Impac Mortgage Holdings Inc (IMPM)

[dpsimswm]

Four Years In, Non-QM Market Struggles to Amass Volume

By Thomas Ressler
[e-mail]
The game-changing ability-to-repay mortgage lending rule from the Consumer Financial Protection Bureau took effect four years ago this month. At that time, regulators said there would be plenty of mortgage lending outside the parameters of the qualified-mortgage box. So far, however, that expectation has yet to be realized.
Authoritative numbers on the size of the non-QM space are difficult to come by. One clear indicator is the volume of interest-only mortgage originations, $20.2 billion during the first nine months of 2017 by 15 major lenders, according to Inside Nonconforming Markets.
And a handful of nonbanks have established a growing securitization market for a variety of non-QM loans and other expanded-credit mortgages, including a new breed of nonprime loans and products for borrowers who don?t easily fit into the agency box such as the self-employed and foreign nationals.
Suzanne Mistretta, a senior director in Fitch Ratings? residential mortgage-backed securities ratings group, told Inside Mortgage Finance this week the sector has been growing. However, ?it is still a very small percentage of total issuance,? she said. For the full analysis, see the new edition of Inside Mortgage Finance.
Other areas of interest: Originations, Regulatory, Nonconforming

[dpsimswm]

Preferred volume today 7K
Common volume today 5K

Something is wrong with that....

[dpsimswm]

On that note....

New Residential to Raise $440 Million Via Stock Sale. More Acquisitions Ahead?

By Paul Muolo
[e-mail]
Fast-growing mortgage REIT New Residential Investment Corp. has filed to sell 25 million shares of common stock, an offering that could raise upwards of $440 million based on the current share price.
In a statement, New Rez said it intends to use the proceeds for ?general corporate purposes? but in all likelihood the money will be used to finance further acquisitions in the mortgage space.
A few months back, the REIT inked a deal to acquire Shellpoint Partners for roughly $190 million in cash through a three-year earn-out deal. New Rez also has been an active buyer of mortgage servicing portfolios in the open market and now ranks fifth overall, according to figures compiled by Inside Mortgage Finance.
The REIT has a current market cap (share price multiplied by number of units outstanding) of $5.27 billion.
Late Tuesday, New Rez ? in tandem with the stock sale announcement ? disclosed estimated fourth quarter earnings ranging from $117.8 million to $202.8 million.

[jwnoble3]

2018 should be a year of transformation and value growth at Impac...

These retained portfolio values rise as i-rates increase:
- Servicing rights 3Q value ~$159 million
- servicing portfolio continues to grow, soon will be nearing almost $10 million per quarter in servicing income in 2018
- September 30, 2017, increased servicing portfolio from the end of the second quarter by 7%, bringing the portfolio to approximately $15.7 billion

These further strengthen the balance sheet:
- Beginning in 2018, the contingent consideration will no longer be on Impacs balance sheet

Next steps the company should undertake IMO-
- Need to complete non-agency securitization when the return to company is best.
- expand into areas that are easy to originate (highest returns)
- Need to re-structure o/s prefs so all future value flows to common

Once the retained portfolio is generating sufficient revenue to cover operating costs+, the company should resume dividends.

Link to transcript from the last Q call:
https://seekingalpha.c...

[dpsimswm]

"The consideration being offered in the Note Offer and the Series D conversion is fair in relation to the market price for each series of Preferred Stock prior to the announcement of the transactions, in relation to the historical market prices of each series of Preferred Stock and by comparison to the consideration paid by Dynex Capital in the tender offer completed by Dynex in February 2003. The consideration being offered in the Note Offer and that would be provided by the Series D conversion each represents a premium to the closing bid price for each series of Preferred Stock as of January 7, 2004, which was the last trading day prior to the announcement of the recapitalization transactions. The closing per share bid price of the Series A Preferred Stock on January 7, 2004 was $26.50, and the market price of the Series A Preferred Stock from January 1, 2001 to December 31, 2003 ranged from a low of $6.63 per share to a high of $28.25 per share. The closing per share bid price of the Series B Preferred Stock on January 7, 2004 was $26.90, and the market price of the Series B Preferred Stock from January 1, 2001 to December 31, 2003 ranged from a low of $7.00 per share to a high of $27.89 per share. The closing per share bid price of the Series C Preferred Stock on January 7, 2004 was $34.30, and the market price of the Series C Preferred Stock from January 1, 2001 to December 31, 2003 ranged from a low of $7.81 per share to high of $34.30 per share. In the February 2003 tender offer, holders of Series A Preferred Stock who tendered their shares received either $24 in cash per share or $25.20 in 2005 Senior Notes holders of Series B Preferred Stock who tendered their shares received either $24.50 in cash per share or $25.725 in 2005 Senior Notes, and holders of Series C Preferred Stock who tendered their shares received either $30 in cash per share or $31.50 in 2005 Senior Notes."

