Impac Mortgage Holdings, Inc.
Q4 2014 Earnings Call Transcript

Published: 1 Apr 2015

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Impac Mortgage Holdings' Year End 2014 Earnings Call. During the presentation all participants will be in listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, April 1, 2015. I would now like to turn the conference over to Justin Moisio, Vice President, Investor Relations. Please go ahead sir.

[Justin Moisio:]

Good morning everyone. Thank you for joining Impac Mortgage Holdings' year end 2014 conference call. During this call we will make projections or other forward-looking statements in regards to but not limited to GAAP and taxable earnings, cash-flows, interest rate risks and market risk exposure, mortgage production and general market conditions. I would like to refer you to the business risk factors in our most recently filed Form 10-K under the Business Securities Act of 1934. These documents contain and identify important factors that could cause actual results to defer materially from those contained in our projections or forward-looking statements. This presentation, including outlook and any guidance is effective as of the date given and we expressly disclaim any duty to update the information herein. I would like to get started by introducing Joe Tomkinson, Chairman and CEO of Impac Mortgage Holdings.

[Joseph R. Tomkinson:]

Good morning. Welcome and thank you for joining our year end 2014 earnings call. With me is Bill Ashmore, our President, Todd Taylor, our Chief Financial Officer and Ron Morrison, our General Counsel. As a result of our recent acquisition of the CashCall mortgage operations, we intend to spend the majority of this call on our strategies and outlook for 2015. However, prior to that, I'll begin with a brief recap of the financial results for 2014. For the fourth quarter 2014 the company reported a net loss of $2.2 million or $0.23 diluted common share as compared to net loss of $1.2 million or $0.13 per share for the third quarter of 2014. For the year ending 2014 the company reported net loss of $6.3 million or $0.60 per share as compared to a net loss of $8 million or $0.94 for 2013. In the fourth quarter of 2014 our total originations increased 20% to $1.1 billion from $923.6 million in the third quarter of 2014. Total originations increased to $2.8 billion [ph] in 2014 as compared to $2.5 billion in 2013. The increase in lending volume was primarily due to bulk purchases from CashCall which I will discuss later on this call. In the correspondent channel, the three key metrics we use to analyze this channel have all increased. These key metrics are total clients, the submitting clients and the funding clients. We continue to add customers in the fourth quarter and we received submissions from more customers in the fourth quarter versus the third quarter and our percentage of funding clients also increased in the fourth quarter as compared to the third quarter. In the fourth quarter of 2014 wholesale volumes remained pretty much flat as compared to the third quarter. However, we are now focused on increasing deliveries by our top tier brokers to increase the channels production volumes and quality which will create a more stable production in this channel moving forward. These key initiatives are increasing multiple loan deliveries by our top tier brokers in the wholesale channel along with a higher customer utilization rate in the correspondent operations will be driving our sales strategies in 2015. Both of these key metrics will not only increase volumes, but it will decrease the overall expenses and increase our net margins in the business-to-business mortgage lending divisions. With the large concentration of correspondent volumes, gain on sale margins decreased in the fourth quarter of 2014 and that's because correspondent margins are lower than other origination channels. However, the correspondent channel operates at a much lower cost to originate with substantially lower expenses and a much higher level of efficiencies. As previously mentioned, moving forward, the large volume of CashCall loans that we delivered to our correspondent channel will now be delivered to our retail lending channel. As part of our current strategy, we continue to sell servicing and as a result you will continue to see the servicing income fluctuate month-over-month. Due to the servicing sales in the fourth quarter of 2014, our servicing income decreased by about $100,000 to $813,000. However, these sales generated cash of $23 million, and this provided us the added liquidity to expand our mortgage operations. Real estate service revenues increased to $3.4 million in the fourth quarter of 2014 as compared to $3.2 million in the third quarter of 2014, but decreased as compared to $4.9 million in the fourth quarter of 2013. The decline in revenue is primarily due to the expected decline in mortgage portfolio as we have previously reported. In our long-term mortgage portfolio, despite the decline in the outstanding balances of the portfolio, the residuals continue to generate better than expected cash flows of $2.3 million in the fourth quarter of 2014 and $9.9 million in 2014 as compared to $2 million in the third quarter of 2014 and $6.8 million in 2013. And we believe this is due to our continued real estate service activity. While the company rebuilds its mortgage origination lines, the residual income from its long-term mortgage portfolio is and will continue to be an important part of the company's cash flows for the foreseeable future. Now I'd like to talk about the recently completed acquisition of the CashCall mortgage operations and our strategy on a go forward basis. In the first quarter, we finalized the acquisition of CashCall's residential mortgage operations. CashCall's residential mortgage operations, which include the complete origination platform, systems and personnel, and will operate as a separate division of the Impac Mortgage Corporation, under a DBA [ph], under the name CashCall Mortgage. This division will continue to operate as a centralized call center that utilizes a marketing platform to generate customer leads through the internet and the call center. In late 2013, when we sold off our retail brick-and-mortar lending platform, we cited the importance of having a highly centralized scalable mortgage lending operation. We felt and continue to feel very strongly that this was the correct approach. Adding CashCall Mortgage to Impac's production channels gives the company a retail mortgage operation which is centralized, extremely efficient and gives us greater control over the ever increasing regulatory compliance standards in the mortgage industry today. This acquisition fits perfectly within our origination strategy. This is a matter of reference to efficiency and this is based on the latest mark available information from the MBA metrics for loans funded per loan losses and total operational personnel, CashCall Mortgages operates the pricing twice as efficient compared to the industry average of funded loans for total operational