10-Q 1 a12-8759_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to             .

 

Commission File Number: 1-14100

 

IMPAC MORTGAGE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

33-0675505

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

19500 Jamboree Road, Irvine, California 92612

(Address of principal executive offices)

 

(949) 475-3600

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes o  No x

 

There were 7,845,146 shares of common stock outstanding as of May 11, 2012.

 

 

 



Table of Contents

 

IMPAC MORTGAGE HOLDINGS, INC.

 

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

 

 

Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011

3

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011 (unaudited)

4

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (unaudited)

5

 

Notes to Unaudited Consolidated Financial Statements

6

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

 

 

 

Forward-Looking Statements

19

 

The Mortgage Industry and Discussion of Relevant Fiscal Periods

19

 

Market Update

19

 

Selected Financial Results for the Three Months Ended March 31, 2012

20

 

Status of Operations, Liquidity and Capital Resources

20

 

Critical Accounting Policies

24

 

Financial Condition and Results of Operations

25

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

37

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

37

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

38

 

 

 

ITEM 1A.

RISK FACTORS

38

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

39

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

39

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

39

 

 

 

ITEM 5.

OTHER INFORMATION

39

 

 

 

ITEM 6.

EXHIBITS

39

 

 

 

 

SIGNATURES

40

 

 

 

 

CERTIFICATIONS

 

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

 

IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

March 31,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

7,302

 

$

7,653

 

Restricted cash

 

1,404

 

5,019

 

Trust assets

 

 

 

 

 

Investment securities available-for-sale

 

189

 

688

 

Securitized mortgage collateral

 

5,573,365

 

5,449,001

 

Derivative assets

 

38

 

37

 

Real estate owned

 

50,064

 

56,467

 

Total trust assets

 

5,623,656

 

5,506,193

 

 

 

 

 

 

 

Mortgage loans held-for-sale

 

58,916

 

61,718

 

Assets of discontinued operations

 

316

 

264

 

Other assets

 

32,398

 

31,193

 

Total assets

 

$

5,723,992

 

$

5,612,040

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Trust liabilities

 

 

 

 

 

Securitized mortgage borrowings

 

$

5,579,512

 

$

5,454,901

 

Derivative liabilities

 

21,685

 

24,786

 

Total trust liabilities

 

5,601,197

 

5,479,687

 

 

 

 

 

 

 

Warehouse borrowings

 

55,415

 

58,691

 

Long-term debt

 

12,163

 

11,561

 

Notes payable

 

6,797

 

5,182

 

Liabilities of discontinued operations

 

9,966

 

9,932

 

Other liabilities

 

11,895

 

15,890

 

Total liabilities

 

5,697,433

 

5,580,943

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Series A junior participating preferred stock, $0.01 par value; 2,500,000 shares authorized; none issued or outstanding

 

 

 

Series B 9.375% redeemable preferred stock, $0.01 par value; liquidation value $16,904; 2,000,000 shares authorized, 665,592 noncumulative shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively

 

7

 

7

 

Series C 9.125% redeemable preferred stock, $0.01 par value; liquidation value $35,389; 5,500,000 shares authorized; 1,405,086 noncumulative shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively

 

14

 

14

 

Common stock, $0.01 par value; 200,000,000 shares authorized; 7,835,746 and 7,814,946 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively

 

78

 

78

 

Additional paid-in capital

 

1,076,799

 

1,076,723

 

Net accumulated deficit:

 

 

 

Cumulative dividends declared

 

(822,520

)

(822,520

)

Retained deficit

 

(229,124

)

(224,334

)

Net accumulated deficit

 

(1,051,644

)

(1,046,854

)

Total Impac Mortgage Holdings, Inc. stockholders’ equity

 

25,254

 

29,968

 

Noncontrolling interests

 

1,305

 

1,129

 

Total equity

 

26,559

 

31,097

 

Total liabilities and stockholders’ equity

 

$

5,723,992

 

$

5,612,040

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2012

 

2011

 

INTEREST INCOME

 

$

142,792

 

$

218,082

 

INTEREST EXPENSE

 

141,738

 

216,547

 

Net interest income

 

1,054

 

1,535

 

 

 

 

 

 

 

NON-INTEREST INCOME:

 

 

 

 

 

Change in fair value of net trust assets, excluding REO

 

6,400

 

4,896

 

Losses from REO

 

(9,427

)

(4,249

)

Non-interest (loss) income - net trust assets

 

(3,027

)

647

 

 

 

 

 

 

 

Mortgage and real estate services fees

 

14,036

 

12,240

 

Other

 

(615

)

(17

)

Total non-interest income

 

10,394

 

12,870

 

 

 

 

 

 

 

NON-INTEREST EXPENSE:

 

 

 

 

 

Personnel expense

 

10,485

 

10,766

 

General, administrative and other

 

4,219

 

4,579

 

Total non-interest expense

 

14,704

 

15,345

 

Loss from continuing operations before income taxes

 

(3,256

)

(940

)

Income tax expense from continuing operations

 

30

 

12

 

Loss from continuing operations

 

(3,286

)

(952

)

Loss from discontinued operations, net of tax

 

(1,268

)

(350

)

Net loss

 

(4,554

)

(1,302

)

Net (earnings) loss attributable to noncontrolling interests

 

(236

)

315

 

Net loss attributable to IMH

 

$

(4,790

)

$

(987

)

 

 

 

 

 

 

Loss per common share - basic and diluted:

 

 

 

 

 

Loss from continuing operations attributable to IMH

 

$

(0.45

)

$

(0.08

)

Loss from discontinued operations

 

(0.16

)

(0.04

)

Net loss per share available to common stockholders

 

$

(0.61

)

$

(0.12

)

 

See accompanying notes to consolidated financial statements

 

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IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2012

 

2011

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

 

$

(4,554

)

$

(1,302

)

 

 

 

 

 

 

Losses from REO

 

9,427

 

4,249

 

Extinguishment of debt

 

423

 

 

Change in fair value of mortgage servicing rights

 

(257

)

99

 

Gain on sale of loans

 

(8,650

)

(90

)

Change in fair value of mortgage loans held-for-sale

 

533

 

(625

)

Provision for repurchases

 

293

 

117

 

Origination of mortgage loans held-for-sale

 

(354,033

)

(53,444

)

Sale and principal reduction on mortgage loans held-for-sale

 

362,498

 

26,554

 

Change in fair value of net trust assets, excluding REO

 

(10,167

)

(21,950

)

Change in fair value of long-term debt

 

93

 

(238

)

Accretion of interest income and expense

 

69,553

 

87,158

 

Change in REO impairment reserve

 

(7,785

)

(10,305

)

Stock-based compensation

 

67

 

76

 

Net change in restricted cash

 

3,615

 

(1,012

)

Amortization of discount on note payable

 

89

 

 

Net cash provided by (used in) operating activities of discontinued operations

 

26

 

(1,076

)

Net change in other assets and liabilities

 

1,340

 

(1,741

)

Net cash provided by operating activities

 

62,511

 

26,470

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Net change in securitized mortgage collateral

 

136,934

 

178,988

 

Net change in mortgages held-for-investment

 

3

 

3

 

Purchase of premises and equipment

 

(33

)

(351

)

Net principal change on investment securities available-for-sale

 

69

 

56

 

Proceeds from the sale of real estate owned

 

26,763

 

49,736

 

Net cash provided by investing activities

 

163,736

 

228,432

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Repayment of warehouse borrowings

 

(350,228

)

(25,675

)

Borrowings under warehouse agreement

 

346,952

 

55,884

 

Repayment of line of credit

 

(5,500

)

 

Borrowings under line of credit

 

1,500

 

 

Repayment of securitized mortgage borrowings

 

(220,239

)

(287,146

)

Issuance of note payable

 

7,500

 

 

Principal payments on notes payable

 

(6,457

)

(1,826

)

Principal payments on capital lease

 

(91

)

 

Proceeds from exercise of stock options

 

9

 

 

Net cash used in financing activities

 

(226,554

)

(258,763

)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(307

)

(3,861

)

Cash and cash equivalents at beginning of year

 

7,665

 

11,620

 

Cash and cash equivalents at end of year - continuing operations

 

7,302

 

7,750

 

Cash and cash equivalents at end of year - discontinued operations

 

56

 

9

 

Cash and cash equivalents at end of year

 

$

7,358

 

$

7,759

 

 

 

 

 

 

 

NON-CASH TRANSACTIONS (Continuing and Discontinued Operations):

 

 

 

 

 

Transfer of securitized mortgage collateral to real estate owned

 

$

22,002

 

$

25,735

 

Acquisition of equipment purchased through capital leases

 

199

 

 

 

See accompanying notes to consolidated financial statements.

