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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 8, 1997
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or Other Jurisdiction of Incorporation)
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0-19861 33-0675505
(Commission File Number) (I.R.S. Employer Identification No.)
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20371 Irvine Avenue
Santa Ana Heights, California 92707
(Address of Principal Executive Offices, Including Zip Code)
(714) 556-0122
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
IMH COMMERCIAL HOLDINGS, INC.
In February 1997, Imperial Credit Mortgage Holdings, Inc. (the "Company")
incorporated IMH Commercial Holdings, Inc. ("ICH"), a specialty commercial
property finance company, to seek opportunities in the commercial mortgage
market. ICH purchases, sells and securitizes commercial mortgage loans and
invests in such mortgage loans and securities backed by such loans. In
connection with the organization of lCH and its initial public offering in
August 1997, the Company capitalized ICH with $15.0 million and currently holds
719,789 shares of ICH common stock, representing 9.8% of the outstanding shares
of ICH's common stock, and 674,211 shares of ICH's non-voting Class A Common
Stock, which are convertible into an equivalent amount of shares of common
stock. ICH's common stock is quoted on the AMEX under the symbol "ICH." The
Company is entitled to receive dividends on the ICH common stock and Class A
Common Stock owned by it.
Similar to IMH, ICH is managed by an outside manager. ICH's manager, RAI
Advisors, LLC ("RAI"), is owned by Joseph R. Tomkinson, William S. Ashmore and
Richard J. Johnson, who are also officers of IMH and ICI Funding Corporation
("ICIFC"). RAI has entered into a submanagement agreement with IMH and ICIFC to
utilize the infrastructure of each for the oversight of ICH. IMH's operating
expenses as a percentage of revenues are expected to decrease as a result of the
cost-sharing of operating expenses among the Company and ICH as ICH will
reimburse the Company on a dollar-for-dollar basis for the services provided to
ICH by the Company. In addition, the Company will receive a 15% service charge
on such operating expenses for services provided to ICH, subject to a minimum
service charge of $500,000 annually for the first three years. In addition to
the aforementioned submanagement agreement, each of IMH and ICIFC have entered
into agreements with ICH and Imperial Commercial Capital Corporation ("ICCC")
governing their relationships.
IMPERIAL CAPITAL MARKETS GROUP
Imperial Capital Markets Group ("ICMG"), a division of ICIFC, was formed in
January 1997 by Michael P. McClanahan, Director of Capital Markets, to (i)
conduct bulk purchases of mortgage loans and selective whole loan sales of such
loans and (ii) locate mortgage loan investments for the Long-Term Investment
Operations. ICMG focuses on selected opportunities to acquire mortgage pools
from financial institutions such as mortgage bankers, banks, thrift and loans
and insurance companies that consist of a variety of product types. ICMG then
seeks to sell portions of the loans purchased in bulk at a higher premium to
targeted financial institutions and institutional investors in the secondary
market or retain those mortgage loans which fit the investment criteria of the
Long-Term Investment Operations. Generally, bulk acquisitions range in size
from $1.0 million to $250.0 million. Prior to 1997, the activities of ICMG were
conducted by ICIFC.
During the six months ended June 30, 1997, ICMG acquired in bulk $219.7
million of mortgage loans, sold $53.9 million of mortgage loans to third party
investors and sold $139.8 million to the Long-Term Investment Operations.
ICMG's whole loan sales from bulk acquisitions accounted for 8.5% of ICIFC`S
total whole loan sales to third party investors and securitizations while ICMG's
gain from whole loan sales for the six months ended June 30, 1997 was $1.5
million, or 16.5% of ICIFC'S total gains on loans sold to third party investors
and securitized. In these whole loan sales, the Company disposes of its entire
economic interest in the loans including servicing rights, for a cash price that
represents a premium over the principal balance. Whole loan sale gains are
recognized at the time of sale. Whole loan sales are typically made pursuant to
purchase agreements that include customary representations and warranties by the
Company regarding the loans. The Company, therefore, may be required to
repurchase or substitute loans in the event of a breach of its representations
and warranties given at the time of the sale of the loans.