person in funded loans per loan officer. With the addition of CashCall Mortgage, we have a scalable, centralized retail platform that is able to efficiently expand and retract during market fluctuations. By using this marketing to generate leads internally, we expect CashCall to be able to compete with some of the large internet lenders across the nation. In addition, we intend to leverage the same marketing platform to expand the volumes of Impac's new AltQM products as well as its government loan products such as FHA and VA. CashCall Mortgage will also be able to make use of our state licenses to expand its national lending footprint into more than 40 states. Prior to the completion of the acquisition, CashCall was licensed in just 11 states. However, within the next 60 days we expect that based on states in which Impac is currently licensed CashCall will begin operating in an additional 30 states. This expanded national lending footprint, combined with access to the Impac loan products will unlock significant opportunities to greatly diversify CashCall Mortgage's loan production, increase the overall total production. With the expansion in an additional 30 states, the marketing will now be nationwide. A nationwide marketing campaign is much more cost effective and efficient than having to target a smaller number of states for marketing campaigns. This will reduce the overall cost of marketing in a nationwide footprint as opposed to just regional costs. Our strategies across the board are already yielding significant results. Total origination volume in the first quarter was approximately $2.3 billion. This is more than double of the $1.1 billion in total originations in the fourth-quarter of 2014. Of the $2.3 billion in total originations, approximately $1.4 billion was through the CashCall Mortgage retail channel which significantly increased our profit margins. In the fourth quarter 2014 our retail originations contributed only 2% to our total origination volumes. In the first quarter of this year, wholesale originations increased dramatically to $279 million as compared to the fourth quarter originations of $159 million. We expect this trend will continue primarily due to market share gain with the expansion of our sales coverage. The percentage in customers delivering multiple loans per month continues to increase month-over-month. As we expected, the volume in the correspondent division decreased to approximately $595 million in the first quarter and this was the result of the CashCall Mortgage volume being moved from our correspondent channel over to our retail channel upon the acquisition. However, what is most important to note is our core correspondent business volume continues to increase month-over-month and as of quarter end we expect it will be over $180 million per month and growing. By having an efficient retail channel we believe that it will compliment the wholesale correspondent businesses by lowering the overall margins and cost for mortgage lending. We anticipate these channels will continue to see a steady growth month-over-month as a result of the increased pipeline growth that both channels have recently enjoyed due to the market share expansion. As of March 31, 2015 our total pipeline was $1.3 billion with the locked pipeline $650 million and this compares to a total pipeline of $750 million and a locked pipeline of $297 million at the end of the fourth quarter of 2014. Consistent with our strategy to expand total originations, the company also rolled out its non-QM loan programs last August marketed as the AltQM and we funded its first originations during the third quarter. In the first quarter of 2015 the company's AltQM pipeline was approximately $50 million and we expect to build on this pipeline throughout 2015. The predominance of AltQM originations was in our wholesale channel. But during the beginning of the fourth quarter, the correspondent channel received commitments from several large retail originators to rule out our AltQM loan products over the next several months. Additionally with the acquisition of CashCall Mortgage the AltQM loan product will now be actively marketed and originated through our retail consumer platform. As part of our strategies to take advantage of practice servicing pricing we sold approximately $760 million of our mortgage servicing portfolio in the first quarter of 2015. The company expects to generate $8 million in cash from the servicing sale and the result of mortgage servicing portfolio decline to $1.3 billion as of the end of February 2015. The company intends to continue to selectively sell servicing to maintain adequate liquidity in capital and will continue to grow and expand its lending and warehouse businesses. Our re-warehousing businesses continue to grow over the last several quarters. We currently have outstanding commitments of approximately $90 million with an additional $30 million in re-warehousing requests of which $10 million is currently approved. As we acquire more re-warehousing capacity to offer reliance to more customers, we expect this business to continue to grow significantly. At the end of 2014 taxable year, we had a net operating loss carry forward of approximately $495 million for Federal income tax purposes and approximately $428 million for state income tax purposes. As was mentioned in our earnings release, during the first quarter, based on expectations, on current and future profitability we expect to reevaluate our ability to recognize the tax benefits from our substantial NOL carry forwards. With increased origination volume, we anticipate the first quarter 2015 pre-tax profitability to improve significantly over the fourth quarter of 2014. Additionally, with the possibility of recognizing some of the aforementioned tax benefits from our net loss carry forwards, our first quarter earnings will not only benefit from solid earnings, but we'll get a further benefit from possible recognition during the quarter of our deferred tax asset. To further clarify, we will not only continue to benefit from the NOL carry forwards, but in addition, we expect to recognize its deferred tax asset representing future tax benefits improving the overall book value. With increased origination volumes and wider overall net margins as a result of our mix of businesses being predominantly retail, we expect to generate solid earnings in the first quarter. As I mentioned in our earnings release last week, we expect these earnings will more than make up for the entire loss of 2014. Going forward based on our $650 million locked pipeline as of yesterday, the second quarter 2015 is anticipated to also look very positive. Longer term for 2015 there remains some uncertainty regarding interest rates. However, we believe by capturing more market share in our business-to-business division and moving CashCall Mortgage into additional space and with the greater mix of mortgage products, we feel positive about our overall 2015 outlook. That concludes my prepared remarks. And now I’d like to open it up to our call for any questions that you have.