 

5



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IMPAC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data or as otherwise indicated)

 

Note 1.—Summary of Business, Market Conditions, and Financial Statement Presentation

 

Business Summary

 

Impac Mortgage Holdings, Inc. (the Company or IMH) is a Maryland corporation incorporated in August 1995 and has the following subsidiaries: Integrated Real Estate Service Corporation (IRES), IMH Assets Corp. (IMH Assets) and Impac Funding Corporation (IFC).

 

The Company’s continuing operations include the mortgage and real estate fee-based business activities conducted by IRES and the long-term mortgage portfolio (residual interests in securitizations reflected as net trust assets and liabilities in the consolidated balance sheets.) The discontinued operations include the former non-conforming mortgage and retail operations conducted by IFC and subsidiaries.

 

The information set forth in these notes is presented on a continuing operations basis, unless otherwise stated.

 

Market Update and Liquidity

 

While there were positive economic signs during the first quarter of 2012, the United States economy continues to face a number of challenges.  Employment conditions began to show signs of improvement during the first quarter.  Unemployment continues to be on a favorable downward trend, although still remains high above 8%.  However, according to the Wall Street Journal, most of the declines were due to more Americans leaving the work force.  As economic recovery continues at a slow rate, Federal Reserve policymakers currently anticipate that economic conditions are likely to warrant exceptionally low levels for the federal funds interest rate at least through late 2014.

 

Real estate activity showed some encouraging signs of stability although home prices continued to decline in many parts of the U.S. during the first quarter.  Although the pace of new foreclosures has fallen from its peak, in part due to industry-wide compliance issues, further declines in home prices may be necessary before substantial progress in reducing the inventory of homes occurs. Serious threats to economic growth remain however, including continued pressure and uncertainty in the housing market and elevated unemployment levels.  Although the economy added jobs in 2012, the pace of new job creation continues to be slower than needed to meaningfully reduce unemployment. As a result, there continues to be uncertainty as to how pronounced the economic recovery will be and whether it can be sustained.

 

The Company believes that current cash balances, cash flows from its mortgage lending activities, mortgage and real estate services fees generated from the long-term mortgage portfolio, and residual interest cash flows from the long-term mortgage portfolio are adequate for current operating needs. However, the Company believes the mortgage lending and real estate services markets are volatile, highly competitive and subject to increased regulation. Competition in mortgage lending comes primarily from mortgage bankers, commercial banks, credit unions and other finance companies which have offices in the Company’s market area as well as operations throughout the United States. The Company competes for loans principally on the basis of the interest rates and loan fees charged, the types of loans originated and the quality of services provided to borrowers. Additionally, competition for real estate recovery services, loss mitigation servicing, loan modification services and other portfolio services has increased due to the unprecedented difficult mortgage environment and severe credit tightening, coupled with the stagnant economy. The Company’s competitors include large mortgage servicers, established special servicers, and newer entrants to the specialty servicing and recovery collections business. Efforts to market the Company’s ability to provide mortgage and real estate services for others is more difficult than many of its competitors because the Company has not historically provided such services to unrelated third parties, and the Company is not a rated primary or special servicer of residential mortgage loans as designated by a rating agency. Additionally, performance of the long-term mortgage portfolio is subject to the continued deterioration in the real estate market and current economic conditions. Cash flows from the residual interests in securitizations can be volatile, because they are sensitive to delinquencies, defaults and credit losses associated with the securitized loans and interest rates associated with the securitized bonds. Losses in excess of current estimates will reduce the residual interest cash receipts from the long-term mortgage portfolio.

 

Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements of IMH and its subsidiaries (as defined above) have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the

 

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information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. These interim period condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the United States Securities and Exchange Commission (SEC).

 

All significant inter-company balances and transactions have been eliminated in consolidation. In addition, certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current year presentation.

 

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. The items affected by such estimates and assumptions include the valuation of trust assets and trust liabilities, the estimated obligation of repurchase liabilities related to sold loans, the valuation of long-term debt, mortgage servicing rights and mortgage loans held-for-sale. Actual results could differ from those estimates and assumptions.

 

Recently Adopted Accounting Pronouncements

 

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. Under this new standard, entities testing goodwill for impairment now have an option of performing a qualitative assessment before having to calculate the fair value of a reporting unit. If an entity determines, on the basis of qualitative factors, that the fair value of the reporting unit is more-likely-than-not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. This ASU was effective beginning January 1, 2012, with early adoption permitted under certain conditions. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

 

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 amends guidance listed under ASC Topic 820, “Fair Value Measurement,” and represents the converged guidance of the FASB and the International Accounting Standards Board on fair value measurement. This Update also permits entities to measure fair value on a net basis for financial instruments that are managed based on net exposure to market risks and/or counterparty credit risk. ASU 2011-04 requires new disclosures for financial instruments classified as Level 3, including: 1) quantitative information about unobservable inputs used in measuring fair value, 2) qualitative discussion of the sensitivity of fair value measurements to changes in unobservable inputs, and 3) a description of valuation processes used. This update also requires disclosure of fair value levels for financial instruments that are not recorded at fair value but for which fair value is required to be disclosed.  ASU 2011-04 became effective prospectively for interim and annual periods beginning after December 15, 2011. The Company has conformed to the new disclosures required in ASU 2011-04 during the first quarter of 2012.

 

Legal Proceedings

 

The Company is a defendant in or a party to a number of legal actions or proceedings that arise in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted against the Company. In view of the inherent difficulty of predicting the outcome of such legal actions and proceedings, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss related to each pending matter may be, if any.

 

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and estimable. In any case, there may be an exposure to losses in excess of any such amounts whether accrued or not. Any estimated loss is subject to significant judgment and is based upon currently available information, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated loss will change from time to time, and actual results may vary significantly from the current estimate. Therefore, an estimate of possible loss represents what the Company believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum loss exposure. At March 31, 2012, the Company does not have an accrued liability recorded for such estimated loss exposure.

 

Based on the Company’s current understanding of these pending legal actions and proceedings, management cannot ascertain whether the judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, will have a material adverse effect on the consolidated financial position, operating results or cash flows of the Company. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the Company’s control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

 

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Updates to legal matters since the filing of our Form 10-K for the year ended December 31, 2011 are as follows:

 

On April 30, 2012 a matter was filed in the Superior Court of the State of California, Orange County entitled Rene Marentes and Martha Marentes v. Impac Mortgage Holdings, Inc.  The complaint is a putative class action matter contending that certain loan modification activities of the company constitute an unfair business practice, that they constitute false advertising and marketing and that the fees charged are improper.  The complaint seeks unspecified damages, restitution, injunctive relief, attorney’s fees and pre-judgment interest.

 

On May 26, 2011, a matter was filed in the United States District Court, Central District of California as Case No. CV11-4514 DSF entitled Citigroup Global Markets, Inc. v. Impac Secured Assets Corp., Impac Funding Corporation and Impac Mortgage Holdings, Inc. The action alleges a violation of Section 18 and Section 20 of the Securities and Act of 1933 and negligent misrepresentation, all involved in the issuance and sale of bonds from a securitization trust. The plaintiff alleges they relied on certain documents filed with the Securities and Exchange Commission (SEC) that were subsequently the subject of an amended filing. The matter seeks unspecified damages, interest, legal fees and litigation expenses.  On May 3, 2012, the Court granted a motion by the plaintiffs for partial summary judgment except with respect to the negligent misrepresentation claim against Impac Mortgage Holdings, Inc.

