Losses continued to mount for former Alt-A lender Impac Mortgage Holdings Inc., hitting $152 million during the second quarter, up 25 percent from $122 million the previous quarter.
Losses for the year to date for the Irvine, Calif.-based lender totaled $274.2 million, compared with $111.9 million in net earnings in the first six months of 2006.
Impac Mortgage, a real estate investment trust (REIT), blamed its growing losses on a $133.6 million increase in provision for loan losses as a result of higher delinquencies, plus a $12.4 million charge-off for the impairment of goodwill and an $8.5 million increase in the loss provision for foreclosed properties.
Loan production was also down in the second quarter, as Impac Mortgage stopped funding Alt-A loans and restricted itself to those eligible to be resold to government-sponsored agencies. The company acquired and originated $1.3 billion of primarily Alt-A mortgages during the second quarter, down 42 percent from the $2.2 billion in originations in the previous quarter and the same quarter last year.
Impac Mortgage said deteriorating conditions in the secondary and securitization markets have made it more difficult to sell loans to investors, at a time when declining home prices and rising defaults have prompted investors to demand higher returns, reducing the price they are willing to pay for loans.
Those market conditions have increased Impac Mortgage’s losses, and prompted many of the company’s creditors to make margin calls. Although Impac has satisfied those calls so far, “We cannot make any assurances we will satisfy all margin calls in the future,” the company said in its latest report to investors.
While some lenders have waived requirements that Impac maintain positive net income and leverage ratios, “There can be no assurance that we will be able to obtain future waivers or new waivers if covenants are not met,” the report said.
Impac Mortgage said it had had negotiated the sale of about $1 billion of the $1.6 billion of loans held on financed facilities.
In its latest quarterly report, Impac Mortgage said the value of real estate-owned property on the books at the end of June soared to $352.9 million, up 118 percent from the end of 2006.
The increase was blamed on accelerated foreclosures due to a seasoning of the loan portfolio, longer holding periods, reduced housing demand in the marketplace, and lower housing prices.
Provisions for losses on the sale of real estate-owned properties were boosted to $26 million, up from $8.5 million at the end of the year.
In an effort to avoid foreclosing on bad loans, Impac Mortgage said it has worked out strategies with subservicers to increase loss-mitigation efforts such as forbearance plans and loan modification. Subservicers will be closely monitored, with daily collections goals in place.
“While the loan portfolio continued to deteriorate in the form of additional delinquencies and REO during July, these recently initiated strategies … are expected to have a fuller impact in the fourth quarter of 2007,” the company told investors.
A $12.4 million impairment of goodwill charge was related to the company’s acquisition in May of loan production facilities on the East Coast from Pinnacle Financial Corp.
“Because of the current market environment, the goodwill was impaired and the company has recorded an impairment charge for the full amount” recorded at the time, Impac said.
Gain on sale of loans decreased by $14.1 million, or 85 percent, during the second quarter compared to the same quarter last year. The decrease was blamed on a $1.7 billion decrease in whole loan sales and well as a reduction in sale prices.
Residential mortgages held for sale totaled $1.1 billion at the end of June, down from $1.38 billion at the end of 2006, while securitized mortgage collateral secured by residential real estate totaled $18.2 billion, down from $19 billion at the end of 2006.