[dpsimswm]

Historic Restructuring at Dynex - SEC Filing 14A

<--- Just added this to the ibox. It's everything you need to know.

[dpsimswm]

"Third, the company has included the preferred stockholders in calculations of book value. This indicates that they do intend to make good on their borrowings."

[dpsimswm]

"Second, the company continues to operate with a retained deficit in earnings. In our view, the issue of the retained equity deficit of $114.7 million needs to be addressed. Preferred stockholders committed capital to the company and have not received this capital back through previous dividend payments or redemption. No business can borrow money and simply refuse to pay the lender their invested capital."

[dpsimswm]

"First, in the company's balance sheet, the company states the liquidation value as $16.6 million and $35 million. This has been stated at least four times a year since any tender offer may have altered any rights of the preferred in 2009. To any ordinary investor, the understanding would be that the company intends to pay this out to the shareholders in the event of a liquidating event. In the broadest possible terms, most investors understand that a liquidating event is a sale, merger, divestiture or bankruptcy."

[dpsimswm]

Impac Preferred Own At Least $51.8 Million Of Book Value

Jan. 10, 2018 7:58 AM ET|17 comments| About: Impac Mortgage Holdings, Inc. (IMH)
David Sims
Summary

Impac's SEC filing language is plain and simple.

Book value per common share is $12.30.

As Impac returns to a strong financial position, the Preferred are due their contributed capital.
https://seekingalpha.com/article/4136526-impac-preferred-least-51_8-million-book-value

[dpsimswm]

Long time, no see....

Anyone paying attention to this message board anymore?

[jwnoble3]

Market cap for Impac has nearly doubled too from $199M last year to ~$355M

[robigus]

Great!

[jwnoble3]

IMO, It's great news. Impac is taking steps to further shore up the balance sheet.

[robigus]

http://ih.advfn.com/p.php?pid=nmona&article=74568902

Is this good news for us?

[robigus]

Thanks!
And now today, no shares traded.

[jwnoble3]

Yes, good summary article here...

https://seekingalpha.com/article/4064539-impac-mortgage-moves-2017-strategy

[robigus]

JWN, are you still in IMPHO? What is up with it lately?

[sidedraft]

What if?

From today's s-3 filing.

USE OF PROCEEDS

Except as otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of securities offered under this prospectus for general corporate purposes. These purposes may include working capital, repaying, reducing or refinancing indebtedness, financing acquisitions of other companies that we believe will add to and/or expand our service offerings, repurchasing or redeeming our securities, investments, and capital expenditures.

http://ih.advfn.com/p.php?pid=nmona&article=73341293&symbol=IMPHP

[jwnoble3]

http://seekingalpha.com/article/3977309-latest-circumstances-call-direct-preferred-solution-impac#alt2

[jwnoble3]

http://seekingalpha.com/article/3958770-preferred-stockholders-seek-restructuring-impac-mortgage

[jwnoble3]

Agree, just added some yesterday. IMH is now 4Q's profitable. Only 1 of 3 profitable companies not paying prefs currently.

GLTA

[dpsimswm]

I don't think you have missed the boat. 2015 is the first year that this company has earned enough that reinstating a dividend is actually a possibility.

From the 10Q,
"Series C 9.125% redeemable preferred stock, $0.01 par value; liquidation value $35,127;"

Based on yesterday's close, the yield is about 27.8% if the company reinstates a regular dividend.

[StockKnowledge]

New here did I miss the boat?

I was looking at an article on IMH, which I believe the common shares are a compelling buy. I came across the preferred and see are they suspended. I was thinking of picking up some IMPHP with the intial thoughts that the common stock can not be paid dividends until they reinstate the preferreds. However, I see information about tender offers etc and other events stripping rights etc...

My question is at $9 did I miss the boat, since it already moved from $2? Is there any chance that the dividend gets reinstated, or the preferreds get redeemed at $25? Or can management not pay the dividend and basically ignore the preferred holders forever?

[kyeh]

What happened to the lawsuit?

Anyone know anything about what happened to the lawsuit vs IMH with regards to the preferred shares? Did Curtis Timm & Carmac settle with IMH and if so, how does that impact IMPHP and IMPHO shareholders? Anyone with info willing to give us an update?

