Alt-A lender Impac Mortgage Holdings Inc. has slashed expenses and outstanding debts since the company stopped funding loans in September, but liabilities exceeded assets at the end of the third quarter.

New accounting procedures the company plans to adopt on Jan. 1 might have prevented the need to report an expected “stockholders’ deficit,” Impac executives announced Monday.

For now, the Irvine, Calif.-based lender is unable to report third-quarter results because managers said they need more time to properly account for and record disclosures for its recently discontinued warehouse lending operations, commercial operations, and the discontinued origination and purchase of nonprime mortgage loans.

Company officials said third-quarter losses were expected to surpass those of a year ago, when Impac, which is organized as a real estate investment trust, lost $128 million.

Impact expects to “significantly” add to its loan loss provisions for the quarter because of increased delinquencies in the company’s long-term investment portfolio and increased losses on the sale and liquidation of real estate-owned properties.

The increase in loan loss severities forced the company to report an expected stockholders’ deficit, with the company’s liabilities exceeding assets. But that assumption rests on the assumption — required by Generally Accepted Accounting Principles — that Impac would lose more than its original investment in trusts that are now worth less than the company’s original investment.

But because the trusts are “nonrecourse,” Impac cannot lose more than its original net investment — a fact that a new accounting rule, FAS 159, permits the company to acknowledge, Impac officials said.

Had Impac adopted FAS 159 in calculating results Sept. 30, 2007, “the company believes that stockholders’ equity would be positive,” the company said. “Further, the company believes that its current cash flows along with its reduction in operating expenses … should provide sufficient liquidity to execute its current business plan.”

On Sept. 25, Impac’s board of directors voted to discontinue mortgage operations, commercial operations and warehouse lending operations. The company blamed deterioration in the secondary market for closed mortgage loans and continuing weakness in consumer demand for mortgage products and services.

According to a Nov. 13 regulatory filing, the company expects to incur $17 million in restructuring charges to downsize, including $12 million in fixed-asset impairment charges and $5 million in lease termination costs.

The filing said that on Sept. 12, Impac received a notice of default from Bear Stearns Funding Inc. on a $286 million credit facility, and that by Nov. 9 all of the loans in the credit facility had been liquidated.

Impac was also forced to sell loans related to reverse repurchase facilities it “was in technical default on” with an outstanding balance of $404 million to Washington Mutual Bank and Natixis Real Estate Capital Inc.

Impac was seeking a waiver from UBS Real Estate Securities Inc. and Colonial Bank on reverse repurchase and warehouse facilities totaling $407 million in which it was in “technical default under certain income and tangible net worth covenants.” The company had not received a response to its request as of Nov. 13.

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