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Impac Servicing Grows, MSR Losses Swing to Gain

As Impac Mortgage Holdings Inc. has grown its servicing portfolio over the past year, it has turned losses on mortgage-servicing rights into gains. Originations declined, and layoffs are ongoing.

Before income taxes, Irvine, California-based Impac earned a $4 million profit during the initial-three months of 2018, according to its first-quarter earnings report.

Income decreased from $5 million in the same three-month period last year. But compared to the preceding quarter, earnings swung from a $28 million loss.

Impac said it had a $7.7 million gain on mortgage-servicing rights in the first quarter, swinging from a $1.0 million year-earlier loss.

Single-family loan originations worked out to $1.320 billion during the most-recent period. Production descended from $1.654 billion in the fourth-quarter 2017 and $1.580 billion in the first-quarter 2017.

Falling production was attributed to escalating interest rates — which have risen 100 basis points from January 2017 through the first quarter of this year — that have dampened demand for refinances.

“The mortgage origination industry continued to face strong headwinds in the first quarter of 2018, challenged by a flattening yield curve and rising rate environment,” Impac Mortgage Holdings President George Mangiaracina explained in the report. “Originators have experienced reduced origination volume at compressed gain-on-sale margins, as capacity exceeded demand.

“Our origination business is not immune to these market conditions.”

Retail production represented $0.631 billion of the latest numbers, while wholesale lending made up $0.209 billion, and correspondent acquisitions accounted for $0.480 billion. Non-QM and government-insured originations share was 61 percent — widening from 39 percent a year earlier.

Impac serviced $16.752 billion as of March 31. The mortgage servicing portfolio expanded from $16.330 billion as of last year’s end and $13.242 billion on the same date in 2017.

At $17.7 million, personnel expense was down 29 percent due to
a reduction in commission expense from slowing originations and staff reductions made in late 2017 and early 2018.

“As we continue to more closely align operating and staffing levels to origination volumes, we will continue to right size the organization,” the report stated.

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