Thanks in advance!

[camaro4me]

Given all you said, it's not a bad time to buy back in at these levels.

[Joe Stocks]

From Lsigurd;
Impac Mortgage

As usual Impac’s GAAP numbers are a confluence of confusion. The headline number was better than the actual results because of changes to accretion of contingent expense that they incurred with the acquisition of CashCall.

The CashCall acquisition had contingent revenue payout and that payout expectation has decreased leading to lower accretion via GAAP. Ignoring accretion the operating income was around $8 million which was less than the first quarter.

The decline was mostly due to lower gain on sale margins, which had declined to 186 bps from 230 bps.

While origination volumes were up 8% sequentially (see below) I had been expecting better. The expansion of CashCall into more states was slower than I expected. In the second quarter CashCall was registered in 19 states. I actually had thought that number was 29.

q2volumesBy the third quarter CashCall is expected to be compliant in 40 states. And really that is the story here. Volume growth through expansion.

CashCall is a retail broker dealing primarily with money-purchase mortgages (mortgages to new home owners). Therefore Impac is not as dependent on refinancing volumes as some other originators.

While it was not a great quarter the company still earned 70c EPS. Its lower than my expectations but in absolute terms not a bad number. On the conference call they said that Q3 margins looked better than Q2, and while July production was only about $700mm, they expected better in August-September as the pipeline was large.

I made a mistake buying the stock at $20 on the expectation of a strong second quarter. But I think at $16 its reasonable given earnings power that should exceed $3+ EPS once CashCall is operating nationwide.

http://reminiscencesofastockblogger.com/2015/08/16/week-2015-maybe-its-just-a-bear-market/

[Joe Stocks]

Earnings report;

http://finance.yahoo.com/news/impac-mortgage-holdings-inc-announces-211100570.html

[dpsimswm]

Several of us flew into Irvine for the annual meeting. We spoke to CEO and he said "cash is king." I think they are rapidly expanding and cash is more important right now to help with extending their warehouse lines and boosting volume.

Could be related to the lawsuits too, but I think this is operational primarily.

[dpsimswm]

Impac IMH announced $10 billion in full year 2015 originations, boosted by an expansion to 41 states that will begin increasing sales in 2nd half of the year.

In Q1, the company earned $17 million operating earnings on $2.3 billion originations. So, for the year, they should do about 4 times that. That implies $60 million in operating earnings on 13.3 million diluted shares, or about $4.50 per diluted common share.

Add the $140 million in remaining DTA to that mix and GAAP earnings surge. The stock is probably trading at about 2x forward earnings.

Since there is no analyst coverage or institutional ownership, there is nobody telling Wall Street these facts. Patience is key here.

[dpsimswm]

New Home Sales worse than expected, but still up 18% versus last year.
http://www.reuters.com/article/2015/07/24/us-usa-economy-idUSKCN0PY1OH20150724

IMH

Purchase application data also up 18% vs prior year.
http://www.mortgagenewsdaily.com/data/mortgageapplications.aspx


From Inside Mortgage Finance...
-----------------------------------

MBA Feeling More Bullish on Purchase Lending; The Millennial Effect?
By Sherry Muolo

[e-mail]

The Mortgage Bankers Association this week hiked its forecast for purchase-money originations for 2015 as well as 2016, citing an array of factors.

The trade group now believes purchase originations will total $801 billion in 2015, compared to a prior forecast of $730 billion. In 2016, it’s looking for $885 billion. Previously, its estimate was $791 billion.

The revision was made in response to changing home sales, prices, and a decline in cash purchases, according to Mike Fratantoni, chief economist at MBA. “The housing market recovery has shifted to a higher gear,” the economist and his team write in a new analysis of the market.

Meanwhile, other groups are crediting the millennial generation for the boost in activity and future growth. Millennials will account for over two-thirds of growth in the housing market over the next five years, said Jonathan Smoke, chief economist at Realtor.com. At the moment, they “make up around 65 percent of first-time homebuyers,” said Smoke.

A study done by the National Conference on Citizenship reported that currently there are 82 million millennials and 77 million baby boomers.

[dpsimswm]

I think you might be right.

I've got nearly a full allocation of shares here. So, I am ready for the timeline to shift. I'm being facetious when I say this, but the lawsuits were great for new preferred shareholders. Without them, these shares wouldn't have traded so low for so long.

I see a win-win scenario coming, but I could be wrong.

