Impac Mortgage posts $2 billion loss for 2007 as it takes $1.4 billion loan-loss provision
IRVINE, Calif. (AP) -- Impac Mortgage Holdings Inc., a real estate investment trust, said late Tuesday it lost $2.05 billion in 2007 because of rising loan-loss provisions.
Impac Mortgage lost $2.05 billion, or $27.10 per share during the year, compared with a loss of $75.3 million, or $1.18 per share in 2006.
The results were mostly attributable to a $1.39 billion reserve to cover loan losses as the REIT -- which used to specialize in alt-A mortgage lending -- set aside cash to cover rising defaults. Impac Mortgage set aside just $34.6 million for loss reserves in 2006.
Alt-A mortgages are loans given to customers with minor credit problems or who cannot properly document their income and assets.
Since the middle of 2007, mortgages have increasingly defaulted, forcing lenders and banks to set aside more cash to cover losses. Also, investors have shied away from purchasing all but the safest types of debt in the credit markets, essentially shutting off an avenue for Impac Mortgage to generate new cash.
Impac Mortgage used the investor market to sell a portion of the loans it originated and did not hold. That in turn would provide them with more cash to continue originating new mortgages.
Because of the paralysis of that investor market, Impac essentially shut down its mortgage origination operations, instead focusing on maintaining its investment portfolio.
Impac Mortgage currently holds about $3 billion in primarily alt-A mortgages in a portfolio along with an additional $234.9 million in commercial mortgages. It was forced to sell a portion of the portfolio in 2007 to help keep up with mounting losses.
Since a peak north of $22 per share in June 2005, Impac shares have been on a long and steady decline. The stock closed at $1.25 Tuesday.
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