IndyMac Bancorp. said Thursday that it expects its 2007 earnings per share to decline as the housing market continues to struggle, driving its shares down nearly 4 percent.

The Pasadena-based mortgage lender stated in a letter to shareholders that slower lending and higher mortgage default rates will lead to earnings of $4.15 per share, below expectations by Wall Street analysts of $5 per share.

The lender already has seen higher default rates on existing loans and a drop in new loan generation as the housing market slump extends beyond 18 months, the letter stated.

Shares in IndyMac were down $1.23, or 3.6 percent, to $33.10 in afternoon trading on the New York Stock Exchange. They have fallen 17 percent since the end of January.