Impac Mortgage Holdings' return to the non-qualified mortgage business is getting accelerated because of the competition-driven margin compression for conforming loans, company executives said on the first quarter earnings call.
At this time last year, the company's
"While the market shift and impact of margin compression can be felt in the industry around originations, we remain committed to serving consumers in the GSE and government lending spaces, while also growing our non-QM opportunities across all channels," said Chief Operating Officer Tiffany Entsminger. "This is an important pivot for the company, allowing it to navigate shrinking GSE margins while driving revenue in the non-QM space."
Impac lost $683,000 in the first quarter, compared with a loss of $2.2 million
In the past, Impac relied on third party originations for the non-QM loans. The shift in focus can be seen in the composition of its origination pipeline of loans yet to close in that channel.
"At the end of the year, within our TPO channel, only about 19% was non-QM production as opposed to today, which is roughly 90% of our production," said Justin Moisio, chief administrative officer, during the call.
Impac has also started shifting some of its call center resources, staff and marketing to the non-QM side. The company has hired staff to originate Veterans Affairs-guaranteed mortgages as well.
"In April, for the first time in over a year, the call center began to reallocate a portion of its marketing spend towards non-QM production," said Jon Gloeckner, its principal accounting officer. "This has already resulted in an increase in non-QM submissions, which we expect to continue to ramp up throughout the second quarter."
Impac originated $850 million in the first quarter, of which $773 million came through the call center and $76.8 million from wholesale. This compared with a total of $810 million in the fourth quarter, with $753.3 million from the call center. In the first quarter of last year, the company logged $1.5 billion, with $1.3 billion from the call center, $152.1 million from wholesale and $54.2 million of correspondent purchases. The company has yet to resume activity in the correspondent channel.
Gain on sale during the quarter was 237 basis points, compared with 265 bps in the fourth quarter and a loss on sale of 187 bps in the first quarter 2020 because of the shutdown of the private label market.
Right now, Impac is having to sell its product to aggregators, but company Chairman and CEO George Mangiaracina said Impac will return to the securitization market shortly.
"One of the lessons that we took away from the COVID crisis of last year is [recognizing] the need for us to have some more sophistication around capital markets, in terms of how the loans that we originate model out for investment grade levels through securitizations," said Mangiaracina. The aim is to develop tactics and strategies in order to better price its loans, and the company is close to securing those additional resources.
"We hope before the end of the year to be able to access the securitization market like we had in years past, so I think you'll see that coming out of us in the next several months," Mangiaracina added.
