5. Mortgaging the Future

Impac Mortgage ( IMH) is feeling the impact of the credit crunch.

The Irvine, Calif., lender canceled its common-stock dividend and laid off 144 workers Tuesday in the latest fallout from the collapse of the mortgage market. Impac joins rivals ranging from giant Countrywide ( CFC) to tiny NovaStar ( NFI) in slashing operations to adjust to sharp declines in U.S. housing sales and prices.

A spike in defaults on recent-vintage loans to homebuyers with poor credit histories has scared investors away from the once-vibrant market for mortgage-backed securities. The squeeze has made it difficult for lenders to raise funding in the market, at a time when demand for riskier mortgage loans has evaporated.

"Given the severe dislocation of the market place, 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," CEO Joseph R. Tomkinson said Tuesday. "It is with deep sadness and regret that we are currently exiting the Alt-A mortgage business which we pioneered in the early 1990s."

Impac investors may regret seeing the value of their investments decline 84% over the past year. But that's not an emotion shared by Tomkinson, who prefers to point out his management team's many recent accomplishments.

Tomkinson allows that "we have suffered significant operating losses this year, for which we are not proud of." But he adds that Impac "has protected its shareholders from capital infusions or restructures that would have significantly diluted or wiped out our stockholders' equity in its entirety."

Thanks, but Impac shareholders could probably do without that sort of protection.

Dumb-o-Meter score: 75. "I am proud of my executive management team," the CEO adds, "for their unfailing efforts to manage through this credit crisis."

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