Impac Mortgage Holdings Inc. reported a massive loss, disclosed that hundreds of employees were laid off during the first quarter and raised doubt about its ability to stay in business.
During 2007, the real estate investment trust had a $2.00 billion loss, according to an announcement late yesterday. Losses ballooned from $0.07 billion in 2006.
The Irvine, Calif.-based company attributed the loss to a $1.4 billion provision for loan losses, REO charge offs of $0.3 billion and $0.4 billion in losses from discontinued operations.
"The mortgage market faced adversity during the second half of 2007 as the continued broad repricing of mortgage credit risk led to a severe contraction in market liquidity," the report stated. "The company believes the existing conditions in the secondary markets are unprecedented since the company's inception and, as such, inherently involve significant risks and uncertainty. These conditions could continue to adversely impact the performance of our long-term investment portfolio. Until bond spreads and credit performance return to more historical levels, it will be impossible for the company to execute securitizations and loan sales."
Impac announced in September it closed its warehouse, commercial mortgage and all other mortgage lending operations except retail lender Pinnacle Financial Corp.
Pinnacle, which subsequently began operating as Impac Home Loans, was shut down during the fourth quarter, according to a filing with the Securities and Exchange Commission yesterday.
All shareholder equity was wiped out in the third quarter 2007, when Impac reported a $1.2 billion loss. Since that time, when stockholder equity stood at a negative $0.5 billion, the equity deficit has risen to $1.1 billion.
Employee count has dropped from 827 on Dec. 31, 2007, to 137 as of March 31, the filing indicated.
"The current disruption in that market caused by, among other things, an increased default rate on residential mortgage loans, an increase in the number of ratings downgrades with respect to bonds issued in connection with securitization of loans, the lack of liquidity in the bond market and the financial condition of many companies that typically participate in this market have negatively affected our ability to sell our loans on terms and conditions that will be profitable to us at all," Impac said in the SEC filing. "Recent increased delinquencies and losses with respect to residential mortgage loans, may cause us to recognize additional losses, which would further adversely affect our operating results, liquidity, financial condition, business prospects and ability to continue as a going concern."