July 7 (Bloomberg) -- IndyMac Bancorp Inc., the lender whose market value has plunged by almost 90 percent this year, will fire half its employees after regulators said the company is no longer ``well capitalized'' and the quarterly loss widened.

IndyMac will slash its workforce by 53 percent to 3,400 employees and curtail lending, the Pasadena, California-based lender said today on its Web site. The company said it is working with regulators on a new business plan.

``We don't expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets,'' Chief Executive Officer Michael Perry said in the statement.

IndyMac, the second-biggest independent U.S. mortgage lender last year behind Countrywide Financial Corp., has lost almost $900 million in the nine months ended in March amid tumbling home prices. The company is focusing on mortgages that can be sold to government-sponsored enterprises like Fannie Mae and Freddie Mac.

Home values fell in 23 of 25 U.S. metropolitan areas in April, according to Radar Logic Inc., as sales of a record number of foreclosed homes pushed prices down. Last month, Senator Charles Schumer, Democrat from New York, asked U.S. regulators to scrutinize the financial health of IndyMac and suggested it may be on the brink of failure.

IndyMac rose 4 cents to 71 cents at 4 p.m. New York time. The stock has lost 98 percent of its value in the past year.

The second-quarter loss will exceed the $184 million reported in the prior period, IndyMac said. The company said it can't be more specific because of uncertainty surrounding accounting matters.

`Too Much Risk'

``We don't expect, given the really rough state of the housing market, that IndyMac is going to be able to get out of this,'' said Jason Arnold, an analyst at RBC Capital Markets in San Francisco. ``The big problem is that no one will give them money. There's too much risk involved and not enough value in their franchise.''

Founded 15 years ago, IndyMac saw net revenue more than double between 2002 and 2006 as it became the largest ``Alt-A'' home lender. The loans are an alternative for A-rated borrowers who fall short of standards for regular prime mortgages. The risk of default is lower than for subprime loans, which are made to people with the worst credit histories.

IndyMac said it expects to receive about $5 billion to $10 billion a year on mortgages meeting the standards of Fannie Mae and Freddie Mac.

Retail Banking

The company plans to keep its Southern California retail bank network with 33 branches and $18 billion in deposits and said it hopes to invest in mortgage loans and mortgage-backed securities when the housing market rebounds.

The world's biggest financial firms have already announced more than 90,000 job cuts after posting $400 billion in writedowns and credit losses tied to the U.S. housing slump. Countrywide was bought last week by Charlotte, North Carolina- based Bank of America Corp., which said it would cut about 7,500 jobs from the combined operations.

As severance, IndyMac employees with five or more years of service will receive at least $20,000, the statement said. Perry, who earned $1 million in salary last year plus option awards, said he's asking the board to reduce his base pay by 50 percent.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Josh P. Hamilton in New York at jphamilton@bloomberg.net

Last Updated: July 7, 2008 18:41 EDT