IMH - Earnings call transcript Q1 2020 | Impac Mortgage Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Impac Mortgage Holdings First Quarter Earnings Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I’d now like to hand the conference to your speaker today, Justin Moisio. Please go ahead, sir.

Justin Moisio

you. Thank and earnings joining conference everyone, first Mortgage you XXXX quarter call. thank morning, Impac for Holdings Good

and like These conditions. and Form to XX-K During this to, actual any the any contained refer I call, and identify Securities the George information materially and update forward-looking disclaim earnings, statements This the important in documents of duty we and to factors flows, most market business to will make and would general those regards to to introducing cash production by our date but outlook projections Mortgage risk to, that exposure, not including guidance, rate herein. could limited is filed given, market interest Mangiaracina, risk GAAP mortgage statements. started taxable Act Chairman recently Impac XXXX. in cause and from forward-looking of presentation, results risk the or get effective Exchange our as CEO contain the I would you we like and or projections factors Holdings. differ in under other of expressly

George Mangiaracina

team from General and call Head quantitative created morning us of XXXX Coast. XXXX Donatacci, businesses CFO; East GSE Thank Tom in Counsel; credit easing materially Covid-XX XX, our global our morning, the volatility Impac’s with Securities the attendant for quarter Chief we March you the constraints Officer; Moisio, interest our business Staff Mortgage on adverse and and company’s Chief Chief Vahdat, and Operations; potential which The year-end respectively. distribution joining impact our Reserve’s Risk earnings Entsminger, Tiffany financial the in Justin and In Nima this resumption of unprecedented is XX, NonQM of is the markets Administrative earnings executive rate rate in Federal call. markets. and for identified you, first me the emergency California, Paul The liquidity cut our risks, we joining program, and thank Good and Justin. Licon, Officer to associated with to operate, Backed March on of its supply effecting our

We the XXXX, satisfied originations, For company its of by and company the this the the suspend curtailing corresponding NonQM fund borrowing company in subset capacity capacity, were from X, the The In as long-term delever those entirety company calls the with concurrent curtail measures with satisfying Investor selling reiterate line company secured company detail from extending well to to volumes at company under then we its a XXXX, to activities. as payable partners. all from TBA website, calls to reduced years We and halting near-term reduced from had our doubled facilities cash necessary extended to settlement million creating call, profile, than and and end lending balance margin and actions and record million, May preliminary date May. and our million its under was end margin reduce warehouse executed lending all sheet. of March by XX March, core satisfied markets company’s billion immediacy March provide right instituted agreements. with financial portfolios, origination all stakeholders. the up economic its and over more trade to The three. commitments electing made our $XXX and a which rightsized unaudited the to that XX. by protect caused required purposes six by activity origination channels, across and decision to growth the existing debt our hedge timeframes capacity the can of billion, capacity pipeline. substantial the $XXX on increase February corresponding of on the global mismatch for of obligations the created momentum dislocations January activity and with March earnings poised and liquidity Relations The XXXX, unsecured focus million, our unrestricted and Beginning calls end company create million loans of a TBA our of loan whole repurchase believes to loan we position and $XX liquidity. curtailing on in out the aggressive The basis. from basis the TBA activities. we singular from XXXX of monetize lending By activities counterparties capacity borrowing $X.X also $X to updates business $X.X originations on following March in fully the to warehouse March. date value XX, satisfied company held-for-sale, margin reduce whole and $XXX on of projected company leverage gains debt. COVID-XX repaying all available these company between to these to warehouse mortgage servicing earnings borrowings in of to the closed the company exposure end on the June, The loans. March its only originations objectives including respectively. by restructuring from present. to in TBA April and March sufficient embedded year-end in June near-term on decision and at obligations, through a substantially significant as GAAP The all and with April XX, time measured of The approximately accomplished XXXX. required prioritize operating for company’s for make Hedging with XX to by the early March We The The to lending of XX, The have below numerous but difficult, of our on a met the capital resumed cycles of

shocks with company’s corresponding $XXX million, warehouse May, was balance were NonQM expected rights from balance of mark-to-market corresponding Impac than $XXX to Company’s sale the less the down risk additional $XXX facility company to to debt were and outstanding of million, classes. Mortgage outstanding As loans which $X balance. to unrestricted mitigated million extend to NonQM initial completed wholly-owned $XX X, was ratio into end experienced X.X:X origination the originally of we by convertible servicing the these its of from the its million, note in term amount leverage $XX X.X:X exposure that million with XXXX, $X the within of company’s end held-for-sale of held-for-sale XX, May, been company with of company’s December million follow-on XXXX. million months company UPB Corp. the asset $XX in the of which subsidiary, its May. million, warehouse loans At volatility The pay risk proceeds credit are the be approximately additive to loans. of reduced principal to holders equity May forbearance-related XXXX, due The entered loans. the aggregate to loan from has company’s the November proceeds and $XX mortgage to less promissory above The Freddie cash related mortgage December also the settlement efforts licensed and then used entirety, of the of agreements billion in related of over has six X, – Mac’s settlement basis interest original in to liquidity borrowing totality sale end believes of constraints,

