Impac Mortgage Holdings' bankruptcy seemed decades in the making. 

The company filed for Chapter 11 bankruptcy protection Sunday, after years of struggles exacerbated by rising interest rates earlier this decade. In a series of federal court filings this week, the former lender and servicer described its debts, and the numerous factors that led to its eventual downfall stemming back to the Great Financial Crisis. 

The Irvine, California-based lender was a multichannel originator, having deployed wholesale, correspondent and retail operations. It last crossed the $1 billion funded origination threshold in the final quarter of 2019, and amid the refinance boom regularly reported nine-figure quarterly non-qualified mortgage production.

As of Sunday, Impac said it had just $130,000 of liquidity on its balance sheet. Counsel for the company was scheduled to ask a federal bankruptcy court Tuesday afternoon to approve $5 million in debtor-in-possession financing from Hildene Re, an arm of asset manager Hildene Capital Management, to continue its operations through the bankruptcy.

Impac listed 14 large unsecured claims among hundreds against the firm. The Bank of New York Mellon is the indenture trustee for the largest claim, $77 million related to a financial exchange with Impac in the fallout of the Great Financial Crisis. Other companies with far six-figure unsecured claims include Dark Matter Technologies, Nationstar Mortgage and Lakeview Loan Servicing. 

According to Sunday's petition, Impac has total estimated assets under $50 million, and estimated liabilities over $100 million. The company and its CashCall Mortgage brokerage were doing minimal business in recent years, after it was delisted from the NYSE American exchange in 2023.

Neither an attorney for Impac's bankruptcy filing nor the remaining two executives responded to emails seeking comment Tuesday. 

Significant issues

Formed as a real estate investment trust in 1995, Impac transitioned to be an independent mortgage banker and servicer in 2007, according to CEO and President George Mangiaracina's recent declaration. The company in 2009 exchanged $51.3 million of preferred securities for $62 million of interest-only junior subordinated notes from BNY, which Impac has been in default since January 2024. 

CashCall also caused woes for Impac, which the larger lender bought in 2015. Fannie Mae deemed CashCall's prepayment activity unacceptable following a refinance spike in 2016, leading Impac's then-CEO to suspend loan deliveries to Fannie. In July 2020, Freddie Mac stopped buying Impac's loans, citing more concerns over prepayment speeds despite Impac's business changes since the Fannie suspension, Mangiaracina wrote. 

Unable to sell to Fannie and Freddie, Impac sold to aggregators, which resulted in highly-compressed margins. Selling to aggregators also increased dwell times and notional outstanding amounts on warehouse facilities, putting even more stress on Impac's capital and liquidity needs. 

The pandemic hits

With the onset of the pandemic in early 2020, the lender briefly ceased origination activity, sold $4.2 billion of unpaid principal balance of Freddie Mac mortgage servicing rights, and reduced its warehouse lending capacity by over 60% to $600 million. As the company rebuilt its lending operations shortly after, rising interest rates pummelled the business. 

Impac ended wholesale lending in the first quarter of 2023, switched Cashcall from a direct lender to broker, and sold residual interests in long-term mortgage loans for $37.5 million. The moves were not enough to alleviate Impac's financial constraints, the CEO wrote, and Impac explored bankruptcy in 2023. 

The company was also in lengthy litigation with preferred shareholders since 2009, in a case settled in 2023. That legacy litigation affected Impac's ability to explore merger and acquisition moves, wrote Mangiaracina. During this time, the interest rate on the BNY notes rose significantly, and Impac couldn't engage in hedging activity, contributing to its 2024 default.

Although the lender was able to secure a $23.9 million revolving credit facility with Hildene, and pay down other convertible promissory notes in recent years, it secured additional bridge financing this past January while it worked toward bankruptcy. 

The remaining financial picture

The company's debts include the $2 million pre-bankruptcy bridge note obligations, part of the $5 million DIP financing, and $16.4 million in life insurance and surety bond obligations to fund those policies. 

In separate motions regarding its go-forward operations, Impac said it expects to pay its remaining 18 employees on average a combined $310,000 per month. 

Sunday's filings show Cede & Co. as holding the majority of the company's common stock, series D preferred stock and warrants. Cede is only the custodian of the shares, and the shareholders of Impac are redacted, as the company is listed on the OTC Marketplace, the bankruptcy filing explained. 

Impac's shutdown was not unexpected, although it's a significant fall from grace for a once-publicly traded mortgage giant. Other Wall Street lenders have gone private or sold their assets in recent years, while other sizable lenders in the past few years have also shut their doors, including Virginia-based retail shop City Lending in February.