The mortgage lending crisis deepened on Tuesday, as Impac Mortgage Holdings Inc said it will quit most lending and cancel its dividend, while Accredited Home Lenders Holding Co posted a big quarterly loss and said its survival remained in doubt.
The developments came a day after another struggling lender, NovaStar Financial Inc, gave up its real estate investment trust status sooner than expected because it could not pay a $157 million dividend to keep it.
Dozens of mortgage lenders have quit the industry this year, including many that have gone bankrupt, amid rising defaults, falling home prices and investor resistance to buying home loans they now consider too risky.
Impac said it has fired 144 workers and will stop making Alt-A home loans, its main business, citing market disruptions and illiquidity. Such loans often go to people who cannot document income or assets.
The Irvine, California-based company also said it is quitting warehouse and commercial lending, and will keep only a small number of offices that make loans eligible for purchase by Fannie Mae and Freddie Mac. It doesn't expect to pay its 10 cents per share quarterly dividend at least through year end.
Given the severe dislocation of the marketplace, which included unprecedented margin calls, we are left with no other alternative but to downsize our company to better operate and navigate through this difficult and unrelenting environment, said Chief Executive Joseph Tomkinson.
He called the credit debacle the worst crisis in his 25 years in the business.
Impac also said it has sold $900 million of mortgages since August 1, but has found it extremely difficult to sell more, and is working with its own lenders to find ways to do so.
Spokeswoman Tania Jernigan did not immediately return a request for further comment.
Accredited, which makes subprime loans to people with weaker credit, posted a loss of $260.2 million, or $10.29 per share, for the quarter ended March 31, according to a delayed report filed with securities regulators. That compared with a profit of $35.8 million, or $1.61 per share, a year earlier.
San Diego-based Accredited said results suffered from a large loss from the sale of mortgage loans.
It also said it expects to need further amendments to or waivers of covenants in its credit facilities in 2007. We cannot assure you that we will continue to operate as a going concern, it said in its quarterly report.
Earlier this month, Accredited closed much of its lending operations, eliminating 1,600 of 2,600 jobs. It had made $15.8 billion of home loans last year.
Accredited is suing to force private equity firm Lone Star Funds to complete a $15.10 per share takeover announced in June. It has rejected a subsequent $8.50 per share offer from Dallas-based Lone Star that valued it at $214 million.
In afternoon trading, Impac shares fell 23 cents, or 13 percent, to $1.53, and Accredited fell 42 cents, or 4.1 percent, to $9.86. Kansas, City, Missouri-based NovaStar fell 76 cents, or 9.2 percent, to $7.48.