Additionally, cash of of whole end fair at a $XX with balance balance million. of unencumbered million million a same million. $XX loans May, as $XX the a over the company of $XX of also carried The from company’s the period UPB increased value unrestricted has carries to

at carrying expressed to We fully and company The stable value, again, while non-agency its market unencumbered and on lending government to to view press market currently additive to reengage that normalized, the circumstances release factors, demonstrated levels extent initially monitor expect and had the with approximating is GSE the have company proceeds being facts the cash the balance. go-forward that not will our NonQM elected settlement stabilized products basis, these external market sufficiently June company segments X loans jumbo distribution, a will and the and evaluating that markets adequate activities. unrestricted The conditions in focus had of company’s continue capital lending. as On segments and monetized evolve.

rigorous a margin differentiator participate in the and a profitably to been position will to originate NonQM to prepared The aligns today’s its risk historical our as continue profile credit. liquidity opportunity key navigates with The for balance it leader the identified respect has management to market forward. and company reemergence has way of path a with discipline alternative environment. of lending. reestablished company NonQM with We’re company in safety as has of

the to Licon, and for would team and like of the these of remain our dedicated of Thank call their of results efforts turning operating discuss support each our to Paul, the quarter. community like Before management months. and and for our first to also would partners employees acknowledge to X.X benefit onto contributions steadfast of who the and commend pride to homeowner. senior challenging our I Directors to local our other I With last our times benefit through over Board you the the tireless profound accountable Paul you. to over benefit capital the customer, gratitude, the American to

Paul Licon

and borrowers, for earnings the March NonQM collapse were the tale from George. investor spreading on January side. overnight. the Beginning Thanks, to was and we financial of expected coronavirus month into Heading right. a the loans core significantly QX of $XX February saw due the impact dropped market of two All Prices March, million. quarters. our NonQM of in

QX. QX backdrop million by loans the million $XX.X $XX this loans have loans gain with for loss quarter to a March $XX not for Core $XX in sale did of we our core portfolio. that QX. XXX% exposure loss $XX of from a GAAP held-for-sale loss still $X.X $XXX,XXX million is million the This earnings It significant a compares this in of of million loss up loss was saw in our quarterly Although core made of on portion million. month million of NonQM decreased QX on for GAAP was and within $XX.X sale total of of we XXXX. in product, to

from As to most increase in prudent decrease of NonQM George NonQM from calls path to the due The the company earlier, a proceeds and expected loss of lenders, warehouse the preserve anticipation to sales value in our strategy follow. that loan collateral. touched margin decided was in on liquidity in

allowed and have have action us reduced the margin margin Although not reduce an originations increased to portfolio, would operations origination lenders. precious pause with our easy that that preserving our calls. further expenses and fund including exposure progress decision, haircuts our significant we the across to to their in to This assisted on capital our required loan of decided made in our was and made, loans, Since new investors total we clearing end been at decision NonQM company otherwise have to out warehouse trades our their call March. exposure

balance loans ending the at balance million $XXX $XXX decreased of held-for-sale end by million. from $XXX of QX million QX Our a to

from Associated million $XXX QX. the by million $XXX to at million warehouse December of borrowings $XXX end decreased at

was Unrestricted have MSR cash able consolidated extended we about speaking in May, month-end down to unrestricted versus $XX.X cash loan leverage an margin portfolio loan our repaid of facility unencumbered million, million; $XX held-for-sale of been have an at XX held-for-sale MSR we $XX.X of million outstanding May. million our our sold borrowings, balance lenders. from $X.X cash additional borrowings balance to balance million at December. million of end XX from our during $XX Tom portfolio, million from of in a reduced servicing off reclaim portfolio; held-for-sale end March loan with be in at legacy we decreased warehouse result million at As the quarter, million, later, to balance balance March of by QX primarily unencumbered write-downs $XXX million; convertible $XX MSR the our maturity from From as the note; decline $XXX speed Freddie of Also, line at excluding further resulting paid XX:X our March assumptions. trust to a of our holding million mark-to-market will $XX.X ratio the the $XX.X of a increased an $X.X to loans sold company $XX activity March our million to at XX, an warehouse in and level, with