[Operator:]

Thank you very much. [Operator Instructions] And our first question comes from the line of Jim Fowler. Please go ahead sir.

[Jim Fowler:]

Hey, Joe, congratulations to you and the team, fantastic at your business transformation here, I wanted to ask you a couple of questions on just the volumes in the fourth quarter and the first quarter and I think the one question I wanted to ask is just on the CashCall volume up a $1.04 billion in the first quarter. I am presuming a fair amount of that is refi relative to the fourth quarter rates, but can you tell me sort of the refi versus purchase volume there?

[Joseph R. Tomkinson:]

Well, the refi has always been a predominant of CashCall and the founder of CashCall is also the founder of DiTech which was a highly successful company. You know, I know people always are concerned about the refi market; however, I believe and on a go forward basis and this is one of the things that we are going to concentrate on is that we can capture more of the purchase money market through the products that we are offering like the AltQM. AltQM is you take it off really yet, but it is a product that really serves an underserved market. And just as an example, our products, maybe realtor, a broker is showing a piece of property to a couple individuals, and they will both qualify, but now the products, the AltQM products now he has the ability to maybe show it to five or six people that are qualified because of some of the underwriting standards within the AltQM. So, I think that will be very, very attractive to a lot of people. Also the other things is, CashCall has such a name recognition in its own markets that we see a lot of individuals, even thought that they are looking maybe another originator, they still call CashCall for their purchase money. Those have been pretty active in this. Do you have any comments, you want to make?

[William S. Ashmore:]

Hey Jim, how are you doing?

[Jim Fowler:]

Hey, hi Bill.

[William S. Ashmore:]

Predominately it was refinances, I mean high FICO average over 740 to 750, low LTV is under 70% LTV, very high quality, borrowers, but you are right, predominately today it is refinances. However, expanding to another 30 states adding FHA, VA and the AltQM we will be able to capture not only more refi business, but also as Joe said starting going after from a purchase money standpoint. So we think that that the strategy for us going forward is in fact depending upon what rates do is to continue to try and bring in those high quality refinances, but also segue over to these other products that they have not been originating at all in additional states.

