Impac Mortgage Holdings (IMH) is wading through a maze of liquidity risks in a mortgage finance market facing headwinds from falling home prices, regulatory uncertainty and litigation risks related to the securitization of mortgage loans. The real estate services firm said in a filing with the Securities and Exchange Commission that one of its top concerns is the ongoing lull in the mortgage lending and credit markets. Impac also reported a first-quarter loss of $987,000, or 8 cents per share, down from income of $5.9 million, or 46 cents per share,  a year earlier. "Mortgage lending and credit market conditions remained soft through the first quarter of 2011 due primarily to an increase in mortgage rates and weak economy," Impac said in the filing. "Existing uncertainties surrounding the housing market, economy and regulatory environment will continue to present challenges for the company. The ongoing economic stress or further deterioration of general economic conditions could prolong or increase borrower defaults leading to deteriorating performance of our long-term mortgage portfolio." Impac said its ability to meet its long-term liquidity requirements hinges on its success in generating fees from its mortgage and real estate businesses and from realizing cash flows in its long-term mortgage portfolio. The company grew its mortgage lending operations in March, opening regional offices in Oregon and Baton Rouge, La. "The company believes that current cash balances, cash flows from mortgage and real estate services fees generated from the long-term mortgage portfolio, and residual interest cash flows from the long-term mortgage portfolio are adequate for the current operating needs," Impac said. However, in the long run, the firm said its "ability to successfully compete in the mortgage and real estate services industry may be challenging as its business activities have been established in the last few years and many competitors have recently entered or have established businesses delivering similar services." In addition, Impac said its investment in securitized non-conforming loans continues to be adversely affected by housing market conditions, leading to more defaults and higher loss severities. The company also is watching securitization litigation and the Dodd-Frank Wall Street Reform and Consumer Protection Act closely. "It is not possible to precisely determine the impact to operations and financial results at this time, Impac wrote in relation to Dodd-Frank. "The company will continue to assess the effect of the legislation on the company’s business as the associated regulations are adopted." Impac outlined a series of lawsuits that could potentially impact the firm, including one filed against the company earlier this year in Massachusetts that alleges Impac Funding Corp. and Impac Secured Assets Corp. violated state securities laws on loans that allegedly did not meet representations made before they were placed into securitized trusts. Another case -- Federal Home Loan bank of Boston v. Ally Financial Inc. — named Impac Funding Corp., Impac Mortgage Holdings. and Impac Secured Assets Corp. as defendants and alleged misrepresentation on materials used to market mortgage-backed securities. "The company believes that it has meritorious defenses to the above claims and intends to defend these claims vigorously and as such the company believes the final outcome of such matters will not have a material adverse effect on its financial condition or results of operations," Impac said in its 10-Q. Write to: Kerri Panchuk.