 

Note 2.—Fair Value of Financial Instruments

 

The use of fair value to measure the Company’s financial instruments is fundamental to its consolidated financial statements and is a critical accounting estimate because a substantial portion of its assets and liabilities are recorded at estimated fair value.

 

The following table presents the estimated fair value of financial instruments included in the consolidated financial statements as of the dates indicated:

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

Carrying
Amount

 

Estimated
Fair Value

 

Carrying
Amount

 

Estimated
Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,302

 

$

7,302

 

$

7,653

 

$

7,653

 

Restricted cash

 

1,404

 

1,404

 

5,019

 

5,019

 

Investment securities available-for-sale

 

189

 

189

 

688

 

688

 

Securitized mortgage collateral

 

5,573,365

 

5,573,365

 

5,449,001

 

5,449,001

 

Derivative assets, securitized trusts

 

38

 

38

 

37

 

37

 

Derivative assets, lending

 

1,674

 

1,674

 

1,179

 

1,179

 

Mortgage servicing rights

 

4,807

 

4,807

 

4,141

 

4,141

 

Mortgage loans held-for-sale

 

58,916

 

58,916

 

61,718

 

61,718

 

Call option

 

280

 

280

 

253

 

253

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Securitized mortgage borrowings

 

5,579,512

 

5,579,512

 

5,454,901

 

5,454,901

 

Derivative liabilities, securitized trusts

 

21,685

 

21,685

 

24,786

 

24,786

 

Derivative liabilities, lending

 

 

 

624

 

624

 

Long-term debt

 

12,163

 

12,163

 

11,561

 

11,561

 

Warehouse borrowings

 

55,415

 

55,415

 

58,691

 

58,691

 

Notes payable

 

6,797

 

6,797

 

5,182

 

5,941

 

Line of credit

 

 

 

4,000

 

4,000

 

 

The fair value amounts above have been estimated by management using available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates of fair value in both inactive and orderly markets. Accordingly, the estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

 

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Table of Contents

 

For securitized mortgage collateral and securitized mortgage borrowings, the underlying Alt-A residential and commercial loans and mortgage-backed securities market have experienced significant declines in market activity, along with a lack of orderly transactions. The Company’s methodology to estimate fair value of these assets and liabilities include the use of internal pricing techniques such as the net present value of future expected cash flows (with observable market participant assumptions, where available) discounted at a rate of return based on the Company’s estimates of market participant requirements. The significant assumptions utilized in these internal pricing techniques, which are based on the characteristics of the underlying collateral, include estimated credit losses, estimated prepayment speeds and appropriate discount rates.

 

Refer to Recurring Fair Value Measurements below for a description of the valuation methods used to determine the fair value of investment securities available for sale, securitized mortgage collateral and borrowings, derivative assets and liabilities, long-term debt, mortgage servicing rights, loans held-for-sale, and call and put options.

 

The carrying amount of cash and cash equivalents and restricted cash approximates fair value.

 

Warehouse borrowings fair value approximates carrying amounts due to the short-term nature of the liabilities and do not present unanticipated interest rate or credit concerns.

 

Line of credit fair value approximates carrying amount due to the short-term nature of the liability and does not present unanticipated interest rate or credit concerns.

 

Notes payable includes notes with maturities ranging from less than a year to three years. Notes payable is recorded at amortized cost, net of any discounts. The estimated fair value is determined using a discounted cash flow model using estimated market rates.

 

Fair Value Hierarchy

 

The application of fair value measurements may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability or whether management has elected to carry the item at its estimated fair value.

 

FASB ASC 820-10-35 specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

 

·                  Level 1—Quoted prices (unadjusted) in active markets for identical instruments or liabilities that an entity has the ability to assess at measurement date.

 

·                  Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices that are observable for an asset or liability, including interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, loss severities, credit risks and default rates; and market-corroborated inputs.

 

·                  Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when estimating fair value.

 

As a result of the lack of observable market data resulting from inactive markets, the Company has classified its investment securities available-for-sale, securitized mortgage collateral and borrowings, net derivative liabilities — securitized trusts, long-term debt, mortgage servicing rights, and call and put options as Level 3 fair value measurements. Level 3 assets and liabilities were 99% and 100%, respectively, of total assets and total liabilities measured at estimated fair value at March 31, 2012 and December 31, 2011.

 

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Table of Contents

 

Recurring Fair Value Measurements

 

We assess our financial instruments on a quarterly basis to determine the appropriate classification within the fair value hierarchy, as defined by ASC Topic 810. Transfers between fair value classifications occur when there are changes in pricing observability levels. Transfers of financial instruments among the levels occur at the beginning of the reporting period. There were no material transfers between our Level 1 and Level 2 classified instruments during the three months ended March 31, 2012.

 

The following tables present the Company’s assets and liabilities that are measured at estimated fair value on a recurring basis, including financial instruments for which the Company has elected the fair value option at March 31, 2012 and December 31, 2011, based on the fair value hierarchy:

 

 

 

Recurring Fair Value Measurements

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

Level 1

 

Level 2

 

Level 3

 

Level 1

 

Level 2

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

 

$

 

$

189

 

$

 

$

 

$

688

 

Mortgage loans held-for-sale

 

 

58,916

 

 

 

61,718

 

 

Derivative assets, net, lending (1)

 

 

1,674

 

 

 

555

 

 

Mortgage servicing rights (2)

 

 

 

4,807

 

 

 

4,141

 

Call option (2)

 

 

 

280

 

 

 

253

 

Securitized mortgage collateral

 

 

 

5,573,365

 

 

 

5,449,001

 

Total assets at fair value

 

$

 

$

60,590

 

$

5,578,641

 

$

 

$

62,273

 

$

5,454,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Securitized mortgage borrowings

 

$

 

$

 

$

5,579,512

 

$

 

$

 

$

5,454,901

 

Derivative liabilities, net, securitized trusts (3)

 

 

 

21,647

 

 

 

24,749

 

Long-term debt

 

 

 

12,163

 

 

 

11,561

 

Total liabilities at fair value

 

$

 

$

 

$

5,613,322

 

$

 

$

 

$

5,491,211

 

 


(1)          At March 31, 2012, derivative assets, net, lending, included $1.6 million in interest rate lock commitments (IRLCs) and $118 thousand in hedging instruments, respectively, associated with the Company’s mortgage lending operations, and is included in other assets and other liabilities in the accompanying consolidated balance sheets.

(2)          Included in other assets in the accompanying consolidated balance sheets.

(3)          At March 31, 2012, derivative liabilities, net—securitized trusts, included $38 thousand in derivative assets and $21.7 million in derivative liabilities, included within trust assets and trust liabilities, respectively. At December 31, 2011, derivative liabilities, net—securitized trusts, included $37 thousand in derivative assets and $24.8 million in derivative liabilities, included within trust assets and trust liabilities, respectively.

