Impac Mortgage Holdings said it was instituting a two-week suspension of all lending activity, effective March 30, in hopes that the pause will give the Fed’s efforts to stabilize the mortgage-backed security markets time to take effect.
The company, a micro-cap residential mortgage originator and servicer, cited “liquidity constraints” and “de-risking mandates” initiated by some of its capital markets counterparties with direct access to the Federal Reserve’s funding mechanisms for the decision.
It said the suspension was a precaution.
The actions and continued lack of communication from one of the company’s whole loan investors have created uncertainty and concern among some of Impac’s other capital markets counterparties, the company said. It indicated that the whole loan investor in question might breach its mandatory purchase commitment to the company.
“In light of these events, the company believes it is necessary to take the temporary and precautionary action of suspending mortgage originations for a two-week interval,” Impac said.
Impac said its unrestricted cash position was about $80 million at the close of business on March 27 and it had met all margin calls. The company said it would maintain a core team to actively manage its business during the two-week lending suspension and furlough the rest of its employees.
It said the two-week pause would allow it to assess the government response to the coronavirus crisis and how best to manage economic stimulus initiatives by the Federal Reserve and other agencies.
“The novel coronavirus outbreak continues to have a real-time impact on all business sectors,” the company said. “The rapid development and fluidity of the effects of the coronavirus preclude any prediction as to the ultimate adverse impact of the coronavirus on its business.”
Last week, several mortgage industry groups sent a letter to regulators indicating that mortgage forbearance programs for consumers would cause liquidity problems for nonbank mortgage providers.
Impac shares were down more than 26% in early afternoon trading Monday. The company’s stock price has fallen nearly 57% in the last month, compared with a 12.9% decline for the S&P 500 SPX.