IndyMac's Servicing Is Not Just a Hedge.(IndyMac Bancorp Inc.-Michael Perry's thought on the services of IndyMac Bancorp Inc.)

IndyMac Bancorp, the fast-growing mortgage lender based in Pasadena, Calif., is known more for its loan origination acumen than its emphasis on loan servicing. But this focus on the company's growing share of the loan origination market obscures an equally important part of IndyMac's success story: it's loan servicing operation.

In fact, IndyMac executives say they want mortgage servicing to be much more than just a "macro-hedge" for the company's loan origination shop. During a conference call to discuss third-quarter results, chairman and CEO Michael Perry said IndyMac wants its servicing shop to contribute to the company's earnings in a variety of interest rate environments. Traditionally, many mortgage companies were content to reap profits from rising mortgage servicing right valuations when rates rise, offsetting lower loan origination volume. When rates fall? Well, lost MSR value is usually more than made up in greater loan production income.

But the way Mr. Perry sees things, IndyMac has way too much capital invested in mortgage servicing to think of it as a back-burner part of the business.

The company also posted a loan servicing milestone in the third quarter, with its portfolio of loans serviced for others rising to $124 billion at Sept. 30, up 69% compared with the third quarter of 2005.

That reflects the company's growing share of the mortgage origination market. Even more impressive, perhaps, is that IndyMac's loan servicing operation was strongly profitable in the third quarter, when falling interest rates took a toll on the servicing performance of some competitors. IndyMac said mortgage servicing contributed $30 million to the company's third-quarter earnings.

Mr. Perry said the servicing portfolio is aggressively hedged to try to make it neutral to interest rate conditions, a move that helps make it more than just a hedge against the mortgage origination segment.

"We need to try to earn stable returns in all interest rate environments in our servicing segment," Mr. Perry said.