Impac revamps enterprise once more, switches to a dealer name heart

Impac Mortgage Holdings, which has shifted business strategy several times as it battled market conditions over the past couple of decades, has changed course once again, electing to become a mortgage broker.

In its most recent iteration, the company had been a wholesale lender and the operator of a retail call center. With the shift, it is leaving third party originations as well as abandoning its Fannie Mae and Freddie Mac seller/servicer status.

Impac purchased consumer-direct lender CashCall Mortgage in 2015, and that brand recognition remains strong among consumers, said Justin Moisio, chief administrative officer in an interview.

“But with margins being so tight in this market as a banker, one of the ways we chose to mitigate this current environment was to pivot CashCall to be a broker fulfillment model,” Moisio explained.

Impac has not yet released its fourth quarter results. However in the third quarter, the company lost 110 basis points on each loan originated. Its net loss of $13 million followed a second quarter net loss of $13.5 million.

Third quarter volume totaled $62 million, of which $49.6 million was non-qualified mortgages. The wholesale channel was responsible for $28.6 million of the non-QM loans, which was nearly all of what came through that channel.

Meanwhile call center originations added $21 million of non-QM and $10.1 million of conforming in the third quarter.

Impac was in the midst of switching to a non-QM focus when the pandemic started and secondary market pricing issues forced the company to the sidelines between April and June 2020.

The company did much more business prior to COVID. In the first quarter of 2020, Impac originated $1.52 billion, of which $261.6 billion was wholesale. Retail was responsible for $1.3 billion of Impac’s volume in the period.

When it did resume business, at first it was originating conforming mortgages through CashCall before working the wholesale channel and conforming products back to the mix.

It had not been directly selling loans to the government-sponsored enterprises since 2016 for Fannie Mae and 2020 to Freddie Mac. Whatever conforming production it did was being sold to aggregators. It also previously sold off most of its servicing rights.

While non-QM is expected to be the focus at the call center, Moisio noted that marketing that product will also attract borrowers who qualify for conforming or government mortgages and being a broker provides Impac with plenty of outlets for those loans.

“So by having multiple broker outlets for us to lean into with lenders, it gives us the ability to offer more products, better pricing in this environment,” Moisio added.

It also allows the company to further reduce costs. Back in December, Impac negotiated a buy-out of its lease for $3 million, reducing its office space from 120,000 to 19,000 square feet, both due to the reduced headcount and having a remote/hybrid work environment.

Furthermore, as a mortgage broker, Impac will be using technology supplied by the lender, another way it cuts expenses, Moisio said.

Even with the switch, Impac will be keeping its mortgage banker licensing and its warehouse lines in place.

“I think it’s prudent for us as an institution to hunker down, be as lean as possible and move forward with cost cutting initiatives, measures that allows us to still be an originator because when the market turns — it’s going to turn and you want to be able to participate,” Moisio said. “And this allows us to run a very capital light type of strategy, while still keeping the machine running.”

Moisio noted Impac conducted an orderly shutdown of the wholesale business, including honoring all of its commitments related to that channel.

The company did not get back into being correspondent aggregation after it started originating again.

Impac is operating under a plan to regain compliance to maintain its stock listing on the NYSE American exchange. In November, the company resolved a legacy issue dating back to the Financial Crisis by an exchange of its Series B and C preferred stock.

On March 9, the day after the company released its plans, Impac’s stock closed at 37.4 cents per share, up 0.1 cent on the day.

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