Impac Mortgage Holdings, Inc. (NYSE:IMH
), a large Alt-A residential REIT, said late yesterday that it lost $66.3 million during 2006, attributing losses to a compression of net interest margins.
In an earnings statement, the company said its borrowings re-priced more quickly than adjustable mortgage assets, and that $29.5 million in losses were due to loan repurchases during the second and fourth quarters.
"Impac's 2006 earnings came under continued pressure as the Federal Reserve increased short-term interest rates through the first half of the year, and as average securitized mortgage collateral declined," said Impac CEO Joseph Tomkinson, noting that the company had tightened underwriting guidelines and adjusted pricing to intentionally reduce loan production and limit its exposure to what he characterized as "deteriorating credit trends in the mortgage market."
Impac is the latest REIT outside of the subprime credit sector to run into financial difficulty during 2006, as a growing number of Alt-A mortgage operations report earnings challenges due to instability in the mortgage market. 92 percent of the company's 2006 orginations and acquisitions were in the Alt-A credit sector.
Florida-based Opteum Inc, whose subprime loan production in 2006 represented less than five percent of total originations, reported a $33.9 million loss
for the fourth quarter due to interest margin compression and poor collateral performance. American Mortgage Acceptance Corporation (AMEX:AMC), a multifamily and commercial REIT, said last week that it had revised its earnings guidance
downward to reflect expected losses.
Tomkinson said Impac had tightened its underwriting guidelines seventeen times during 2006, which led to a decrease in fundings for the year but helped the company jettison loan types that were driving forced repurchases by investors, including HLTV seconds and adjustable loans with a rate reset within less than three years.
"As a result of consolidation within the industry and a number of companies going out of business, our 2007 business plan anticipates that loan production will remain at current levels, with continued volatility in our bulk acquisitions, offset by the continued expansion of our Alt-A wholesale and commercial platforms," said Impac president William Ashmore. "Our 2007 business plan fits well into our long term strategy to have our wholesale business channels make up the majority of our overall originations that will support the growth of the long-term investment portfolio."
Reflecting a deterioration in asset performance, Impac's volume of REO assets nearly quadrupled during 2006. The company reported $161.5 million in REO assets at the end of 2006, compared to just $46.3 million one year earlier.
For more information, visit http://www.impac-companies.com