Impac Mortgage Holdings Inc. is shutting down mortgage units and laying off more employees.
Impac announced today it would close its warehouse, commercial mortgage and all other mortgage lending operations except Pinnacle Financial Corp. -- which originates conforming business through retail loan officers.
The exits reportedly resulted in 144 employee terminations and follow 350 job cuts in August and 108 terminations in May.
The moves were taken because of "the continued market disruptions and illiquidity in the nonconforming and Alt-A mortgage market which was precipitated by the deterioration of the subprime mortgage market and lack of investor confidence," the announcement stated.
The Irvine, Calif.-based company's Chairman and Chief Executive Officer Joseph R. Tomkinson expressed regret in the statement, noting that Impac pioneered the Alt-A business in the 1990s.
"Given the severe dislocation of the market place, which included unprecedented margins calls, we are left with no other alternative, but to down size our company to better operate and navigate through this difficult and unrelenting environment," Tomkinson said.
He noted that in addition to servicing past mortgage customers, Impac will continue to make strategic investments like its recent acquisition of nonperforming loan investor Arch Bay LLC. He explained they are still trying to unload loans that remain on warehouse lines after investors abandoned commitments -- though $900 million has been sold since Aug. 1.
Impac temporarily suspended Alt-A business early last month and subsequently said it planned on offsetting origination losses with conforming business from Pinnacle, which it acquired in May. In addition to stepped up conforming business, Impac hoped to offset lost production with wholesale and retail reverse mortgage originations, for which it said it had secured definitive agreements to begin originating and selling.
Ongoing operating losses forced Impac to cancel any further dividends this year -- a strategy it can now embark on because it is abandoning its real estate investment trust status, the press release stated. The slimmed down business model and the elimination of the REIT status is expected to leave the company in a more healthy position.
Tomkinson said in today's statement that the current credit crisis is the worst he's seen in 25 years, adding, "The company, unlike many other companies, has protected its shareholders from capital infusions or restructures that would have significantly diluted or wiped out our stockholders' equity in its entirety."