Impac Mortgage Holdings said late yesterday that it will suspend its second quarter dividend due to “higher than expected loss levels” associated with the firm’s REO disposition strategy:

…as a result of the Company’s previously disclosed strategy to accelerate the liquidation of its real estate owned (“REO”) portfolio through the new auction process implemented this quarter, the Company is experiencing higher than expected loss levels. The Company believes accelerating the disposition of REO’s through this auction process will ultimately reduce losses and preserve capital over the long run. Joseph R. Tomkinson, Chairman and Chief Executive Officer, states, “Although we are seeing charge offs at levels higher than we anticipated, we are pleased to have reduced our exposure to future losses by auctioning REO’s, especially as real estate values may deteriorate in the near future. In light of increased delinquencies, REO and loan losses, we believe it is prudent to aggressively liquidate REOs in this market.”

Very interesting. If this is true, does that mean eventual losses on loan charge-offs are being kept off of other lender’s balance sheets simply because they aren’t unloading their REO assets as quickly?