Impac Loses $2.05 Billion, Gets SEC Inquiry

Once an Alt-A powerhouse, Impac Mortgage Holdings Inc. (IMH) said Wednesday that it lost $2.05 billion during 2007, or ($27.10)/share, in a delayed filing with the Securities and Exchange Commission. The annual loss compared with a $75.3 million loss recorded one year earlier. Estimated taxable loss available to common stockholders for 2007 was $136.0 million, or $(1.79)/share, compared to estimated taxable income of $79.5 million or $1.05 per diluted common share for 2006, the company said. Driving the loss was a huge $1.4 billion provision for loan losses, which Impac said was the “result of deteriorating market conditions, higher delinquencies and higher severities.” The Alt-A lender shut down all origination activity in September of last year, and said in its SEC filing that “the capital markets remain very volatile and illiquid and have effectively been unavailable.” The company will now look to compete its first quarter earnings report, which is also expected to show substantial and continuing losses for the Irvine, Calif.-based lender. It continued to shed staff in the first quarer, as well: Impac said that by the end of March, it employed 137 full-time employees, compared to 827 at the end of 2007. Mounting credit costs, including skyrocketing loss provisions, kept Impac’s shareholder equity in the red, with the lender reporting negative equity of $1.1 billion at the end of last year, with the company warning that “further deterioration in the mortgage industry” would like put it at risk as a going concern. REO auctions, and an SEc inquiry Given company CEO Josef Tomkinson’s involvement in an ongoing dispute involving REO auction firm REDC, it was certainly eye-opening to see a disclosure in the 10-K filing that disclosed a new partnership with the auction firm — one that delivered $1.1 million to Impac’s benefit in the first quarter of this year, and $1.7 million in gains during 2007. Impac said that in March, it had entered into an agreement to help with business development for REDC in exchange “for a percentage of the firm’s gross profit.” The lender also said that the Securities and Exchange Commission had begun an inquiry into the company’s internal operations. “During 2008, pursuant to informal requests from the SEC, we have provided certain information … about our business operations and related accounting policies and methodology,” the company’s 10-K filing read. The company did not elaborate further on the requests from SEC officials, and in a conference call with analysts Wednesday, company officials declined to provide further specifics. Reuters and other news agencies said Wednesday that the SEC has not provided further details, either. For more information, visit http://www.impaccompanies.com. Disclosure: The author held no positions in IMH when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.