[Joseph R. Tomkinson:]

Yeah, I am going to add something. Hey Jim, this is Joe. I am going to add something else for everybody’s, put this little bit into perspective. Everyone is always concerned about refi. All the volumes today that people are reporting from the quick and on down is predominantly refi. But here is something that people should consider, by generation, those generation prior generation Jim everyone as you see using a mortgage originator or when they go and they buy house the real estate broker has predominantly directed the business. And so they directed to their local mortgage broker, their local bank. And then when I watch my own son who is in his mid 20s and I have discussions with him about the pieces why you would go to a real estate broker or a mortgage broker. He says I, or a mortgage broker, I can just go online and do the same thing in 10 or 15 minutes. And of course he tells me, he says well, why don’t you just do it online and I say well because I get confused. I don’t like using computers, but the reality is more and more people are getting to start shifting and that’s where we are preparing for is more internet access.

[William S. Ashmore:]

Okay, I think it is a great strategy, I wonder if you could, I know you have been very early, I can feel this very early in the non-QM and the AltQM putting products together and talking about that and its fantastic here that you already had a $50 million pipeline. I am wondering if you might provide a little context around where you think the non-QM is today relative to where you think it might go, pick a period of time, one year, two years. It seems to me that there are a lot of people out there even they still have very little access to mortgage credit where the non-QM that is going to take us the top slice of the those popes and then maybe down the road another slice, etc, etc. But you are much closer to it and I think your CashCall acquisition is a perfect way to get into that channel and your legacy of being able to underwrite that type of product will certainly be beneficial, but how do you view that segment sort of like coming back to life both near-term and longer term? And may be sort of you could weave into that and Todd if you have any thoughts on what we might expect or what you're expectations are in 2015 for volumes in that channel this year, whether it is aspirational or whether you think there is a high, you have a high percentage probability of what you think you might get this year? Thanks.

[Joseph R. Tomkinson:]

I'll start off and then I'm sure, I will give you my thoughts and I'm sure Bill will have some thoughts that he want to jump in on. Number one, that market that we are in the AltQM is certainly underserved and I'm talking about loans that exceed the Fannie, Freddie loan limits will go up to $3 million. We knew going into this that it would be a slow growth. The reason for that is that the lenders are used to now originating to one box and that box is the GSE boxes. For years there has been no credit available for the individuals that follow that box. The other thing is it has to do with compensation. The loan officer under the new Dodd-Frank rules is prohibited from making any more money for originating different types of loans. And so the unintended consequence is that the originator rather than originates something that is a little bit more difficult to originate, it originates to what is easy originate because it takes a little bit more time and costs a little bit more money. Now, having said all that, we - the other thing is there has been regulatory fear as to what the agencies may or may not do. And we spent several hundred thousand dollars reviewing the regulatory process. In fact I went back and I met with the regulators and talked to them about it. So, you have a couple of things working against the AltQM right now is the fear of regulatory which we're slowly overcoming. You have loan officers that are going, I can make more money on a per loan basis doing the AltQM, but it takes me longer to do an AltQM as opposed to doing three or four qualified mortgages. Now, we think that will slowly change over time. But as the real estate broker discovers that there is available credit to them for the larger purchases and as the lenders out there discovered that, hey there is a legitimate source that is actually buying and funding these loans then we see this volume growing exponentially once it sort of catches on. Having said that, the fact that we now have our own retail origination, we can market it directly and we think we can grow it. So Bill is seriously writing notes over here, so I'm sure he has some things that he wants to add. Bill?

[William S. Ashmore:]

The preferred perspective is that Deutsche Bank about a month, a month and a half ago did come out with piece there that they were trying to estimate what this non-QM market is and their original estimate was around $40 billion to $50 billion, but could be growing to as much as $150 billion to $200 billion. And put into context the total markets $1.1 trillion, $1.2 trillion, so it could be a pretty sizable amount of the overall origination market. One of the headwinds, in addition to what Joe mentioned, which was from a regulatory standpoint, it just kind of understanding the product is that today with rates where they are, the low hanging fruit is what’s attracting the Fannie and Freddie refinance or the Fannie Mae and Freddie Mac and FHA loans are the kind of the low-hanging fruit that a lot of these loan officers are levitating to, However, we have seen a significant uptick in the amount of requests that are being made for trainings and people that are signing up and they are using it as a tool to hire additional loan officers or brokers and are correspondents are using it as a improvement ability because of an expanded product menu. We should be clarifying here that in addition to us offering this product in connection with our partners at Macquarie we are also have incorporated into this our old iDASLg2 automated underwriting engine that we want every loan that comes in to us to be run through this inner Impac direct access system for lending that for all of our programs we offer pre-qualification and we have expanded it for full underwrite through our bank statement program we've called the old income and it is a tremendous tool to allow them to initially be able to send this loan through. And it also will identify if the loan was available for any other loan products that might be available. So, it is a way to give comfort to these originators that they will be originating the best loan program, the right loan program for an individual. So, as we can see here, moving into the areas of self-employed through our bank statement program or the four nationals which we been meeting with number of originators for national loans that’s a big area of growth for us in addition to our asset depletion program and we think that we’ve got in addition to some other programs a pretty solid foundation for what we feel is going to be serving with so called [indiscernible] market has identified today by Deutsche Bank.