[kyeh]

Settlement?

It sure smells like some type of settlement is in the works based on the recent updates to the Timms vs IMH case. The previous trial date in August was cancelled and no new trial date has been set.

Anyone else have some insights or know what's going on?

[robigus]

Impac Mortgage Holdings, Inc. Announces Live Webcast of its Annual Stockholders’ Meeting

http://ih.advfn.com/p.php?pid=nmona&article=67770089

[kyeh]

Hmm, it is curious that the court date scheduled for next month is cancelled. However, this doesn't necessarily mean that there's a settlement in the process. There's a block date of 7/20. It's quite conceivable that a new court date will be set on 7/20.

[obscureinvestor]

Court date cancelled -- settlement?

can search for the information through this link: http://casesearch.courts.state.md.us/inquiry/processDisclaimer.jis

[kyeh]

IMH was recently added to Russell 3000 Index (as of 6/19/2015)

Here's the official link to the Russell index website:

http://www.russell.com/indexes/americas/tools-resources/reconstitution/additions-deletions.page#indexes

If you search for "Impac" on the list of Additions, you will see Impact Mortgage listed there.

[Joe Stocks]

Trail date set for 8/17

Event Type: Civil TrialNotice Date:10/20/2014
Event Date: 08/17/2015Event Time:09:30 AM
Result: Result Date:

[kyeh]

Looks like Pickup is picking up more shares!

RHP and his associates are apparently buyers at around $17-$18 range. He's been actively snapping up shares around that price in decent quantities. Good news for IMH longs.

[Joe Stocks]

IMH insider market buy just posted;
http://www.sec.gov/Archives/edgar/data/1000298/000120919115048418/xslF345X01/doc4.xml

[dpsimswm]

Here's something I posted to tumblr yesterday.

http://simsonfinance.tumblr.com/post/118963465684/a-simple-solution-for-impac-preferred-imh

My belief, and its something that I have believed for the past two years as I bought IMPHO, is that management is doing their best to grow the business.

In 2009, they did their best to save the business and they succeeded. I also believe that management sees IMPHP and IMPHO in a similar light.

In order to take the business to the next level, they need to unlock the capital markets. And to do that, the preferred holders need to participate in the profitability of the business. This is not a one-sided transaction.

On one side, the company's management provides POSITIVE GOODWILL. On the other side, investors provide TRUST. Trust and goodwill are the currencies. Once management wins back our trust, the capital markets unlock. They can then issue new securities and they don't need to rely on cash injections from an insider.

[kyeh]

I didn't swap out my IMPHO for IMPHP because...

IMPHO had a nice run-up lately and I was also holding onto IMPHO because it had been going up. Now that it's leveled off, I'll probably make that swap pretty soon. IMO, both preferred shares have nice upside now that IMH is doing much better financially. But IMPHP has some nice upside in case Curtis Timms wins the lawsuit.

[Joe Stocks]

kyeh, What haven't you swapped out your IMPHO shares for IMPHP? I at one time owned some IMPHO but once I understood the difference as to the court case, I saw no reason not to trade out dollar for dollar. Slightly less shares, but much better risk reward proposition.

[Joe Stocks]

Hmm...raising $25 mil.

There are 665,592 shares of IMPHP shares outstanding.

If the courts were to lose the their case against IMPHP holders they would owe them redemption value of $16,639,800, and past dividends of about 15.25 per share, or $10,150,278.

Total $26,790,078 ($40.25 per share)

I think us IMPHP shareholders would settle for $25 mil. Think about it...if you were IMH and thought you may lose out on the court case which I think goes to trial this summer, wouldn't you want to raise funds now to offer a settlement?

(Sorry IMPHO holders. You guys voted away your rights.)

[Joe Stocks]

Impac Mortgage Holdings, Inc. (NYSE MKT: IMH), announced today that it entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which it is issuing $25 million in original aggregate principal amount of Convertible Promissory Notes due 2020 (the “Notes”). The Notes mature on or before May 9, 2020 and accrue interest at a rate of 7.5% per annum, to be paid quarterly. The Note Purchase Agreement contains customary affirmative and negative covenants of Impac, including covenants not to incur certain indebtedness that is not subordinated and not to make optional payments on its indebtedness (other than on the Notes) or amend material indebtedness in a manner that is adverse in any material manner to the noteholders. In connection with the Note Purchase Agreement and issuance of the Notes, Impac also granted certain rights to demand the registration of the shares underlying the Notes.