 

The following tables present a reconciliation for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2012 and 2011:

 

 

 

Level 3 Recurring Fair Value Measurements

 

 

 

For the three months ended March 31, 2012

 

 

 

Investment
securities available-
for-sale

 

Securitized
mortgage
collateral

 

Securitized
mortgage
borrowings

 

Derivative
liabilities, net

 

Mortgage
servicing
rights

 

Call
option

 

Long-term
debt

 

Fair value, December 31, 2011

 

$

688

 

$

5,449,001

 

$

(5,454,901

)

$

(24,749

)

$

4,141

 

$

253

 

$

(11,561

)

Total gains (losses) included in earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (1)

 

13

 

51,940

 

 

 

 

 

 

Interest expense (1)

 

 

 

(120,997

)

 

 

 

(509

)

Change in fair value

 

(443

)

231,360

 

(223,956

)

(561

)

257

 

27

 

(93

)

Total gains (losses) included in earnings

 

(430

)

283,300

 

(344,953

)

(561

)

257

 

27

 

(602

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

 

 

Purchases, issuances and settlements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

 

 

 

 

 

 

 

Issuances

 

 

 

 

 

2,454

 

 

 

Settlements

 

(69

)

(158,936

)

220,342

 

3,663

 

(2,045

)

 

 

Fair value, March 31, 2012

 

$

189

 

$

5,573,365

 

$

(5,579,512

)

$

(21,647

)

$

4,807

 

$

280

 

$

(12,163

)

Unrealized gains (losses) still held (2)

 

$

72

 

$

(3,685,532

)

$

5,694,493

 

$

(20,884

)

$

 

$

 

$

58,600

 

 


(1)          Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. The total net interest income, including cash received and paid, was $1.1 million for the three months ended March 31, 2012, as reflected in the accompanying consolidated statement of operations. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations is primarily from contractual interest on the securitized mortgage collateral and borrowings.

 

(2)          Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2012.

 

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Table of Contents

 

 

 

Level 3 Recurring Fair Value Measurements

 

 

 

For the three months ended March 31, 2011

 

 

 

Investment
securities available-
for-sale

 

Securitized
mortgage
collateral

 

Securitized
mortgage
borrowings

 

Derivative
liabilities, net

 

Mortgage
servicing
rights

 

Call
option

 

Put option

 

Long-term
debt

 

Fair value, December 31, 2010

 

$

645

 

$

6,011,675

 

$

(6,012,745

)

$

(65,876

)

$

1,439

 

$

706

 

$

(61

)

$

(11,728

)

Total gains (losses) included in earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (1)

 

28

 

107,369

 

 

 

 

 

 

 

Interest expense (1)

 

 

 

(194,015

)

 

 

 

 

(540

)

Change in fair value

 

(202

)

139,446

 

(137,278

)

2,930

 

(99

)

(223

)

 

238

)

Total gains (losses) included in earnings

 

(174

)

246,815

 

(331,293

)

2,930

 

(99

)

(223

)

 

(302

)

Transfers in and/or out of Level 3

 

 

 

 

 

 

 

 

 

Purchases, issuances and settlements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

 

 

 

 

 

 

 

 

 

Issuances

 

 

 

 

 

 

 

 

 

Settlements

 

(56

)

(204,724

)

287,461

 

16,741

 

 

 

 

 

Fair value, March 31, 2011

 

$

415

 

$

6,053,766

 

$

(6,056,577

)

$

(46,205

)

$

1,340

 

$

483

 

$

(61

)

$

(12,030

)

Unrealized gains (losses) still held (2)

 

$

202

 

$

(4,342,090

)

$

6,222,257

 

$

(46,475

)

$

 

$

 

$

 

$

58,733

 

 


(1)             Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. The total net interest income, including cash received and paid, was $1.5 million for the three months ended March 31, 2011, as reflected in the accompanying consolidated statement of operations.

(2)             Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at March 31, 2011.

 

The following table presents quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and non-recurring basis at March 31, 2012.

 

Financial Instrument

 

Estimated Fair
Value

 

Valuation
Technique

 

Unobservable
Input

 

Range of
Inputs

 

Assets and liabilities backed by real estate

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale,

 

$

189

 

 

 

Discount rates

 

6.00 - 30.0

%

Securitized mortgage collateral, and

 

5,573,365

 

DCF

 

Prepayment rates

 

0.9 - 15.5

%

Securitized mortgage borrowings

 

(5,579,512

)

 

 

Default rates

 

0.23 - 8.2

%

 

 

 

 

 

 

Loss severities

 

15.4 - 71.8

%

 

 

 

 

 

 

 

 

 

 

Other assets and liabilities

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

4,807

 

DCF

 

Discount rate

 

12.0

%

 

 

 

 

 

 

 

Prepayment rates

 

11.9 - 14.7

%

Derivative liabilities, net, securitized trusts

 

(21,647

)

DCF

 

1M forward LIBOR

 

0.24 - 3.8

%

Long-term debt

 

(12,163

)

DCF

 

Discount rate

 

25.0

%

Lease Liability

 

(2,201

)

DCF

 

Discount rate

 

12.0

%

 


DCF = Discounted Cash Flow

1M = 1 Month

 

For assets and liabilities backed by real estate, a significant increase in discount rates, default rates or loss severities would result in a significantly lower estimated fair value.  The impact of changes in prepayment speeds would have differing impacts depending on the seniority or other characteristics of the instrument.  For other assets and liabilities, a significant increase in discount rates would result in a significantly lower estimated fair value.  A significant increase in one-month LIBOR would result in a significantly higher estimated fair value for derivative liabilities, net, securitized trusts.  The Company believes that the imprecision of an estimate could be significant.

 

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Table of Contents

 

The following tables present the changes in recurring fair value measurements included in net earnings (loss) for the three months ended March 31, 2012 and 2011:

 

 

 

Recurring Fair Value Measurements

 

 

 

Change in Fair Value Included in Net Earnings

 

 

 

For the three months ended March 31, 2012

 

 

 

Interest

 

Interest

 

Change in Fair Value of

 

Other Non-interest

 

Mortgage and real

 

 

 

 

 

Income (1)

 

Expense (1)

 

Net Trust Assets

 

Long-term Debt

 

Income

 

estate services fees

 

Total

 

Investment securities available-for-sale

 

$

13

 

$

 

$

(443

)

$

 

$

 

$

 

$

(430

)

Securitized mortgage collateral

 

51,940

 

 

231,360

 

 

 

 

283,300

 

Securitized mortgage borrowings

 

 

(120,997

)

(223,956

)

 

 

 

(344,953

)

Mortgage servicing rights

 

 

 

 

 

257

 

 

257

 

Call option

 

 

 

 

 

27

 

 

27

 

Derivative liabilities, net

 

 

 

(561

) (2)

 

 

 

(561

)

Long-term debt

 

 

(509

)

 

(93

)

 

 

(602

)

Mortgage loans held-for-sale

 

 

 

 

 

 

(534

)

(534

)

Derivative assets - IRLCs

 

 

 

 

 

 

377

 

377

 

Derivative liabilities - Hedging Instruments

 

 

 

 

 

 

742

 

742

 

Total

 

$

51,953

 

$

(121,506

)

$

6,400

 (3)

$

(93

)

$

284

 

$

585

 

$

(62,377

)

 


(1)          Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2)          Included in this amount is $3.2 million in change in the fair value of derivative instruments, offset by $3.8 million in cash payments from the securitization trusts for the three months ended March 31, 2012.

(3)          For the three months ended March 31, 2012, change in the fair value of trust assets, excluding REO was $6.4 million.  Excluded from the $10.2 million change in fair value of net trust assets, excluding REO, in the accompanying consolidated statement of cash flows is $3.8 million in cash payments from the securitization trusts related to the Company’s net derivative liabilities.

 

 

 

Recurring Fair Value Measurements

 

 

 

Change in Fair Value Included in Net Loss

 

 

 

For the three months ended March 31, 2011

 

 

 

Interest

 

Interest

 

Change in Fair Value of

 

Other Non-interest

 

Mortgage and real

 

 

 

 

 

Income (1)

 

Expense (1)

 

Net Trust Assets

 

Long-term Debt

 

Income

 

estate services fees

 

Total

 

Investment securities available-for-sale

 

$

28

 

$

 

$

(202

)

$

 

$

 

$

 

$

(174

)

Securitized mortgage collateral

 

107,369

 

 

139,446

 

 

 

 

246,815

 

Securitized mortgage borrowings

 

 

(194,015

)

(137,278

)

 

 

 

(331,293

)

Mortgage servicing rights

 

 

 

 

 

(99

)

 

(99

)

Call option

 

 

 

 

 

(223

)

 

(223

)

Derivative liabilities, net

 

 

 

2,930

 (2)

 

 

 

2,930

 

Long-term debt

 

 

(540

)

 

238

 

 

 

(302

)

Mortgage loans held-for-sale

 

 

 

 

 

 

625

 

625

 

Total

 

$

107,397

 

$

(194,555

)

$

4,896

 (3)

$

238

 

$

(322

)

$

625

 

$

(81,721

)

 


(1)          Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2)          Included in this amount is $20.0 million in change in the fair value of derivative instruments, offset by $17.1 million in cash payments from the securitization trusts for the three months ended March 31, 2011.