[Jim Fowler:]

Fantastic, Bill and Tom thank you very much, Joe and Bill thank you very much, I'll jump back in the queue.

[William S. Ashmore:]

All right, thanks, Jim.

[Operator:]

And our next question comes from the line of Daniel Baldini with Oberon Asset Management. Go ahead.

[Daniel Baldini:]

Hi, good morning, thanks for taking my call. I have a couple of small mundane questions. On your cash flow statement, there is an item called net cash used in operating activities of discontinued operations, and the amount in 2014 was $7.6 million and in 2013 it was $8.2 million and I'm just curious why are these cash outflows so large and how long will this go on for?

[Todd R. Taylor:]

This is Todd Taylor, I can take that. The discontinued operations is slowly running off, but there are still some expenses that we are incurring that has to do with some legacy stuff well around settlements and litigation that we think we’ve got most of that behind us. So, as in the future we expect to see that decline, but a lot of that is associated with the settlements of legacy items that we’ve resolved.

[Daniel Baldini:]

So, I mean if the number was $7.6 million in 2014 what would the cash out be this year and what range do you expect it might be?

[Todd R. Taylor:]

Yeah, I would think it probably would be about half of that at most, yes.

[Daniel Baldini:]

Okay, all right, that’s good news. Now I have another question, on the balance sheet there is an item and I can’t find in the notes to the financial statements any further explanation of what it is and it’s other liabilities. And the reason I'm interested is its $24 million which is basically the size of your stockholders equity and what is in other liabilities?

[Todd R. Taylor:]

You know, I'd have to probably get back to you on that exactly what’s in that number, off the top of my head accrued liabilities or accrued expenses is in that number, as far as to make up the most of the balance, but as far as any detail, I probably have to get back to you on that.

[Daniel Baldini:]

If you have any examples in the accrued?

[Todd R. Taylor:]

Accrued expenses relative to pay rent or ongoing operating expenses, for payroll for commissions, et cetera.

[Daniel Baldini:]

Okay, okay. Well, great, well thanks very much.

[Operator:]

[Operator Instructions] The next question comes from the line of Michael Salzhauer. Go ahead sir.

[Michael Salzhauer:]

Hi, I will go the opposite direction and ask you more qualitative questions. Why did CashCall decide to get married to Impac?

[Joseph R. Tomkinson:]

Well, I'll give you a qualitative answer.

[Michael Salzhauer:]

Okay. Don’t tell me you're the prettiest girl in the world.

[Joseph R. Tomkinson:]

No I'll just say it's none of your business. We have a long operating history together back and forth. And I think it was, to be very honest with you, it was more relationship based and it had a lot to do with trust. We both took a bet on one another. CashCall brought a lot of things to the table that if we wanted to reproduce it, it would have cost us a lot of upfront cash. It would have cost us a lot of time and then there was no guarantee. Whereas the purchase of CashCall allowed us to enter the marketplace and read the awards right away. What we brought to the table was the licensing. We brought loan products. We brought a different level of management that may be CashCall was missing. So it was and I mean it was a good opportunity for both. And I think we trust the folks at full CashCall. I have known them personally for 27 years and they trusted us. And a lot of times in this business you with them here in bed with you, you've got to trust them.

[Michael Salzhauer:]

Right.

[Joseph R. Tomkinson:]

Yes I know, It’s not the best qualitative answer, but it’s a truthful answer.

[Michael Salzhauer:]

No, that’s fine. And is your management staying in this company?

[Joseph R. Tomkinson:]

Is what?

