Moh,
Here is an excerpt from an Alt-A article:
"Impac Mortgage Holdings, Inc. Clarifies Position as an Alt-A Lender and Misconceptions in the Market Place
IRVINE, Calif., March 5 /PRNewswire-FirstCall/ -- The following is in response to recent media reports that have had an adverse impact upon our common stock price, Impac Mortgage Holdings, (Nachrichten) Inc. , or the "Company", a Maryland corporation being taxed as a real estate investment trust ("REIT"):
1) Impac is an Alt-A Lender. Substantially all of the mortgages we originate or acquire are Alt-A loans. We define Alt-A loans as mortgages made to borrowers whose credit is generally within Fannie Mae and Freddie Mac guidelines, but have loan characteristics that make them non-conforming under those guidelines. As of the fourth quarter 2006, 99.8% of the loans held in our portfolio had a credit grade of A or A-, which means that the credit rating exceeded 620, with a weighted average loan-to-value ratio of 74%. As of December 31, 2006, the weighted average credit score of the Alt-A loans in our portfolio (i.e. the long-term investment operations) was 697. During 2006, subprime mortgages represented 0.4% of acquisitions and 0.2% of the ending securitized mortgage collateral. We define subprime mortgages made to borrowers with credit ratings less than 620, or other characteristics, that increase the credit risk. In addition, the major credit rating agencies, mortgage bond investors and our industry identify the Company as an Alt-A lender.
2) The Company's liquidity position is strong. At December 31, 2006, the Company reported approximately $180.0 million in cash and cash equivalents. Further, the Company has additional liquidity of approximately $75.0 million in equity invested in mortgage loans held-for-sale and other liquidity sources at the Company's disposal.
3) Estimated taxable income is the primary indicator for common stock dividends. During 2006, the Company had estimated taxable income of $79.5 million, or $1.05 per diluted common share. During 2006, we paid common stock dividends of $72.3 million, or $0.95 per diluted common share.
4) Estimated taxable income during the fourth quarter 2006 was generated entirely from the balance sheet at the REIT and did not include a dividend from our taxable REIT subsidiary.
5) The Company believes it has sufficient financing under its reverse repurchase agreements to meet its ongoing origination and funding needs.
6) The Company continues to meet all of its loan repurchase obligations. In the future we expect loan repurchase obligations to decline based on a reduction in whole loan sales and improved credit and duration characteristics. Since January 2006, we have tightened our underwriting guidelines 20 times, which resulted in a 40% decline in total production primarily related to bulk acquisitions. Although total acquisitions and originations declined, we believe we have benefited from an improved credit risk and duration profile. We believe this was validated by the securitization market where despite one of the more turbulent credit spread environments in recent history, Impac executed its most recent securitization with the tightest bond spreads it has experienced in over a year.
7) The restatements for 2004 - 2005, as previously described in our Form 8-K filed on February 23, 2007 has no effect on the Company's net earnings, cash position, stockholders' equity or taxable income.
In summary:
Mr. Tomkinson commented, "It is unfortunate for our stockholders that the Company continues to be put in the same category as subprime lenders, when essentially we have no exposure to subprime loans. In anticipation of a downturn in the industry, Impac, since January 2006, began increasing its loan loss reserves, preserving capital, increasing its pricing and tightening its underwriting guidelines with the intent to further improve the performance of our Alt-A mortgage portfolio."
Mr. Tomkinson concluded, "We believe that the Company has adequately prepared for this challenging market. We believe that the Company is well capitalized, diversified in its business segments and has the expertise to manage through this lending cycle."
Hope that clarifies things
Brad
, but my standard requires the convergence of one more event-a kick butt jobs recession. Combine that with an interest rate spike & the market pigs will really be squealing.
