Impac's moves set the company up for normalized markets

Impac Mortgage Holdings decided a year ago to emphasize its non-qualified mortgage lending operations and placed the company in position to succeed when the housing market returns to normal.

The company's full-year and fourth-quarter results improved greatly over its 2018 performance. The company lost $677,000 in the fourth quarter, compared with net earnings of $1.44 million in the third quarter and a net loss of $6.44 million in the fourth quarter of 2018.

For the full year, Impac lost $7.98 million, versus a $145.4 million loss for all of 2018.

"Historically, near-term challenge creates long-term opportunity," George Mangiaracina, chairman and CEO of Impac, said in a press release. "The company believes it has positioned itself to manage the challenges of today's markets and to benefit from opportunities that will present themselves once these markets normalize."

"The momentum we have created in 2019 should accelerate in the future as we continue to invest in technology, product design, industry talent and geographic expansion. We understand that these are extraordinary times, with unprecedented interest rate shocks and global market dislocations. Any enthusiasm for future prospects must be properly balanced and tempered by potential supply and distribution constraints, and attendant liquidity risks associated with current macro-economic conditions," Mangiaracina said.

For the fourth quarter, Impac originated $1.5 billion, down 8% from $1.6 billion in the third quarter, but up 139% from $632.1 million in the year ago period.

Non-QM was $325.7 million of fourth-quarter production, an increase of 27% over $257.4 million in the third quarter and 25% over volume of $261.3 million in the fourth quarter of 2018.

Of the $4.5 billion of full-year originations at Impac, $1.2 billion was non-QM; a year ago, originations totaled $3.8 billion, of which $1.3 billion was non-QM.

The company saw its full-year gain-on-sale margins rise along with the increase in volume to an average of 217 basis points, compared with 174 bps in 2018.

Impac's servicing portfolio fell 21% from year-end 2018, to $4.9 billion from $6.2 billion, as part of the switch to a non-QM strategy as well as sales to strengthen the company's liquidity position.

It reported a loss on its MSRs of $24.9 million compared to $3.6 million in 2018. Change in fair value of MSRs accounted for a $25.8 million loss, primarily due to changes in the fair value associated with falling interest rates, associated inputs and assumptions as well as mortgage loan prepayments. Prepayments were responsible for $23.4 million of the fair value change.