[Michael Salzhauer:]

Is there are management staying involved with the new company?

[Joseph R. Tomkinson:]

The management of the CashCall is being done by the, how am I to say it, we have a service contract with the parent company overseen by us.

[Michael Salzhauer:]

Okay.

[William S. Ashmore:]

So, nothing is really changing to be you know to put it mildly.

[Michael Salzhauer:]

And then, I'm sorry to ask this question, are they taking stock or cash?

[Joseph R. Tomkinson:]

No, there is a combination of cash, small cash payment, small stock payment and earn-out. So in other words, if they make money they get a very good earn-out, if they don’t make any money they don’t get anything. And so the purchase was based upon their book value at the time that we entered into the agreement first a very small minimal premium to book. So, it was, everyone is looking at me with a strange look on their face. That's correct. All right, so now in the earn-out in the first year is the greatest amount and then it declines year-after-year for total of three years. And then there is a non-compete from everybody for a total of four years. Does that help you?

[Michael Salzhauer:]

Yes. Let see, your DTA [ph] are you foreseeing that coming own cing that coming on in one chunk or does that come on in several pieces as you are able to be show your auditors earning?

[William S. Ashmore:]

Yes, it’s probably more likely several pieces, given, it’s based on the more and likely approach as far as realization of net operating losses which what basically means to the extent we feel confident that there is going to be future taxable income we will out of recognize it and future benefit in the form of DTA [ph], but we will probably record that in some pieces as we will have to evaluate at each quarter.

[Michael Salzhauer:]

Okay, and that’s roughly 50

[William S. Ashmore:]

Yes, that’s about right.

[Joseph Tomkinson:]

Yeah.

[William S. Ashmore:]

Yeah.

[Michael Salzhauer:]

And then the last question is in a business like Impac why does it, I assume that so the DTA would increase the book value, why does it and what benefits come to the company with an increased book value?

[William S. Ashmore:]

Yeah, it helps us tremendously in being able to borrow more. It gives us the ability to greater leverage more.

[Michael Salzhauer:]

Does the stock price goes up?

[William S. Ashmore:]

Yeah.

[Joseph R. Tomkinson:]

I know that the stock price, stock price could also vary with earnings.

[William S. Ashmore:]

Sure. But is also keyed off above our book, both earnings and book value.

[Michael Salzhauer:]

Okay, thanks again.

[William S. Ashmore:]

All right, thanks.

[Operator:]

And we have another question from the line of Jim Fowler with Harvest Capital. Go ahead sir.

[Jim Fowler:]

Hey, guys, just thanks for taking the follow up, two questions, one it seems that the non-QM, one of the headwinds there has been the ability to sell triple-As off of securitizations and maintain the BPs [ph] and earn the returns on the BPs over time, I guess the first question is, how is that going, how is the development of the market for placing the senior pieces of securitizations into bond investors hands? And then secondly, have you given some thought to taking a look at becoming a member of the federal home loan banks, somewhat other mortgage REITs that have established the captive insurance entity, I know to harbor the Invesco, New York Mortgage Trust and First Oaks [ph] have gotten lender number sort of Federal Home Loan Bank, yet. I don’t think anybody can draw anything down yet because they are in a slight little bit of a moratorium here, but they are now permanent numbers. I am wondering if you give them some thought to that also?

[Joseph R. Tomkinson:]

Yes, now I'm not going to really comment too much on the Federal Home Loan Bank, but we give a lot of thought to those things. So maybe that helps you. But as far as the securitizations, as you know, we were, in cash flow we were the number 10th largest issuer in the nation of these types of securities years ago. So we are really familiar with the process of the securitization. We're not really looking, we with our partner Macquarie, they have the balance sheet and he ability to put it on their balance sheet. We think at the appropriate time, we will approach the rating agencies and we will be able to get some pretty favorable treatment for us and our partner under the way that our partnership is structured. We're not really too concerned in what the securitization market is right now.

[Jim Fowler:]

Great, okay thank you. Yes, perfectly, thank you very much.

[Operator:]

[Operator Instructions] And gentlemen, we have no other questions over the phone at this time.

[Joseph R. Tomkinson:]

Okay, well if there are no other questions, then on behalf of Impac and Will, Todd, Ron we appreciate you joining us for this call and we look forward to the next call. Thank you.

[Operator:]

Ladies and gentlemen, this concludes our conference for today. We thank you for your participation. Have a great day everyone.