Says drastic changes, including winding down its TPO channel, are intended to help it 'navigate current market conditions.'
California-based Impac Mortgage Holdings Inc. announced major changes Wednesday, converting to a mortgage broker model, announcing plans to “wind down” its third-party origination channel, and voluntarily giving up its seller/servicer designation with the government-sponsored enterprises.
In a news release, the Newport Beach-based mortgage lender and servicer said the changes are being made as it reviews its operations and expenses in order to better “navigate current market and industry conditions.”
Impac said the shift from a retail direct-to-consumer model to a broker model allows it “to originate a variety of products that serve its national consumer base at a reduced cost per loan, due to significant expense abatement relative to specialized staffing, operations, technology, and business promotion. The broker channel will support an expanded suite of loan products and programs, offering enhanced flexibility with respect to credit, pricing, best-in-class technology, and product development and maintenance.”
As part of the change, Impac said it has partnered with established lenders “to ensure its consumers continue to receive an optimized experience.”
It added that it expects “Non-QM originations to continue to be the dominant product in the mortgage broker channel.”
Ending TPO, Giving Up GSE Designation
As for its third-party origination (TPO) channel, the company said it experienced significant volume and margin deterioration in 2022. “These conditions have persisted into the first quarter of 2023,” it said. “The company has decided to wind-down operations within the TPO channel.”
In November, Impac Holdings reported a net loss of $13 million, or 62 cents per diluted common share, down from net income of $2.1 million, or 8 cents per diluted common share in the same quarter a year earlier. It has not yet released its fourth-quarter or year-end earnings for 2022.
Impac said it will continue to honor its pipeline and related obligations, as well as all of its commitments to its business-to-consumer and business-to-business partners. Impac “remains in good standing with its warehouse lenders, whole loan take-out investors, regulators, vendors, and subservicing counterparties,” it said.
In addition, Impac said it intends to “voluntarily relinquish” its GSE Seller/Servicer designation, which it said “has been suspended during these periods of non-delivery.” It made the decision based on its “lack of conventional GSE origination volume and servicing rights over the past several years, with no direct GSE deliveries to Fannie Mae or Freddie Mac since 2016 and 2020, respectively,”
The company said it expects to be a third-party originator to support its broker model as needed.
Relocation Saves $8M
Alongside those announcements, Impac said it negotiated a buyout in December of its legacy commercial lease for $3 million, reducing its office footprint from 120,000 to 19,000 square feet. The change reduced its office expenses by $8 million, it said.
“The relocation was made possible by the company’s ability to maintain a hybrid and remote workforce, both during and following the Covid crisis,” Impac said.
George A. Mangiaracina, chairman and CEO of Impac Mortgage Holdings Inc., said the changes were necessary because of the downturn in the housing market.
“The residential mortgage market continues to be challenged by adverse macroeconomic conditions ushered in by rate and credit dislocation that commenced in the fourth quarter of 2021,” Mangiaracina said. “Non-transitory inflation and Fed tightening, coupled with widening credit spreads, has reduced the addressable market for our product offerings.”
He continued, “Despite competitor consolidation and closures, excess industry origination capacity remains, evidenced by participants pricing to decreased net margins in pursuit of market share. The company has no intention of engaging in systematic, non-economic activities. The company has no visibility as to when these dislocations will abate and return the industry to normalized volumes and margins.”
Mangiaracina said Impac’s proactive initiatives “accomplished in 2022 and early 2023 have helped align the stakeholders of the company’s capital stack and reduced its overall operating expense load.”
He added that, “The steps the company outlines in this business update continue the theme of eliminating complexity and reducing costs from the company’s corporate and operating verticals, permitting the company to focus on complementary strategic ventures, adjacent revenue opportunities, and attendant capital raise and corporate finance activities.”