(3)          For the three months ended March 31, 2011, change in the fair value of trust assets, excluding REO was $4.9 million.  Excluded from the $22.0 million change in fair value of net trust assets, excluding REO, in the accompanying consolidated statement of cash flows is $17.1 million in cash payments from the securitization trusts related to the Company’s net derivative liabilities.

 

The following is a description of the measurement techniques for items recorded at estimated fair value on a recurring basis.

 

Investment securities available-for-sale—Investment securities available-for-sale are carried at fair value. The investment securities consist primarily of non-investment grade mortgage-backed securities. The fair value of the investment securities is measured based upon the Company’s expectation of inputs that other market participants would use. Such assumptions include judgments about the underlying collateral, prepayment speeds, future credit losses, forward interest rates and certain other factors. Given the market disruption and lack of observable market data as of March 31, 2012 and December 31, 2011, the estimated fair value of the investment securities available-for-sale was measured using significant internal expectations of market participants’ assumptions. Investment securities available-for-sale are considered a Level 3 measurement at March 31, 2012.

 

Mortgage servicing rights—The Company elected to carry all of its mortgage servicing rights arising from its mortgage loan origination operation at fair value. The fair value of mortgage servicing rights is based upon an internal discounted cash flow model. The valuation model incorporates assumptions that market participants would use in estimating the fair value of servicing. These assumptions include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Mortgage servicing rights are considered a Level 3 measurement at March 31, 2012.

 

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Table of Contents

 

Mortgage loans held-for-sale—The Company elected to carry its mortgage loans held-for-sale originated from its mortgage loan origination operation at fair value. Fair value is based on quoted market prices, where available, prices for other traded mortgage loans with similar characteristics, and purchase commitments and bid information received from market participants. Given the meaningful level of secondary market activity for conforming mortgage loans, active pricing is available for similar assets and accordingly, the Company classifies its mortgage loans held-for-sale as a Level 2 measurement at March 31, 2012.

 

Call option—As part of the acquisition of AmeriHome as more fully discussed in Note 21.—Business Combinations of our Annual Report on Form 10-K for the year ended December 31, 2011, the purchase agreement included a call option to purchase an additional 39% of AmeriHome. The estimated fair value is based on a multinomial model incorporating various assumptions including expected future book value of AmeriHome, the probability of the option being exercised, volatility, expected term and certain other factors. The call option is considered a Level 3 measurement at March 31, 2012.

 

Put option—As part of the acquisition of AmeriHome, a put option which allows the noncontrolling interest holder to sell his remaining 49% of AmeriHome to the Company in the event the Company does not exercise the call option discussed above. The estimated fair value is based on a multinomial model incorporating various assumptions including expected future book value of AmeriHome, the probability of the option being exercised, volatility, expected term and certain other factors. The put option is considered a Level 3 measurement at March 31, 2012.

 

Securitized mortgage collateral—The Company elected to carry all of its securitized mortgage collateral at fair value. These assets consist primarily of non-conforming mortgage loans securitized between 2002 and 2007. Fair value measurements are based on the Company’s internal models used to compute the net present value of future expected cash flows, with observable market participant assumptions, where available. The Company’s assumptions include its expectations of inputs that other market participants would use in pricing these assets. These assumptions include judgments about the underlying collateral, prepayment speeds, estimated future credit losses, forward interest rates, investor yield requirements and certain other factors. As of March 31, 2012, securitized mortgage collateral had an unpaid principal balance of $9.3 billion, compared to an estimated fair value of $5.6 billion. The aggregate unpaid principal balance exceeds the fair value by $3.7 billion at March 31, 2012.  As of March 31, 2012, the unpaid principal balance of loans 90 days or more past due was $1.6 billion compared to an estimated fair value of $0.5 billion. The aggregate unpaid principal balances of loans 90 days or more past due exceed the fair value by $1.1 billion at March 31, 2012. Securitized mortgage collateral is considered a Level 3 measurement at March 31, 2012.

 

Securitized mortgage borrowings—The Company elected to carry all of its securitized mortgage borrowings at fair value. These borrowings consist of individual tranches of bonds issued by securitization trusts and are primarily backed by non-conforming mortgage loans. Fair value measurements are based on the Company’s internal models used to compute the net present value of future expected cash flows, with observable market participant assumptions, where available. Fair value measurements include the Company’s judgments about the underlying collateral and assumptions such as prepayment speeds, estimated future credit losses, forward interest rates, investor yield requirements and certain other factors. As of March 31, 2012, securitized mortgage borrowings had an outstanding principal balance of $9.4 billion compared to an estimated fair value of $5.6 billion. The aggregate outstanding principal balance exceeds the fair value by $3.8 billion at March 31, 2012. Securitized mortgage borrowings is considered a Level 3 measurement at March 31, 2012.

 

Long-term debt—The Company elected to carry all of its long-term debt (consisting of trust preferred securities and junior subordinated notes) at fair value. These securities are measured based upon an analysis prepared by management, which considered the Company’s own credit risk, including settlements with trust preferred debt holders and discounted cash flow analysis. As of March 31, 2012, long-term debt had an unpaid principal balance of $70.5 million compared to an estimated fair value of $12.2 million. The aggregate unpaid principal balance exceeds the fair value by $58.3 million at March 31, 2012. The long-term debt is considered a Level 3 measurement at March 31, 2012.

 

Derivative assets and liabilities, Securitized trusts—For non-exchange traded contracts, fair value is based on the amounts that would be required to settle the positions with the related counterparties as of the valuation date. Valuations of derivative assets and liabilities are based on observable market inputs, if available. To the extent observable market inputs are not available, fair values measurements include the Company’s judgments about future cash flows, forward interest rates and certain other factors, including counterparty risk. Additionally, these values also take into account the Company’s own credit standing, to the extent applicable; thus, the valuation of the derivative instrument includes the estimated value of the net credit differential between the counterparties to the derivative contract. As of March 31, 2012, the notional balance of derivative assets and liabilities, securitized trusts was $1.3 billion. These derivatives are included in the consolidated securitization trusts, which are nonrecourse to the Company, and thus the economic risk from these derivatives is limited to the Company’s residual interests in the securitization trusts. Derivative assets and liabilities, securitized trusts are considered a Level 3 measurement at March 31, 2012.

 

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Table of Contents

 

Derivative assets and liabilities, Lending—The Company’s derivative assets and liabilities are carried at fair value as required by GAAP and are accounted for as free standing derivatives. The derivative assets are IRLCs with prospective residential mortgage borrowers whereby the interest rate on the loan is determined prior to funding and the borrowers have locked in that interest rate. These commitments are determined to be derivative instruments. The derivative liabilities are Hedging Instruments used to hedge the fair value changes associated with changes in interest rates relating to its mortgage loan origination operations. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The estimated fair value is based on current market prices for similar instruments. Given the meaningful level of secondary market activity for derivative contracts, active pricing is available for similar assets and accordingly, the Company classifies its derivative assets and liabilities, lending as a Level 2 measurement at March 31, 2012.

 

The following table includes information for the derivative assets and liabilities — lending for the periods presented:

 

 

 

 

 

Total Gains (Losses)

 

 

 

Notional Balance

 

For the Three Months Ended

 

 

 

March 31, 2012

 

March 31, 2012 (1)

 

Derivative assets - IRLC’s

 

$

138,675

 

377

 

Derivative liabilities - TBA/FNMA’s

 

127,317

 

(1,287

)

 


(1)          Amounts included in mortgage and real estate services fees within the accompanying consolidated statements of operations.

