its new loan production has fallen by almost two-thirds in the past year. As you know, Moody’s Investors Service recently downgraded its servicer quality rating because of concerns about inadequate capital and wamed of further downgrades. You may recall that late last year I wrote to Chairman Rosenfeld expressing my concem about the quality of Countrywide’s pledged collateral, and given the rapid deterioration of Countrywide’s loans I was glad to see that measures were taken to cur advances to Countrywide. I fear that IndyMac’s financial situation is even worse than Countrywide’s was at the time of my writing. As of March 31, 2008, IndyMac’s portfolio had an 11 percent delinquency rate, twice that of the beleaguered Countrywide, due largely to irresponsible lending practices. Because IndyMac holds over $10 billion dollars in advances from the Federal Home Loan Bank, I ask that you conduct a careful review of loans that are being held as collateral for FHLB advances. Specifically, I would like to know what steps FHLB San Francisco and the Federal Housing Finance Board are taking in response to IndyMae’s financial trouble. First, have you verified that IndyMac’s deposits are not supporting loans that do not meet the Joint Banking Guidelines on ability to repay and documentation? Second, has the Bank taken steps to determine that the credit and collateral terms for the advances made to IndyMac accurately reflect the associated risks? Have there been, for example, recent field reviews of pledged collateral or management controls, or changes in financingavailability or margins? Third, does the bank plan future actions to mitigate the risks of its exposure to IndyMac? ‘Thank you for your consideration of this matter, and I look forward to your prompt response to the concems that I have raised, Please don’t hesitate to contact myself, or David Stoopler of my staff with any information or questions at 202-224-6542. Sincerely, Charles Schumer dene United States Senator