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Impac Mortgage Holdings, Inc. (NYSE:IMH) (the "Company") is providing the following business update:
The Company continues to responsibly assess its operating strategies to navigate current market and industry conditions, including business model review and expense reduction initiatives.
In December 2022, the Company negotiated a buy-out of its legacy commercial lease for $3.0 million, reducing its office space footprint from 120,000 to 19,000 square feet. The relocation was made possible by the Company's ability to maintain a hybrid and remote workforce both during and following the Covid crisis, thereby minimizing physical office space needs. The new lease term runs through July 31, 2025 with a total expense of approximately $800 thousand over the term of the new lease, as compared to over $8.8 million that remained under the prior lease.
In line with its business review and expense reduction initiatives, the Company recently repositioned its retail consumer direct lending division into a mortgage broker fulfillment model. The shift to a broker model allows the Company to originate a variety of products that serve its national consumer base at a reduced cost per loan due to significant expense abatement relative to specialized staffing, operations, technology and business promotion. The broker channel will support an expanded suite of loan products and programs, offering enhanced flexibility with respect to credit, pricing, best in class technology, and product development and maintenance. The Company has partnered with established lenders to ensure its consumers continue to receive an optimized experience. The Company expects Non-QM originations to continue to be the dominant product in the mortgage broker channel.
The Company's third-party origination ("TPO") channel, in line with industry cohorts, experienced significant volume and margin deterioration in 2022. These conditions have persisted into the first quarter of 2023. The Company has decided to wind-down operations within the TPO channel. The Company will continue to honor its pipeline and related obligations and commitments to its business-to-consumer and business-to-business partners, as it has done historically. The Company remains in good standing with its warehouse lenders, whole loan take-out investors, regulators, vendors and subservicing counterparties.
As a result of the Company's lack of conventional GSE origination volume and servicing rights over the past several years, with no direct GSE deliveries to Fannie Mae or Freddie Mac since 2016 and 2020, respectively, the Company intends to voluntarily relinquish its GSE Seller/Servicer designation which has been suspended during these periods of non-delivery. The Company expects to be a third-party originator to support its broker model as needed.
Mr. George A. Mangiaracina, Chairman and CEO of Impac Mortgage Holdings, Inc., commented, "The residential mortgage market continues to be challenged by adverse macro-economic conditions ushered in by rate and credit dislocation that commenced in the fourth quarter of 2021. Non-transitory inflation and Fed tightening, coupled with widening credit spreads, has reduced the addressable market for our product offerings. Despite competitor consolidation and closures, excess industry origination capacity remains, evidenced by participants pricing to decreased net margins in pursuit of market share. The Company has no intention of engaging in systematic, non-economic activities. The Company has no visibility as to when these dislocations will abate and return the industry to normalized volumes and margins. The proactive initiatives that the Company accomplished in 2022 and early 2023, have helped align the stakeholders of the Company's capital stack and reduced its overall operating expense load. The steps the Company outlines in this business update continue the theme of eliminating complexity and reducing costs from the Company's corporate and operating verticals, permitting the Company to focus on complimentary strategic ventures, adjacent revenue opportunities and attendant capital raise and corporate finance activities."
Posted In: IMH