 

Nonrecurring Fair Value Measurements

 

The Company is required to measure certain assets and liabilities at estimated fair value from time to time. These fair value measurements typically result from the application of specific accounting pronouncements under GAAP. The fair value measurements are considered nonrecurring fair value measurements under FASB ASC 820-10.

 

The following tables present financial and non-financial assets and liabilities measured using nonrecurring fair value measurements at March 31, 2012 and 2011, respectively:

 

 

 

Nonrecurring Fair Value Measurements

 

Total Gains (Losses)

 

 

 

March 31, 2012

 

For the Three Months Ended

 

 

 

Level 1

 

Level 2

 

Level 3

 

March 31, 2012 (3)

 

REO (1)

 

$

 

$

37,814

 

$

 

$

(9,427

)

Lease liability (2)

 

 

 

(2,201

)

(217

)

 


(1)          Balance represents REO at March 31, 2012 which have been impaired subsequent to foreclosure. Amounts are included in continuing operations. For the three months ended March 31, 2012, the $9.4 million loss represents additional impairment write-downs attributable to higher expected loss severities on properties held during the period which resulted in a decrease to net realizable value (NRV).

(2)          Amounts are included in discontinued operations. For the three months ended March 31, 2012, the Company recorded $217 thousand in losses resulting from changes in lease liabilities as a result of changes in our expected minimum future lease payments.

(3)          Total losses reflect losses from all nonrecurring measurements during the period.

 

 

 

Nonrecurring Fair Value Measurements

 

Total Gains (Losses)

 

 

 

March 31, 2011

 

For the Three Months Ended

 

 

 

Level 1

 

Level 2

 

Level 3

 

March 31, 2011 (3)

 

REO (1)

 

$

 

$

62,656

 

$

 

$

(4,247

)

Lease liability (2)

 

 

 

(2,246

)

(217

)

 


(1)          Balance represents REO at March 31, 2011 which have been impaired subsequent to foreclosure. Amounts are included in continuing operations.  For the three months ended March 31, 2011, the $4.3 million loss related to additional impairment write-downs during the period is within continuing operations.

(2)          Amounts are included in discontinued operations.  For the three months ended March 31, 2011, the Company recorded $217 thousand in losses resulting from changes in lease liabilities as a result of changes in our expected minimum future lease payments.

(3)          Total gains (losses) reflect gains and losses from all nonrecurring measurements during the period.

 

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Real estate owned—REO consists of residential real estate acquired in satisfaction of loans. Upon foreclosure, REO is adjusted to the estimated fair value of the residential real estate less estimated selling and holding costs, offset by expected contractual mortgage insurance proceeds to be received, if any. Subsequently, REO is recorded at the lower of carrying value or estimated fair value less costs to sell. REO balance representing REOs which have been impaired subsequent to foreclosure are subject to nonrecurring fair value measurement and included in the nonrecurring fair value measurements tables. Fair values of REO are generally based on observable market inputs, and considered Level 2 measurements at March 31, 2012.

 

Lease liability—In connection with the discontinuation of our non-conforming mortgage, retail mortgage, warehouse lending and commercial operations, a significant amount of office space that was previously occupied is no longer being used by the Company. The Company has subleased a significant amount of this office space. The Company has recorded a liability, included within discontinued operations, representing the present value of the minimum lease payments over the remaining life of the lease, offset by the expected proceeds from sublet revenue related to this office space. This liability is based on present value techniques that incorporate the Company’s judgments about estimated sublet revenue and discount rates. Therefore, this liability is considered a Level 3 measurement at March 31, 2012.

 

Note 3.—Stock Options

 

There were no options granted during the three months ended March 31, 2012 or 2011, respectively.

 

The following table summarizes activity, pricing and other information for the Company’s stock options for the three months ended March 31, 2012:

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Number of

 

Exercise

 

 

 

Shares

 

Price

 

Options outstanding at beginning of period

 

1,241,808

 

$

3.64

 

Options granted

 

 

 

Options exercised

 

(23,500

)

0.53

 

Options forfeited / cancelled

 

(17,601

)

20.20

 

Options outstanding at end of period

 

1,200,707

 

$

3.46

 

Options exercisable at end of period

 

984,176

 

$

3.61

 

 

As of March 31, 2012, there was approximately $506 thousand of total unrecognized compensation cost related to stock option compensation arrangements granted under the plan, net of estimated forfeitures. That cost is expected to be recognized over the remaining weighted average period of 1.63 years.

 

The following table summarizes activity, pricing and other information for the Company’s restricted stock units (RSU’s), also referred to as deferred stock units as the issuance of the stock is deferred until termination of service, for the three months ended March 31, 2012:

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Number of

 

Grant Date

 

 

 

Shares

 

Fair Value

 

RSU’s outstanding at beginning of period

 

24,000

 

$

2.73

 

RSU’s granted

 

 

 

RSU’s exercised

 

 

 

RSU’s forfeited / cancelled

 

 

 

RSU’s outstanding at end of period

 

24,000

 

$

2.73

 

 

As of March 31, 2012, there was approximately $37 thousand of total unrecognized compensation cost related to the RSU compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted average period of 1.68 years.

 

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Note 4.—Reconciliation of Loss Per Share

 

The following table presents the computation of basic and diluted loss per common share, including the dilutive effect of stock options and cumulative redeemable preferred stock outstanding for the periods indicated:

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2012

 

2011

 

Numerator for basic loss per share:

 

 

 

 

 

Loss from continuing operations

 

$

(3,286

)

$

(952

)

Net (earnings) loss attributable to noncontrolling interest

 

(236

)

315

 

Loss from continuing operations attributable to IMH

 

(3,522

)

(637

)

Loss from discontinued operations

 

(1,268

)

(350

)

Loss available to common stockholders

 

$

(4,790

)

$

(987

)

 

 

 

 

 

 

Denominator for basic loss per share (1):

 

 

 

 

 

Basic weighted average common shares outstanding during the year

 

7,819

 

7,788

 

 

 

 

 

 

 

Denominator for diluted loss per share (1):

 

 

 

 

 

Basic weighted average common shares outstanding during the year

 

7,819

 

7,788

 

Net effect of dilutive stock options and RSU’s

 

 

 

Diluted weighted average common shares

 

7,819

 

7,788

 

 

 

 

 

 

 

Loss per common share - basic and diluted:

 

 

 

 

 

Loss from continuing operations attributable to IMH

 

$

(0.45

)

$

(0.08

)

Loss from discontinued operations

 

(0.16

)

(0.04

)

Net loss per share available to common stockholders

 

$

(0.61

)

$

(0.12

)

 


(1)         Number of shares presented in thousands.

 

For the three months ended March 31, 2012 and 2011, stock options to purchase 1.2 million and 1.4 million shares, respectively, were outstanding but not included in the above weighted average share calculations because they were anti-dilutive.

