June 24 average daily rates in Orange County for 30-year fixed loans with one-point fee: Conforming up to 6.078%, Jumbo up to 7.446% and Conforming-Jumbo up to 7.208% (Note: conforming-jumbo rates are for loans from $417,000 to $729,750, while conforming is up to $417,000 -- both types are sold to GSEs. Jumbos here are $730,000 or higher and not sold to GSEs.)
Source: Newspaper Chart Services 
Has battered Impac Mortgage turned a corner?
May 25th, 2008, 12:01 am · 8 Comments · posted by Matt Padilla, Register Reporter and Blogger
Stock analysts see light at the end of the tunnel for Impac Mortgage Holdings of Irvine.
Despite reporting a $2 billion paper loss for 2007, analysts seemed upbeat during the conference call to discuss the results. Joseph Tomkinson, CEO of the Irvine-based investor in home loans, said the company has met margin calls and is actually growing its cash position, which is around $30 million. Certainly, his company, which focused on mid-range credit borrowers during the housing boom, has remained standing while all the subprime players folded.
These days Impac is holding loans and servicing them. On the call, Tomkinson said 2008 will continue to see a weak housing market, but the rebound could start in 2009, and that implies his company too.
Here’s a sample of an exchange with an analyst from the call last week:
Matthew Howlett, analyst with Fox-Pitt Kelton: “Thanks for taking my question. Congratulations on getting the (annual report) out and it looks like putting the worst of things behind you. The question is on the new business activities that Joe you alluded to. It looks like you will be potentially buying distressed loans, servicing them and earning a return on them. Could you elaborate on them how much capital you are looking to dedicate to this business and what type of returns you could receive from them?
Joseph Tomkinson: “Well, that’s a good question that I’m not really prepared to answer in any detail. As I look around at the general overall condition of the industry, there is — we see a lot of opportunities and I’m not so sure that the smartest opportunity is just going after distressed mortgages. I think a lot of people have probably already had their heads handed to them when they started buying these assets last summer. I continue to believe that there is going to be further deterioration in the marketplace. So it would be a little bit premature for me in this conference call to give any kind of numbers. What I’m looking at more so is doing more of a bar bell affect where we may take some of our capital and invest in some of the triple A securities that are out there.”
“We may take and look at small home loan portfolios where perhaps banks have good product on their balance sheet but because of other economic factors have to unload some of the balance sheet. I think now that we have gotten through what I think is the major issues that were facing the company, we can now take a look and start circling those areas that we want to go ahead and invest in. Having said that, before we can do any of that, I think it is paramount to get a small servicing platform and that’s one of the things that Bill Ashmore has been working on, and as I mentioned earlier, I think we are done with the negotiations and now we turn everything over to the attorneys and hopefully we can get those documents”
(Blogger’s note: Impac may buy a servicing operation in addition to its own.)
Related Links:
- Impac Mortgage posts $2 billion loss for ‘07
- Impac Mortgage loses two top execs
- Impac CEO caught up in suit between two auction companies
- Impac loses $1.2 billion in Q3
- Impac notified of NYSE listing violation
- Impac in default on $407 million
May 25th, 2008 at 12:00 pm
I really shouldn’t comment, and I may not be able to keep it clean. Just look at all the older articles with Joey here, and you will see he has never ever had a clue on what to do. This company is toast, and should just go BK. The last time this moron bought a company (Pinnacle) he shut it down a month later. The last thing that idiot needs to buy is another servicing company, for gawd sakes they have a negative equity of $1.1 BILLION because they have too many garbage loans of their own that they service.
For love of business Joey, just file for BK, and put your few employees, shareholders, and anyone else who cares, just put an end to the misery and file BK.
Remember this genius said that the New Century thing was overblown. And I quote this genius…
“However, that doesn’t mean (the lending industry is) going to implode, that lenders can’t manage what they’re going through now.”
Oops, the industry did implode, and he wants to get into the distressed asset business. I would go short, again, on these fools, but at $1.11 a share it just isn’t worth it any more. Is Eckert from Roth Capital still recommending a buy on them? If so, I may change my mind and go short them.
