Sept. 7 (Bloomberg) -- IndyMac Bancorp Inc., the second- biggest U.S. mortgage company, plans to cut 10 percent of its workforce and lower the dividend as housing sales falter and home-loan defaults climb. It may post a loss for the first time in at least eight years.

IndyMac expects to eliminate about 1,000 jobs over the next ``several months'' and slice its dividend in half to 25 cents a share, the Pasadena, California-based company said today in a statement. It also may report a third-quarter loss of as much as $36.8 million, or 50 cents a share. The forecast falls short of the average estimate of eight analysts surveyed by Bloomberg, who predicted the lender would earn 30 cents a share.

The company eliminated all subprime loans except those it can sell to U.S. government-sponsored buyers and ``substantially cut all other non-conforming products,'' according to the statement. Loan origination will probably drop 20 percent in the third quarter from the second, IndyMac said.

``This is a company that's changing its business model in midstream,'' said Stuart Plesser, an equity analyst at Standard & Poor's in New York. ``They're paring back loan production. Trying to do that and keep expenses in line is a very difficult process.'' He recommends selling the stock.

The collapse of the subprime mortgage market in the U.S. has punished lenders across the nation. Citigroup Inc. stopped accepting new clients at a Concord, California-based unit that offers credit lines to mortgage banks, according to two people familiar with the situation. National City Corp., Ohio's biggest bank, said yesterday it would reduce staff by 1,300, while Lehman Brothers Holdings Inc., the biggest underwriter of U.S. mortgage bonds, is firing 850 people.

Record Foreclosures

The number of Americans at risk of losing their homes to foreclosure rose in the second quarter as subprime borrowers missed payments on one out of every seven loans.

The share of all U.S. mortgages entering foreclosure reached an all-time high of 0.65 percent, the Mortgage Bankers Association said yesterday.

``Though we will likely report a loss for this quarter, I believe that we will perform better than almost all other independent mortgage lenders given the strengths of our business model, thrift charter and overall risk management practices,'' Chief Executive Officer Michael Perry said in the statement.

IndyMac is focusing on ``safety and soundness first and foremost,'' it said. The company plans to keep ``prudently rebuilding our mortgage franchise which has been damaged as a result of the illiquidity in the secondary markets.''

Keeping the Jumbos

IndyMac's shares fell 25 cents, or 1.2 percent, to $21.41 in New York Stock Exchange Composite trading, after declining as much as 9.8 percent earlier today. They've fallen about 53 percent this year.

The lender may sell 76 percent of the loans it produces this quarter, down from 96 percent in the first three months of this year. The company said on Aug. 22 it planned to retain jumbo loans in its investment portfolio until it was able to sell them.

The growth in loans held for sale is a concern because it's unclear what they're worth, S&P's Plesser said.

The reduced dividend, which requires board approval, should remain at 25 cents a share ``through the current down cycle for the mortgage and housing markets,'' the company said.

Perry, the CEO, has taken steps to capitalize on the market turmoil. Last month, IndyMac said it would hire as many as 850 former employees of bankrupt American Home Mortgage Investment Corp., in a push to loan more through storefront offices.

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: September 7, 2007 16:32 EDT