 

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Note 5.—Segment Reporting

 

The Company has three reporting segments, consisting of the long-term mortgage portfolio, mortgage and real estate services and discontinued operations. The following tables present the selected financial data and operating results by reporting segment for the periods indicated:

 

 

 

 

 

Mortgage and

 

 

 

 

 

 

 

 

 

Long-term

 

Real Estate

 

Discontinued

 

 

 

 

 

 

 

Portfolio

 

Services

 

Operations

 

Reclassifications (1)

 

Consolidated

 

Balance Sheet Items as of March 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

$

7,314

 

$

56

 

$

(68

)

$

7,302

 

Restricted cash

 

823

 

581

 

 

 

1,404

 

Trust assets

 

5,623,656

 

 

 

 

5,623,656

 

Mortgage loans held-for-sale

 

 

58,916

 

 

 

58,916

 

Other assets

 

22,658

 

9,740

 

260

 

56

 

32,714

 

Total assets

 

5,647,137

 

76,551

 

316

 

(12

)

5,723,992

 

Total liabilities

 

5,626,080

 

61,399

 

9,966

 

(12

)

5,697,433

 

Total stockholders’ equity (deficit)

 

21,057

 

15,152

 

(9,650

)

 

26,559

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Items as of December 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

7,685

 

12

 

(44

)

7,653

 

Restricted cash

 

4,450

 

569

 

 

 

5,019

 

Trust assets

 

5,506,193

 

 

 

 

5,506,193

 

Mortgage loans held-for-sale

 

 

61,718

 

 

 

61,718

 

Other assets

 

18,824

 

12,369

 

252

 

12

 

31,457

 

Total assets

 

5,529,467

 

82,341

 

264

 

(32

)

5,612,040

 

Total liabilities

 

5,502,175

 

68,868

 

9,932

 

(32

)

5,580,943

 

Total stockholders’ equity (deficit)

 

27,292

 

13,473

 

(9,668

)

 

31,097

 

 

 

 

 

 

Mortgage and

 

 

 

 

 

 

 

 

 

Long-term

 

Real Estate

 

Discontinued

 

 

 

 

 

 

 

Portfolio

 

Services

 

Operations

 

Reclassifications (1)

 

Consolidated

 

Statement of Operations Items for the three months ended March 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

1,111

 

$

(57

)

$

 

$

 

$

1,054

 

Non-interest (loss) income- net trust assets

 

(3,027

)

 

 

 

(3,027

)

Change in fair value of long-term debt

 

(93

)

 

 

 

(93

)

Mortgage and real estate services fees

 

 

14,036

 

 

 

14,036

 

Other non-interest (expense) income

 

(549

)

27

 

(504

)

504

 

(522

)

Non-interest expense and income taxes

 

(4,016

)

(10,718

)

(764

)

764

 

(14,734

)

(Loss) earnings from continuing operations

 

$

(6,574

)

$

3,288

 

 

 

 

 

(3,286

)

Loss from discontinued operations, net of tax

 

 

 

 

 

$

(1,268

)

 

 

(1,268

)

Net loss

 

 

 

 

 

 

 

 

 

$

(4,554

)

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Operations Items for the three months ended March 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

1,535

 

$

 

$

 

$

 

$

1,535

 

Non-interest income- net trust assets

 

647

 

 

 

 

647

 

Change in fair value of long-term debt

 

238

 

 

 

 

238

 

Mortgage and real estate services fees

 

 

12,240

 

 

 

12,240

 

Other non-interest income (expense)

 

(32

)

(223

)

(131

)

131

 

(255

)

Non-interest expense and income taxes

 

(4,270

)

(11,087

)

(219

)

219

 

(15,357

)

(Loss) earnings from continuing operations

 

$

(1,882

)

$

930

 

 

 

 

 

(952

)

Loss from discontinued operations, net of tax

 

 

 

 

 

$

(350

)

 

 

(350

)

Net loss

 

 

 

 

 

 

 

 

 

$

(1,302

)

 


(1)         Amounts represent reclassifications of activity in the discontinued operations segment into loss from discontinued operations, net of tax as presented in the accompanying consolidated statements of operations.

 

Note 6.—Warehouse Borrowings

 

The Company, through IRES and its subsidiaries, enters into Master Repurchase Agreements with lenders providing warehouse facilities. The warehouse facilities are used to fund, and are secured by, residential mortgage loans that are held for sale.

 

At March 31, 2012, the Company was in compliance with all financial covenants.

 

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The following table presents certain information on warehouse borrowings for the periods indicated:

 

 

 

Maximum

 

 

 

 

 

 

 

Borrowing

 

Balance Outstanding At

 

 

 

Capacity

 

March 31, 2012

 

December 31, 2011

 

Short-term borrowings:

 

 

 

 

 

 

 

Repurchase agreement 1 (1)

 

$

32,500

 

$

20,930

 

$

20,163

 

Repurchase agreement 2

 

30,000

 

15,760

 

24,769

 

Repurchase agreement 3 (2)

 

25,000

 

18,725

 

13,759

 

Total short-term borrowings

 

$

87,500

 

$

55,415

 

$

58,691

 

 


(1)         In April 2012, the maximum borrowing capacity increased from $32.5 million to $38.5 million.

(2)         In May 2012, the maximum borrowing capacity increased from $25.0 million to $50.0 million.

 

Note 7.—Notes Payable

 

Note payable—Debt Agreement

 

In February 2012, the Company entered into a $7.5 million structured debt agreement using eight of the Company’s residual interests (net trust assets) as collateral. The Company used a portion of the proceeds to pay off the $408 thousand balance owed on the previous debt agreement. The Company received proceeds of $7.0 million, net of the aforementioned payoff and transaction costs of approximately $50 thousand.

 

The structured debt agreement is evidenced by an Indenture with Deutsche Bank National Trust Company, as trustee. It bears interest at a fixed rate of 25% per annum and is amortized in equal principal payments over 18 months with all distributions from the underlying residual interests being used to make the monthly payments, and was recorded as a note payable in the accompanying consolidated balance sheets. If the cumulative cash flows received from the collateralized residual interests are not sufficient to pay the required monthly principal and interest, the Company would be required to pay the difference to avoid the transfer of the residual interests and the rights to the associated future cash flows to the note holder. Any excess cash flows from the residual interests are included in a reserve account, which is available to cover future shortfalls.  To the extent there is excess cash flows after the reserve account reaches a balance of $1.5 million, the Company will receive 70% of the excess cash flows to a monthly maximum of $300 thousand.  Subsequent to the new structured debt agreement through March 31, 2012, the Company received $823 thousand in excess cash flows from the residual interests collateralizing the note payable. The $823 thousand in excess cash flows is included in restricted cash on the consolidated balance sheets. If the amount of restricted cash becomes sufficient to satisfy the remaining obligation, the note payable can be paid off and the residuals listed as security are released. The carrying value of the debt agreement at March 31, 2012 was $6.8 million and was current as to principal and interest payments.

 

Note 8.—Line of Credit Agreement

 

In April 2012, the Company, through its subsidiaries, amended the $4.0 million working capital line of credit agreement with a national bank at an interest rate of one-month LIBOR plus 3.5%.  The amendment extends the expiration to April 2013.  Under the terms of the agreement the Company and its subsidiaries are required to maintain various financial and other covenants.  There was no outstanding balance on the working capital line of credit as of March 31, 2012.

 

Note 9.—Subsequent Events

 

In April 2012, Repurchase agreement 1 was amended primarily to increase the maximum borrowing capacity from $32.5 million to $38.5 million.

 

In April 2012, the Company, through its subsidiaries, amended the $4.0 million working capital line of credit agreement with a national bank extending the expiration to April 2013.

 

In May 2012, Repurchase agreement 3 was amended to increase the maximum borrowing capacity from $25.0 million to $50.0 million.

 

Subsequent events have been evaluated through the date of this filing.

 

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Table of Contents

 

ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

(dollars in thousands, except per share data or as otherwise indicated)

 

Unless the context otherwise requires, the terms “Company,” “we,” “us,” and “our” refer to Impac Mortgage Holdings, Inc. (the Company or IMH), a Maryland corporation incorporated in August 1995, and its subsidiaries, Integrated Real Estate Service Corporation (IRES), IMH Assets Corp. (IMH Assets), and Impac Funding Corporation (IFC).

 

Forward-Looking Statements

 

This report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements, some of which are based on various assumptions and events that are beyond our control, may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “likely,” “should,” “could,” “seem to,” “anticipate,” or similar terms or variations on those terms or the negative of those terms. The forward-looking statements are based on current management expectations. Actual results may differ materially as a result of several factors, including, but not limited to the following: the ongoing volatility in the mortgage industry; our ability to manage successfully through the current market environment; our compliance with applicable local, state and federal laws and regulations and other general market and economic conditions; our ability to meet liquidity needs from current cash flows or generate new sources of revenue; management’s ability to manage successfully and grow the Company’s mortgage and real estate business activities including mortgage lending operations; the ability to make interest payments; increases in default rates or loss severities and mortgage related losses; our ability to obtain additional financing and the terms of any financing that we do obtain; inability to effectively liquidate properties to mitigate losses; increase in loan repurchase requests and ability to adequately settle repurchase obligations; decreases in value of our residual interests that differ from our assumptions; the ability of our common stock to continue trading in an active market; the outcome of litigation or regulatory actions pending against us or other legal contingencies.