May 25th, 2008 at 3:17 pm
Graphrix,
I am not surprised at your skepticism. I was surprised by the upbeat tone of analysts. I think they were very concerned about the margin calls. You have to admit that if Impac is able to survive, they will be one of only a few local players left standing and so could prosper. However, if they try to make a go as sell-everything-to-GSEs lender, they will have to watch every penny. But I am thinking of the subprime shake up in the 1990s that lead those who survived (New Century, Ameriquest etc.) with an open playing field. I don’t expect subprime to come back in the same form, but there should be some market for nonGSE loans and Impac could play in that market, perhaps.
May 25th, 2008 at 3:47 pm
Tacky.
May 25th, 2008 at 8:06 pm
Matt and all -
I think the question here is whether Impac can convert its existing repurchase line; it’s an issue most of the analysts missed, from what I can tell. If it’s successful, the issue becomes whether the portfolio can generate enough cash for operations — much simpler, substantively speaking. If not, I’d probably suggest that all bets are off.
See this post on HW from Patrick Harden, who specializes in REITs:
http://www.housingwire.com/2008/05/23/mortgage-reit-insider-thornburg-needs-more-time/
Impac is second in coverage in the story.
May 27th, 2008 at 12:58 am
Matt,
We both know the analysts on Impac are a joke. What’s his name from Roth Capital was just so wrong, it must make him cry every night. Honestly, the analysts have been drinking the same Kool-Aid as thoughtless.
As Paul from housingwire (the best source in national mortgage news) pointed out with their repo lines, they have one last straw of hope to grab on to. If they can convert that to a note, then they can maybe generate some cash. They have a servicing business, and that is where the money is right now. But, to start thinking about buying distressed assets right now is still premature, especially for a company that is broken with what their business model is now. And, didn’t they already start a company to buy distressed assets, right around the summer, when Joey said that is when people were getting their you know what handed to them? I know you blogged about it, and I just not in the mood to dig it up.
As for the 90s S&L shake up, New Century and Ameriquest were spawned from it, not survivors. Arnall was part of Long Beach Savings, and look up the history on them and how they look like a sub-prime debacle of today. He signed an agreement not to start a mortgage biz until X date, and as soon as that X date hit he started Ameriquest.
Now, I will agree with you, Impac can’t survive on GSE loans. The profit margin is too small, and big boys like Wells, B of A, and Chase will kill them by the volume they have and smaller margins they need. It would be great for a local lender to rise from the ashes, and take on a greatly needed niche of non-GSE loans. But, they would need to have quality underwriting and the ability to keep the loans on their books, something Impac can’t and won’t be able to do.
If you look at some of the quotes of Joey, and the fact that their AEs were touting the 3% rebate, without any clue as to how bad that would make the neg-am, then they unfortunately deserve to fail. I have said it before, and I am saying it again, Walter Hahn took his head out of the sand, and many others like Joey should have too, but it is too late for them.
BTW, great article on Sunday. I linked it on IHB, and made my mom read it, at least there are some out there who get how bad it really is out there.
May 27th, 2008 at 10:52 am
Graphrix,
Just FYI, I wasn’t referring to the S&L crisis. I was referring to the 1998/99 crisis in debt markets spawned by early prepayments screwing with the Gain on Sale accounting and residual assets of subprime lenders at the same time Russia balked at paying some debts and Long Term Capital Management imploded. Around that time a host of subprime lenders failed; New Century only survived when U.S. Bancorp agreed to buy its loans for a year and invested $20 million in the company. I don’t foresee a white knight for Impac Mortgage, but if it somehow manages to survive it will have an open playing field on nonGSE loans, or at least pretty open. That, of course, depends on who is buying the loans, what they are paying for them, and when they start buying.
YOUR BLOGGER
May 27th, 2008 at 12:04 pm
http://www.latimes.com/business/la-fi-homes28-2008may28,0,2372957.story
May 28th, 2008 at 1:35 am
Thanks Matt for clearing that up, and nice work on digging up the US Bancorp bailout of New Century. Where did you find that juicy info? Please tell me you didn’t pour over the 10-Ks New Century. Wait, never mind, tell me you made an intern suffer through pouring over the 10-Ks.
I will say there is hope for Impac, but there is no white knight in sight. No one, not a PE group or hedge fund would touch that garbage unless Impac paid them too. Oh yeah, they can’t, they have a negative cash problem.
Someone could be a leader in non-GSE loans, but with the continued decline in prices, and no end in sight, there is no way to underwrite that, let alone sell them.