Executives at Impac Mortgage Holdings Inc. say they plan to grow the company this year, even as some are wondering about whether the battered Irvine-based mortgage investor will survive a downturn that has claimed others in the industry.
“We’re looking forward to 2008,” Chief Executive Joseph Tomkinson said on a December conference call. “2007 was a disaster for everybody.”
Impac, which buys mortgages as investments and up until recently made home loans itself, plans to go after new sources of business, Tomkinson told analysts last month.
“We’re not going to stand around and do nothing,” he said.
Tomkinson said he didn’t want to give away his “game book” but “we have some things that we think will impact the company in a positive manner.”
Impac could look to acquire more mortgages in fire sales from companies trying to unload them.
“It’s obvious that we should be buying portfolios at deep discounts,” Tomkinson said.
Asset Management
The company also could go into asset management, where Impac would manage troubled loans or related securities for hedge funds or banks, said Matthew Howlett, an analyst with New York’s Fox-Pitt Kelton Inc.
In one scenario, a hedge fund could buy troubled home loans on the cheap and hire Impac to manage them for a fee, Howlett said.
“Impac has all the resources in place and the expertise to make this work,” he said.
The growth talk from Impac comes after a tough year.
Impac, which in late 2004 peaked with a market value of $1.6 billion, has seen its stock drop more than 80% in the past year. The company had a market value of about $45 million last week.
Last month, the company reported a $1.2 billion third-quarter net loss, a massive sum given Impac’s shrunken market value and interest income of $313.8 million during the third quarter.
Things could have been worse, Tomkinson said during the conference call.
Impac beat the odds just by surviving “the most hostile mortgage environment I’ve seen during my 25-year career,” he said. “There are 110 of our competitors that went bankrupt.”
Projections call for Impac to start generating cash again in the second quarter. At that point, executives hope to start rebuilding the company.
The company also hopes to raise money for new ventures at some point this year.
As the housing and mortgage markets slumped last year, Impac opted to exit most of its lending operations in September. It also quit lending money to others to make mortgages.
The company made and invested in Alt-A loans, which are one step above the riskiest subprime loans to borrowers with credit problems.
Less than a year after moving into a new headquarters near John Wayne Airport, Impac has laid off a majority of its employees.
More than 1,000 positions have been cut in the past three months alone, leaving empty much of Impac’s 200,000-square-foot, seven-story building on Jamboree Road that bears its name.
A return to Alt-A mortgages appears unlikely in the short term.
Securities backed by Impac’s Alt-A mortgages have been among the worst-performing in the industry, ratings agency Standard & Poor’s reported last month.
Impac’s $6.6 billion 2006 Alt-A loans were 8.3% delinquent, making it one of the three worst-performing securities backed by Alt-A mortgages. The average delinquency rate for Alt-A loans is about 4.6%, S & P; said.
The company has spent part of the past few months paying back creditors who demanded repayment amid rising defaults. Impac reduced its lines of credit from $924 million at the end of September to about $337 million by mid-December.
The past four months have been spent “fending off the markets and maintaining goodwill with lenders,” Tomkinson said.
Seeking Sublease
The next big operating expense the company’s looking to cut is the lease for its headquarters at its namesake Impac Center. Its lease there runs through 2016.
Impac put much of the building up for sublease in late September. The company pays close to $7 million in rent at Impac Center annually. The deal was signed in 2005, when the company’s market value was close to $1.4 billion.
The company says it expects to have sublease and lease termination deals finalized by mid-2008.
As of mid-December, there’s been one sublease agreed to at the building, for a floor of space, according to brokers.
