Impac, Angel Oak concentrate on non-QM with combined outcomes

Two players in the non-market borrowing market had mixed results in the second quarter as product margins became increasingly attractive compared to mainstream mortgages.

Unqualified mortgage specialist Angel Oak Mortgage, which went public in June, posted net income of $ 2.2 million and acquired $ 395.5 million in new loans for the current quarter. Impac Mortgage Holdings, which offers a mix of non-QM and government-sponsored corporate loans, posted a net loss of $ 8.9 million in the second quarter, up from $ 23 million a year earlier. However, it was higher than the losses from the first quarter of this year ($ 683,000) due to valuation changes and costs related to rebuilding non-QM operations. The company's non-QM loans soared to nearly $ 101 million from just under $ 15 million in the prior fiscal year.

Investments in non-QM in the second quarter of this year are in clear contrast to the conditions in the same period in 2020. At this point in time, the non-QM market collapsed for a short time due to a pandemic-related market disruption and some players fled from it in favor of state-subsidized corporate loans . A year later, the results for the second quarter show that it now looks more favorable in terms of margins than the non-QM.

"GSE's origination business was not immune to the compressed margin pressures experienced by the industry in the second quarter," said George Mangiaracina, Chairman and CEO of Impac, in a press release, adding that, by contrast, the company was "healthy Margins ”in non-QM.

While pressure to diversify into higher-margin lending has historically been known to ease mortgage lending to worrying levels, both companies said in separate phone calls that the leeway they gave to qualified nontraditional borrowers was not inordinately large.

"We took an iterative, risk-based approach in the second quarter to update our credit box policies to provide a competitive proposition to the market while … maintaining high credit quality standards," said Justin Moisio, Chief Administrative Officer, Impac.

"Let me stress that our borrowers are not bad credit," said Robert Williams, CEO of Angel Oak. "In fact, the credit metrics are solid, including great to near-top credit, a medium 70% loan-to-value ratio, and a low debt-to-income ratio."

Although Impac's non-QM credit grew rapidly during the quarter, it was still a relatively small fraction of the roughly $ 600 million in credit, so the niche may take some time to grow large enough to deliver economies of scale achieve.

Total tenders decreased from $ 850 million in the previous fiscal year. Corporate spending totaled $ 19.6 million for the second quarter compared to nearly $ 14.5 million last year but less than nearly $ 21.3 million in the first quarter.

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