Noteholders may convert all or a portion of the outstanding principal amount of the Notes at any time after January 1, 2016 into shares of Impac’s common stock (“Conversion Shares”) at a rate of $21.50 per share, subject to adjustment for stock splits and stock dividends (the “Conversion Price”). The conversion price of the Notes was to equal the closing stock price of Impac’s common stock on the second trading day after Impac released its 2015 Q1 earnings release; provided, however, that in no event would this amount be less than $21.50 or greater than $22.00. Impac released its earnings on April 24 and the closing price of Impac’s common stock on April 27 was $21.02; the Conversion Price is thus $21.50. Impac will have the right to convert the entire outstanding principal of the Notes into Conversion Shares at the Conversion Price if the market price per share of Impac’s common stock, as measured by the average volume-weighted closing stock price per share of the common stock on the NYSE MKT, reaches the level of $30.10 (subject to adjustment for stock splits and stock dividends) for any twenty (20) trading days in any period after January 1, 2016, of thirty (30) consecutive trading days. Upon conversion of the Notes by Impac, the entire amount of accrued and unpaid interest (and all other amounts owing) under the Notes are immediately due and payable. Furthermore, if the conversion of the Notes by Impac occurs prior to the third anniversary of the closing date, then the entire amount of interest under the Notes through the third anniversary is immediately due and payable.

[dpsimswm]

Lawsuits, lawsuits, lawsuits....

The talk about lawsuits has turned away most investors that are looking for a quick resolution.

Two things matter, regardless of the lawsuit outcome.

1. Voting rights are intact.
2. There is a $25 liquidation preference.

The lawsuit has actually thrown the valuation of these shares out of whack. If not for the lawsuit, people would have bought these long ago hoping for a quick restructuring.

[loobeyondbm]

Are you a lawyer? If not, go read the judge's order. Both you and Joe have reading comprehension issues.

If you have no idea what you say, then don't say it.

[kyeh]

To put the lawsuit in plain english for non-legal types:

Preferred B shareholders should NOT be able to vote on amendments on Preferred C shares.

Preferred C shareholders should NOT be able to vote on amendments on Preferred B shares.

Or put it another way:

Preferred B shareholders should ONLY be able to vote on Preferred B amendments.

Preferred C shareholders should ONLY be able to vote on Preferred C amendments.

If Timms wins his argument, then:

Preferred B received < 66.6% of the required votes to pass the amendments to Preferred B shares (IMPHP). The amendments would NOT have passed and would not have taken effect.

Preferred C received > 66.6% of the required votes to pass the amendments to preferred C shares (IMPHO). The amendments would pass and take effect.

If IMH wins their argument, then:

Preferred B and Preferred C are the same since they are both preferred shares of IMH stock. The overall vote of B and C shareholders combined was > 66.6% to effect the amendments. The amendment would pass and take effect.

You do the math.

[kyeh]

It has everything to do with the class of treatment of the 2 classes of Preferreds. Read the Legal Memorandum on the Maryland District Court website:

http://www.courts.state.md.us/businesstech/pdfs/mdbt1-13.pdf

Excerpt from the above legal document from official Maryland Court website:

DEFENDANT:

Defendants argue that plain language of the Articles Supplementary defeats Plaintiff?s claim. According to Defendants, the number and percentage of consenting Preferred B shares alone is irrelevant because the Articles Supplementary allow (and in fact, require) voting of
Preferred B and C shares together as a class. Under this interpretation of the Articles Supplementary, the only vote tally that matters is the total percentage of all Preferred Shares that were tendered and consented, and failure to obtain consents from holders of two-thirds of the Preferred B shares alone does not prevent a valid amendment of the Articles.

PLAINTIFF RESPONSE:

First, Plaintiff asserts that the Preferred B and C shares do not have “like voting rights” in this transaction. He argues that Preferred C shares cannot have like voting rights as Preferred B shares because they have no voting rights with regard to Preferred B shares.

...

Plaintiff?s argument would conclude that Preferred C shares would never have the ability to participate in a class vote on amendments to the Preferred B Articles Supplementary.

...

and so on...

To summarize, Timm's argument is that a vote on Preferred C's articles should have no bearing on Preferred B's articles because they are not the same.

[loobeyondbm]

Both of you and Joe are confused on the major point of lawsuit: the lawsuit tries to invalidate the tender/vote event, and has nothing to do the different treatment of 2 classes and Timm even doesn't ask for any different treatment/result. The judge will not reward you anything that you didn't ask.

I am not trying to convince you or Joe, do whatever you think is right...