 

For a discussion of these and other risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the period ended December 31, 2011, and other reports we file under the Securities and Exchange Act of 1934. This document speaks only as of its date and we do not undertake, and specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

 

The Mortgage Industry and Discussion of Relevant Fiscal Periods

 

The mortgage industry is continually vulnerable to current events that occur in the financial services industry. These events include changes in economic indicators, government regulation, interest rates, price competition, geographic shifts, disposable income, housing prices, market liquidity, market anticipation, and customer perception, as well as others. The factors that affect the industry change rapidly and can be unforeseeable.

 

Current events can diminish the relevance of “quarter over quarter” and “year-to-date over year-to-date” comparisons of financial information. In such instances, the Company attempts to present financial information in its Management’s Discussion and Analysis of Financial Condition and Results of Operations that is the most relevant to its financial information.

 

Market Update

 

While there were positive economic signs during the first quarter of 2012, the United States economy continues to face a number of challenges.  Employment conditions began to show signs of improvement during the first quarter.  Unemployment continues to be on a favorable downward trend, although still remains high above 8%.  However, according to the Wall Street Journal, most of the declines were due to more Americans leaving the work force.  As the economic recovery continues at a slow rate, Federal Reserve policymakers currently anticipate that economic conditions are likely to warrant exceptionally low levels for the federal funds interest rate at least through late 2014.

 

Real estate activity showed some encouraging signs of stability although home prices continued to decline in many parts of the U.S. during the first quarter.  Although the pace of new foreclosures has fallen from its peak, in part due to industry-wide compliance issues, further declines in home prices may be necessary before substantial progress in reducing the inventory of homes occurs. Serious threats to economic growth remain however, including continued pressure and uncertainty in the housing market and elevated unemployment levels.  Although the economy added jobs in 2012, the pace of new job creation continues to be slower than needed to meaningfully reduce unemployment. As a result, there continues to be uncertainty as to how pronounced the economic recovery will be and whether it can be sustained.

 

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Table of Contents

 

Selected Financial Results for the Three Months Ended March 31, 2012

 

Continuing Operations

 

·                  Loss from continuing operations increased to $3.3 million for the three months ended March 31, 2012, compared to a loss of $1.0 million for the comparable 2011 period primarily due to a decrease in fair value of net trust assets associated with cash received and an increase in expected forward LIBOR rates in the first quarter offset by an increase in mortgage and real estate service fees and a decline in expenses.

 

·                  Non-interest (loss) income—net trust assets was a loss of $3.0 million for the three months ended March 31, 2012, compared to income of $647 thousand for the comparable 2011 period.  Loss in the first quarter was due to a change in fair value of net trust assets and REO losses of $3.0 million associated with $3.2 million in cash received and an increase in expected forward LIBOR rates in the first quarter.  The estimated fair values of securitized mortgage collateral and securitized mortgage bonds increased in the quarter primarily due to improvement in bond prices and yields since December 31, 2011.  Should this trend continue, estimated bond prices and yield assumptions may need to be updated in future periods.

 

·                  Earnings from the mortgage and real estate services segment increased to $3.3 million in the first quarter of 2012, compared to $930 thousand in the comparable period in 2011.

 

·                  The mortgage lending operations originated $365.0 million and sold $355.7 million of loans during the three months ended March 31, 2012 as compared to $57.3 million and $26.3 million of loans originated and sold, respectively, for the comparable 2011 period.  Additionally, mortgage lending revenues increased to $9.2 million during the three months ended March 31, 2012 as compared to $551 thousand for the comparable 2011 period.

 

Discontinued Operations

 

·                  Loss from discontinued operations, net of tax was $1.3 million for the three months ended March 31, 2012, compared to a loss of $350 thousand for the comparable 2011 period primarily due to a change in the discontinued operations repurchase provision related to additional repurchase claims received from Fannie Mae and legal costs associated with previously disclosed discontinued operations matters..

 

Status of Operations, Liquidity and Capital Resources

 

Mortgage and Real Estate Services

 

The mortgage and real estate services include the mortgage lending operations and portfolio loss mitigation and real estate services, and had net earnings of $3.3 million in the first quarter of 2012, compared to $930 thousand in the comparable period in 2011.  The increase was due to an increase in revenues and a decrease in expenses.  Mortgage and real estate services fees were $14.0 million for the three months ended March 31, 2012, compared to $12.2 million for 2011 with the increase primarily due to an increase in mortgage lending net revenues, partially offset by a decrease in title and escrow fees due to the sale of the title company.  The increase was primarily due to an increase in lending activities which produced revenues of $9.2 million while portfolio loss mitigation and real estate services revenues were $4.8 million.  Additionally, title and escrow fees declined $4.3 million due to the sale of the title insurance company in 2011.  As expected the portfolio loss mitigation and real estate services activities and revenues declined as lending activities and revenues increased including the increase in sales to and of the respective servicing portfolios of Fannie Mae and Ginnie Mae loans.

 

Mortgage Lending Operations—During the three months ended March 31, 2012, the Company originated $365.0 million and sold $355.7 million of loans, respectively, as compared to $57.3 million and $26.3 million of loans originated and sold, respectively, during the three months ended March 31, 2011.

 

The Company is currently focusing on originating Fannie Mae, Freddie Mac, and government loans as it believes that having the ability to sell loans to Fannie Mae, Freddie Mac, and issue Ginnie Mae securities makes it more competitive in the overall mortgage origination market with regard to products, pricing, operational efficiencies and overall recruitment of higher quality loan originators. Consistent with the Company’s strategy, during 2012, the Company sold $249.2 million in service retained loans to Fannie Mae and Freddie Mac, issued $78.0 million in Ginnie Mae securities through its AmeriHome Mortgage Corporation indirect subsidiary and sold $28.5 million in loans on a service released basis to other investors.   In March 2012, the Company sold $250

 

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Table of Contents

 

million in unpaid principal balance of Fannie Mae servicing rights with an expected transfer date in May 2012. The mortgage servicing portfolio increased to $891.7 million in unpaid principal balance at March 31, 2012 (including $250 million sold but not transferred) as compared to $605.4 million at December 31, 2011.

 

In April and May 2012, two of the Company’s warehouse lenders approved increases from $32.5 million and $25.0 million to $38.5 million and $50.0 million, respectively.  As of May 2012, the Company increased its warehouse borrowings capacity to $118.5 million from $87.5 million at December 31, 2011.

 

Portfolio Loss Mitigation and Real Estate Services—The Company provides portfolio loss mitigation and real estate services including REO surveillance and disposition services, default surveillance and loss recovery services, short sale and real estate brokerage services, portfolio monitoring and reporting services.  During the three months ended March 31, 2012, fees from real estate services, loss mitigation and portfolio services decreased to $4.8 million as compared to $7.2 million for the three months ended March 31, 2011, primarily due to a decline in the real estate and recovery activities declined in the long-term mortgage portfolio.

 

Although the Company seeks to expand its portfolio loss mitigation and real estate services to more third parties in the marketplace, the revenues from these business activities have historically been generated from the Company’s long-term mortgage portfolio. Furthermore, as the distressed mortgage and real estate markets remain unstable and uncertain due to the number of foreclosure properties that need to be sold, there remains uncertainty about the ongoing need and delivery of these services in the future.

 

For the three months ended March 31, 2012 and 2011, mortgage and real estate services fees were as follows:

 

 

 

 

For the Three Months

 

 

 

Ended March 31,