Impac Mortgage Holdings sees wider loss, backs off non-QM production

Find out the reason behind the loss…

Impac Mortgage Holdings sees wider loss, backs off non-QM production

Non-QM specialist Impac Mortgage Holdings has revealed a $13.5 million loss in its financial results for the quarter ended June 30, 2022.

That is compared to a loss of $1.2 million in the first quarter and $8.9 million in the second quarter of 2021. Its margins plunged year over year from 175bps to just 14bps.

Jon Gloeckner, principal accounting officer of Impac, said the Q2 financial results “reflect significant market pressure, which began in the fourth quarter of 2021 and accelerated into the second quarter as a result of increasing interest rates, inflation, credit and liquidity risk.

“Our results, as well as many of our peers’ performance, reflect the intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market, which has suffered from a lack of housing inventory and the significant increase in mortgage interest rates resulting in affordability issues.”

To mitigate the risks associated with reduced distribution exits and extended settlement timelines, Impac CEO George Mangiaracina shared that the company started to pull back on production, raised the pricing on its loan products, and shifted its focus on non-agency production in the first quarter.

As a result, Impac originated and sold $128.1 million and $248.2 million of mortgage loans. Of this figure, Impac originated $80.2 million in non-QM loans in Q2, down from $314.3 million in Q1.

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However, Gloeckner noted the recent dislocation within the non-QM market due to the significant increase in interest rates.

“We reduced our marketing spend as we pulled back on our origination volumes,” he said. “Although we continue to source leads through digital campaigns, which allows for a more cost-effective approach, the recent competitiveness among our other lenders for non-QM production within the California market as well as a decline in lead conversion as a result of the current environment has driven up the cost per lead.”

“While layered risks cannot assuredly be hedged in times of acute market dislocation, since the end of the first quarter of 2022, the company’s non-QM pipeline has been fully deliverable into forward best-efforts arrangements with a variety of counterparties,” Mangiaracina added. “Throughout the year, the company has proactively increased the minimum and weighted average note rate on our non-QM offerings to ensure availability of normal course capital market exit and pricing. We have consciously elected to discourage down in coupon non-QM origination volume.”