California-based Impac Mortgage Holdings is repositioning itself as a mortgage brokerage and voluntarily giving up its seller-servicer designation with Fannie Mae and Freddie Mac.
“Non-transitory inflation and Federal Reserve tightening, coupled with widening credit spreads, has reduced the addressable market for our product offerings,” George Mangiaracina, chairman and CEO, said in a statement.
“Despite competitor consolidation and closures, excess industry origination capacity remains, evidenced by participants pricing to decrease net margins in pursuit of market share. The Company has no intention of engaging in systematic, non-economic activities,” Mangiaracina added.
Impac is transitioning its retail consumer direct lending division into a mortgage broker fulfillment model to offer various products at a reduced cost per loan. Non-qualified mortgages will continue to be the dominant product in the broker channel, the company said.
The company said the reduced cost per loan will come from, among other things, the decreased need for specialized staffing and operations. For example, Impac reduced its office space from 120,000 square feet to 19,000 square feet and negotiated a buy-out of its legacy commercial lease for $3 million.
Like some of its peers, Impac has also decided to wind down operations within the third-party origination (TPO), which has experienced volume and margin deterioration. Impac will continue to honor its pipeline through the correspondent channel.
Impac, whose stock is under threat of being de-listed on the New York Stock Exchange, expects to be a third-party originator to support its broker model as needed.
The company has also voluntarily relinquished its government-sponsored enterprise seller/servicer designation due to the lack of conventional GSE origination volume and servicing rights over the past several years.
“The Company has no visibility as to when these dislocations will abate and return the industry to normalized volumes and margins,” Mangiaracina said. “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.”
Impac reported a $13 million loss in the third quarter of 2022, down slightly from the $13.5 million loss in the second quarter of 2022, despite a defensive posture of its executive team by pulling back on non-QM products and trimming the workforce.