Q3 2020 Impac Mortgage Holdings Inc Earnings Call

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Good afternoon, ladies and gentlemen, and welcome to the Impac mortgage holdings.

<unk> third quarter 2020 conference call at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone.

As a reminder, this conference call is being recorded I would now like to turn the call conference over to your host.

Working conditions and external factors had sufficiently stabilized with the company is elected to restart retail lending activities at that time. He also stated that we anticipated restarting PPO lending activities in early third quarter.

As we entered Q3 the market was characterized by strong margins reflective of an imbalance between excess consumer demand relative to capacity constraints across the industry.

While it is challenging to project future performance.

And industry forecasts suggest a favorable environment mortgage lenders in queue for.

And throughout 2021.

Mortgage bankers Association forecast mortgage originations of 3.2 trillion in 2020 and two five trillion in 2021 amongst the highest totals over the past 15 years.

With respect to non QM.

Scheduled pay down of $5 million of principal on November nine 2020, all of the terms of the notes remain the same including the interest rate at 7% and the conversion price at $21.50 a share.

Financial results of the quarter reflected our increased production gain on sale of loans in Q3 was $19.3 million versus one and a half million in Q2 as a result of increasing production volumes total operating expenses increased from 14, and a half million in Q2 to $16 million in Q3 led by an increase in personnel costs.

On cash position product turn times and borrowing resources, we feel we have the liquidity necessary to meet our near term production goals.

Based on current execution levels and market conditions, we expect to continue to increase income in Q4 as quick as we exceed our original funding goal of $250 of $250 million, a month increase our product diversity and ramp up our TBR channel.

I will now turn it over to Tiffany, our chief operating officer to discuss production mix and product focus.

The company currently has just over 300 employees up from 250 employees at the end of the second quarter and more than 50 employees added during the third quarter, primarily supporting retail production.

Organic lead volumes continued to perform favorably throughout the third quarter requires little to no spend into business promotion month over month.

As we continue to add new products to the channels adjusted marketing to support volume targets and managed seasonality, we anticipate increased spend in business promotion in the fourth quarter for 2020.

As previously noted our warehouse capacity was reduced as part of our de risking strategy in the second quarter to better support our volume targets.

Production level for the Tipo channel near term so Tiffany.

Take that.

Street that I'm going into 2021, so Paul generally.

12%.

Ginny yields are probably 15 plus percent and so we may look at.

Attaining MSR us in the future. Thanks.

I'll speak to it I'd say investors have largely returned.

Nine Q and market the appetite I'd say is as strong as it was pre covid.

The timeframe around clearing that was was accelerated and compressed.

And that that to us indicators, we have a very healthy securitization and secondary market for not swim.

So once the margins come back into line.

Will deliver it to that.

Thanks.

These next two questions by could probably lumped together the first piece of it was how do we see how long do we see the refi demand lasting for and then the second component of that is related to the competitive landscape.

The demand around refi, so Tiffany if you could touch on that that's great.

I would say based on some of the research that we've done.

Kansas and the industry right now is that research expected to stay low.

Three of 2021 and extending at least for the next 12 to 18 months and the projection is right around the 3% average rate.

There's still a large population of consumers across the country that have not yet available himself to lower rates in payment. So there's absolutely consumer demand there we another capacity constraints in the industry. So it's going to take time for that to work its way through the system.

I would say with the capacity constraints related to competitive landscape, there's definitely weeds inflation and probably the most surprising thing that we're seeing is the wage inflation and the increased incentives around recruiting and retaining staff.

<unk> seemed to be largely outsized and far above a normalised market. So I think that's only going to be sustainable for a short period of time and hopefully returning to a more normalised right. Once the capacity works its way through.

Okay.

Those are the all the questions that we have received so at this time, we will end our third quarter call. We look forward to speaking to the market again.

In 2021 when we.

Report our year end results. Thank you all very much.

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