Impac Mortgage halts lending for two weeks due to coronavirus

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Impac Mortgage Holdings suspended all mortgage lending activity for a two-week period effective March 31, citing liquidity constraints at the company's secondary market counterparties as a result of the coronavirus.

"The actions and continued lack of communication from one of the company's whole loan investors has created uncertainty and concern amongst some of the company's other capital markets counterparties that the whole loan investor in question might breach its mandatory purchase commitment to the company, as required by the contract," an Impac press release said. "In light of these events, the company believes it is necessary to take the temporary and precautionary action of suspending mortgage originations for a two-week interval."

According to Impac's 10-K filing, the company had $1.7 billion in maximum warehouse capacity as of Dec. 31, 2019. There were three agreements set to expire during March and on April 1; all were renewed. Impac did not disclose who the lenders are.

However, "across the entire mortgage industry, warehouse lenders are reevaluating terms, including the length, of the facilities they provide," said Justin Moisio, Impac's chief administrative officer.

Impac did not disclose the whole loan investor involved, other than it was "a large Wall Street bulge bracket firm."

The two-week hold also will give Impac, and the mortgage industry as a whole, the opportunity to evaluate all the measures being put in place because of the coronavirus, namely the economic stimulus package, mortgage payment forbearance, liquidity and mortgage origination and servicing practices, it said in the release.

Impac had an unrestricted cash position of nearly $80 million on March 27. It has satisfied all the margin calls under the company's to-be-announced mortgage-backed securities hedging agreements.

During Impac's fourth-quarter conference call, the company pointed out hedging with TBAs can create a timing mismatch between the immediacy of margin calls payable on those positions, and the extended timeframes required to monetize gains embedded in the whole loan pipeline, the latest press release added.

Subsequent to the call, on March 18, it closed out the entirety of its TBA hedge position, creating net margin due to, and collected in full by, Impac from its TBA counterparties. It hasn't utilized the TBA market to hedge its activities since that time.

Impac is maintaining a core team to actively manage its businesses during this two-week period. All of its other employees have been furloughed; however, Impac is covering its employees' costs of health and medical benefits during this period.

During 2019, Impac lost just under $8 million, but that was much improved from a $145 million loss in 2018.

The company has been placing a greater emphasis on non-qualified mortgage originations; those loans made up $326 million of its total volume of $1.5 billion in the fourth quarter.

However, that also makes companies like Impac reliant on the actions of warehouse loan providers and whole loan purchasers in the private-label MBS market.

Angel Oak, another non-QM lender, previously announced a two-week halt in lending; it let go of 70% of its staff.

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Secondary market Coronavirus Warehouse lenders Correspondent Impac Mortgage Holdings Qualified Mortgages MBS Hedging