Dec. 6 (Bloomberg) -- IndyMac Bancorp Inc., the second-largest U.S. independent mortgage lender, forecast losses until at least the second half of next year and rejected a shareholder proposal to buy back stock. The company fell as much as 9.1 percent in New York trading.

The lender may cut its dividend or sell bonds convertible into shares to raise capital, Chief Executive Officer Mike Perry said today in documents the Pasadena, California-based company filed with the U.S. Securities and Exchange Commission.

``Until we can `see some light at the end of the tunnel,' maintaining strong capital and liquidity is paramount,'' Perry wrote, responding to a shareholder's proposal that the company repurchase stock. ``If all goes well, we could return to `modest profitability' in the second half of 2008.''

IndyMac has lost more than 80 percent of its value on the New York Stock Exchange this year as the worst U.S. housing slump in 16 years forced a record number of homes into foreclosure. The company reported its first loss in more than eight years in the third quarter.

IndyMac fell 67 cents, or 7.7 percent, to $8.08 at 12:26 p.m. in New York Stock Exchange composite trading after dropping as low as $7.95.

``We expect them to eliminate the dividend in the fourth quarter. Clearly the company has to do everything possible to raise capital,'' said Matthew Howlett, an analyst at Fox Pitt Kelton Cochran Caronia Waller LLC. ``We think they will be a survivor and that they have the leverage to pull through this.'' He rates the shares ``inline.''

IndyMac is considering a convertible debt or preferred offering that would be privately sold to one or more investors, Perry said. ``We are exploring every option possible to raise our capital levels, including shrinking our balance sheet,'' he said.

`Eye of the Storm'

IndyMac's business model ``is in the eye of this storm,'' Perry said. Calabasas, California-based Countrywide Financial Corp., the biggest U.S. mortgage lender, has declined 75 percent this year in New York trading.

IndyMac on Nov. 6 cut its dividend in half to 25 cents. The company is expected to lose 26 cents a share in the fourth quarter, the average of eight estimates compiled by Bloomberg.

More than 30 percent of borrowers with subprime adjustable- rate mortgages are behind on their payments before their loans reset higher, and 775,000 homes with $143 billion of mortgage debt will go into foreclosure over the next two years, according to estimates from analysts at Credit Suisse Group.

Capital Levels

IndyMac's capital and liquidity levels at the end of the year will be about the same as at Sept. 30, even with the fourth-quarter loss, Perry said.

Moody's Investors Service on Nov. 29 downgraded IndyMac's bank deposit ratings to non-investment status, citing ``significant deterioration in the quality of IndyMac's loan portfolio.'' The company has boosted the interest its bank pays account holders after it became harder to raise cash through debt-secured loans and asset-backed commercial paper, Perry said on Nov. 6.

``They have ramped up their bank deposits and their advances from the Federal Home Loan Bank system because the securitization source of funds has completely evaporated,'' Howlett said.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: December 6, 2007 12:35 EST