May million. XX, unrestricted $XX unencumbered of $XX.X As loan our balance cash with million an held-for-sale was balance of

consisted a decreased the Freddie only portfolio of In loans selling as servicing Mae as result a our both MSR $X.X which portfolio. of million of Jenny UPB Jenny has of billion from primarily UPB loans, Freddie of March of to $XXX addition, servicing XX, and our

the We have our rightsize of expenses also company steps undertaken a and to have at thorough review cost taken structure.

come we in to to out times have recent from resources the these move and restart discuss that initiatives this our company’s responsible a we feel mortgage of lending and and call crisis, its now I’ll manner. available we As trying to the servicing. operations regarding the liquidity disciplined over pass Tom Donatacci forward

Tom Donatacci

Paul. Thanks,

with million remaining slightly been above multiple, XXXX. was we July where seasoned two XX loans, will successful will resulted received and concentration, weighted bank. The a be The on holdback portfolio or billion and announce in sale market coming MSR auction, which transaction XXXX. May pleased approximately executed bid winning of date We’re transfer The a sale The note in XX of volatility, $X.X saw closed liquidity with points, over $XX average a was points. a of XX, received basis has California sale X, large XX% million fee of prices the significant The rate X.XXX%, to XX,XXX MSRs, consisted of UPB during on regional time Mac basis months, a approximately a funds months. from net $XX.X decline. which XX a market of sale payment the of servicing via executed of Freddie a

on had the And at so survey of average new origination market our buyers upper-end the an the recent bid industry resulting sale seven the of MSR warrants, results satisfactory terms expectations. active most the and were MSR A also The sale California and of a included risk X.XX tail of multiple impact conventional as co-issue higher limited exposure limited versus well. the reps of auction in results. to

earlier, to MSRs, pay cash mentioned and down to used improve to MSR liquidity and were the This decision the GSE line has which any debt satisfy brought As balance. our the to were be any impact required dislocation or continue to by by sale liquidity. to George firm been the financing or increase position to of other zero caused None used COVID-XX. the proceeds of and risk sale our protect and a proceeds The the on will was used initiated entity. prioritize during made manage market

on In million, addition of to the in this remaining months. purchase price funds transaction coming $X expected to be received the

a who’ll now from balance if established well. confirmation of will This to to operational capacity. document also and delivery in that have We underway. is $X.X due collected all And accelerate current expect our to the as insight not, currently million into of Tiffany I approximately transactions. project most, we turn XXXX MSR over receipt Entsminger, be team past provide

Tiffany Entsminger

are been fund in government $X from higher and Impac GSE loan back over products prior caused is demand into market well originate Tom. risk that the the Thanks, heading to they events and than years. Consumer corresponding to activity preventative refinancing lending measure. for to us pull margins as suited for billion a and March eligible have

million is market in XXXX in the targeting While serve lending channel there It alone market the eligible, substantial by in a is initially origination of end consumers. funded to remain for still is $XXX profitability the FHA the of we responsibly focused, platform. that NonQM retail provides VA and here QX baseline volume liquidity rebounding, the GSE

be diversity that support during hardship, and margin will consumer sought to safety a we eligible and that mind wholesale sensitive top margin product channel quarter. offerings will we’re alert forward. in COVID-related to provide offerings maximizing operational derisking TPO and aggressive liquidity geographic rate in be efficiencies, In strong the run management GSE margin with and of of to the quality, credit and around a create of community. efforts – needs through going Originating continuing government remain updating forbearance team portfolio, the maintaining to loans to to committed the next liquidity optimizing our changing The addition,

discuss product mix production now will Moisio Justin and near-term focus.

Justin Moisio

Tiffany. you, Thank

Our targeted through be in run monthly $XXX center. quarter the third million our call originated rate will

demonstrated other our capital segments VA be loans stable in competitive some on originated Currently, while we’ve bare FHA approach some the remain borrowers, these we’ve to April, of have optimizing reevaluated market. pause may from the necessary and expense demand Keeping GSE, our which have markets focused the been eligible since step and adequate remain originators, will distribution able box execution. instituting we’ve keep promotion within We’re and in initially and market at lending. of to GSE the offerings, with responsible exits, to that with overlays where competitive pricing, who credit able taken product XXXX, With widest been March a in serving having minimum. pent-up in margins business and

work leads, a the to continue and backlog alternative both credit of we efforts has a storied As around Impac ALTA we’ve our pioneer while space. history suspended. the origination were received through NonQM high-quality tremendous and in

as to continue around products. have for pricing published to borrower GSEs, and on attention it the mortgage in pay markets risk-based to in area, Nima dialogue focused the impact FHA NonQM changing NonQM appetite forbearance discovery for a has relaunching the borrowers to and same expectations potential the Vahdat with past. The and – the changes. servicers, management and ensure rule ways alternative lenders originations behavior in will forbearance have of in guidance We committed CFPB to VA significant the to detail additional strong across the and credit in Nima? which remains rule, around identifying consistent serving Monday, this to participating impacted CFPB will all these NonQM the borrowers market proposal appropriate the way. Impac prior has a participate in and continue warehouse a and revise continues product market. goal revive provide the qualified issued solutions milestone risk to be the and thoughtful meaningful investors practices On a proposed in have to significantly landscape,

