Impac Mortgage stops lending, furloughs 333 workers
Impac Mortgage temporarily shut lending operations and furloughed 333 workers due to market turmoil tied to the novel coronavirus.
The Irvine, Calif.-based company, one of the few nontraditional lenders that survived the mortgage collapse of the Great Recession, suspended lending as of March 30. Impac filed a layoff notice with the state on April 18 saying its employees were in "temporary layoff" status.
The mortgage market has been erratic as economic blows from COVID-19 took unexpected turns. Efforts to offer borrowers payment deferrals to ease their financial losses and cheaper mortgages to help new borrowers were no panacea for parts of the lending industry.
So-called nonbank lenders and mortgage servicers have seen cash flows squeezed and mortgage investors scared off. These gyrations hurt a lender like Impac that made more than $1 billion in non-traditional mortgages — through both mortgage brokers and directly with its CashCall brand — in each of the past two years.
"While mortgage markets may appear to be normalizing, the industry, most acutely for non-bank mortgage originators and servicers, continues to manage to the uncertainties of the various initiatives promulgated by the U.S. federal government, the Federal Reserve and other state and local governmental and quasi-governmental agencies relating to economic stimulus, mortgage principal and interest forbearance, liquidity and origination and servicing practices," an April 15 update from Impac stated.
"Until the industry achieves clarity on these items, the company's lending activities will remain on hold," the statement reads. "The company continues to believe it prudent to de-risk and to protect liquidity during this unprecedented time. These actions are crucial to preserving long-term value for our capital partners and stakeholders."
Investors have slashed the value of Impac stock by three-quarters since a recent peak in October. Its market capitalization as of Monday, April 20 was only $40 million.
The losses by lenders such as Impac put parts of the housing market at risk. It's especially true in high-price markets like California where nontraditional lender — who can make larger loans to buyers with less-conventional incomes — have been a noteworthy slice of the homebuying business.
Impac's cutback is one example of why state data showing Orange County's economy losing 13,200 jobs in early March is just the tip of a layoff iceberg. Real estate, construction and finance industries accounted for 2,000 of those March job losses.