Nima Vahdat

to theory to and that supported Realtors, repay. the borrower’s the approaches. hybrids MBA could The The alternative being proxy the perception The way an on the Justin. the organization of proposed on In have of market. price NonQM price-based the thresholds a set January, you, ability until alternative and of patch expiration extends the National CFPB by impact address rule date Association price-based as the lenders issued effective QM been repay. proposed will as the a as others, of that DTI approach. to in to of and legislation Thank eliminate qualify to gave the the the of or originally proposed moves repay and The is loan to ability the have risk to mortgage focused agency ATR-QM for avoiding it rules. mortgage that income in considered regulations disruption CFPB loan, The An the of for loans the be also would amendments less DTI favor of a compliance. ability requirements among and a future amendments space, overall concerned the result rules a the the lenders prescriptive and proposed between considering the CFPB higher borrower’s forward. ability to rule theory debt that patch the XX% expire about higher presumption borrower company repay remains The AGR-QM price and the QM of to credit being proposed of amendments underwriting price proposed the to the

the whole. a should qualified serve market amendments could proposed to considerably, mortgage broaden as constrain NonQM what a However, that considered the is

Bill last was been sweeping. Another reforms the week. under significant California failure development Assembly bill of The proposed this XXXX have would

have other for the forbearance to consumer impact the potential As to on months the unclear an COVID-XX or the have bill have periods active the imposed turn exposed the and its consumer the bill Despite the servicers George prohibited industry up to that to without bill relief, would also providing and fees. attempt violating attempt XX lenders the California be closing over in litigation. of will the provisions afforded of the foreclosures I’ll would protections, during reintroduced, for after the considerable. would accruing The have new been industry became would It but providing to borrowers interest bill on year remains now Legislature feels lending call have comments. state that right came back negative conclusion. penalties could

George Mangiaracina

call remarks. That and financial prepared the concludes our We’ll open questions. for results now

Operator

Instructions] [Operator

Justin Moisio

Victor, right before – couple sorry, calls couple received with I’m a a I this Actually, of some of questions. e-mails

me with let now our team. So just those through walk

to So what received we The mix to on first volume profitability? that the production, want to I think based on current to touch of company would your you question one? Paul, need levels reach return

Paul Licon

Yes. Thanks, Justin.

profitability. production, to we at products, with forward consistent is volume direct As move our million expect conventional achieve $XXX consumer a month we anticipate channel. This ramping a restarting predominantly level up to we our from that our of high-quality

down our Looking are business. TPO road, or third-party the we origination reviving

maintained the once loans. would to We contribute this for business and high-quality that and quarters GSE, again will building have within channel FHA VA it leadership expect within two one key

predicated sorry, foundational potentially around on a business, – I’m TPO is NonQM reform away, also through forbearance. business six on months which Our uniform is standardization on our for a

Justin Moisio

Okay.

well the we company industry, other The the question received as lot a forbearance. as was regarding mentioned as

company to how loan So the that So you is exactly take forbearance? want one? if handling probably, Tiffany,

Tiffany Entsminger

Sure.

being Mac, government Fannie period subservicer, currently into to Mae loans COVID-related a which opportunity with provided forbearance through and experiencing by serviced allows needed. to conventional borrowers to our the the extend adhering opt our we’re Freddie guidance hardship as For and

homeownership available documentation special support available government we’re this and our servicer borrower for during promoting market. asset. time best to path liquidity approach Above all, industry Unlike practices it ensure this is program offerings having our borrowers hearing to goal to on the to continued relates reinstatement our which For impact for all no hardship. through engaged our to we’re population, actively NonQM hardship an borrowers NonQM with options, difficult and markets, that and adverse uniform experiencing GSE forbearance, contact, governing as there’s the who are is

discussions warehouse actively within our and Impac And with these rating previous company standardized around our address approach mentioned these lenders provide issues support Corp., clients around which to Copperfield investors, promote as same expertise Capital to engaged through and leverages press to agencies a release, issues forbearance. We’re forbearance. existing credit navigating alternative in created

Justin Moisio

Okay. we Thank At questions. received any company, you. this the time, haven’t additional

So call. our we Thank everyone, you, for quarter in will first you quarter with us, joining earnings call. earnings conclude early Thank and our we’ll back second be for August you.

Impac Mortgage (IMPM) 26 Jun 202020 Q1 Earnings call transcript