PURCHASE OF 125% LTV MORTGAGE LOANS FROM PREFERRED CREDIT CORPORATION
In July 1997, ICIFC began purchasing loans on a bulk basis from Preferred
Credit Corporation ("Preferred") pursuant to a mortgage loan purchase agreement
(the "Preferred Purchase Agreement"). As of August 25, 1997, ICIFC had
purchased approximately $210.0 million of mortgage loans from Preferred and has
agreed to purchase up to an additional $290.0 million in mortgage loans. These
loans consist of second mortgage loans to qualified borrowers who satisfy
Preferred's underwriting criteria based on income, credit scores and other
factors, but also who have limited access to traditional mortgage-related
financing generally because of a lack of equity in
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their homes. The loans are typically closed-end (usually 15 years), fixed rate,
fully amortizing loans secured by a first or second lien on the borrower's
primary residence, and are typically used by consumers to pay-off credit card
and other unsecured indebtedness. Although Preferred seeks to lend to borrowers
with high credit worthiness, almost all of Preferred's loans are made in excess
of the value of the underlying collateral available to secure such loan. ICIFC
reviews all loans purchased from Preferred under ICIFC prepared guidelines,
including a regulatory compliance audit, and may reject any loans that do not
meet ICIFC's guidelines. ICIFC intends to sell or securitize all loans purchased
from Preferred, although there can be no assurance of its ability to do so.
In January 1997, the California Department of Real Estate (the "DRE")
suspended the license of Preferred and its top two executive officers for 60
days for mishandling trust funds, failing to supervise employees and other
offenses which occurred in 1995. These suspensions were stayed upon payment of
a $3,000 fine. In July 1997, the California Department of Corporations (the
"DOC") filed a lawsuit against Preferred and its top two executive officers
alleging, among other things, that (1) Preferred was delaying loan closings in
violation of California's licensing laws; (2) as a result of the delayed loan
closings, Preferred was accruing interest on loans prior to the borrower's
receipt of the loan funds; and (3) Preferred had changed dates on the refund
checks and on internal loan reports to create an appearance that refund checks
had been mailed prior to the actual mailing date. Preferred reached a
settlement with the DOC on July 3, 1997, without admitting any liability or
wrongdoing. The settlement generally provides for the following: (1) Preferred
is obligated to complete any refunds not already made to borrowers and agreed to
the appointment of a third party to verify the accuracy of the refunds (prior to
completion of the settlement, Preferred had made refunds of approximately $1.4
million); (2) Preferred is forming an internal audit department and implementing
new operating procedures to prevent the reoccurrence of any funding delays in
the future; (3) Preferred's President/Chief Operating Officer, Walter Villaume,
resigned and agreed to be barred from employment, management or control of any
California residential mortgage lender; and (4) Preferred agreed to pay a fine
of $1.0 million. Pursuant to the Preferred Purchase Agreement, Preferred has
made certain representations and warranties concerning such loans to ICIFC,
agreed to repurchase any loan materially and adversely affected by a breach
thereof and agreed to further hold the Company harmless in connection therewith.
PURCHASE OF MORTGAGE LOANS FROM GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
In August 1997, ICIFC purchased through ICMG $80.2 million of non-
conforming residential mortgage loans from Greenwich Capital Financial Products,
Inc. ("Greenwich") pursuant to a mortgage loan purchase agreement (the ''WSI
Purchase Agreement"). Greenwich previously purchased such loans from Walsh
Securities, Inc. ("WSI"), a firm affiliated with James Walsh, a director of the
Company. The transaction was approved by the disinterested members of the
Company's Board of Directors and represented an arm's-length transaction. This
bulk purchase was a one-time event; ICIFC intends to resell these loans through
bulk whole loan sales through ICMG.
According to published reports, some independent brokers whose loans were
financed by WSI are being investigated by state and federal authorities for
alleged mortgage fraud. In response, ICIFC reunderwrote a higher percentage of
the mortgage loans purchased from Greenwich than required by ICIFC-prepared
guidelines. Pursuant to the WSI Purchase Agreement, WSI and Greenwich made
certain representations and warranties concerning such loans to ICIFC, including
that none of the mortgage loans were originated, brokered, owned or sold by any
of the independent brokers identified by WSI as connected to the fraud
allegations. Any breach of said representations and warranties would require
WSI (or Greenwich in the case of representations and warranties made by it) to
repurchase the loan and further hold ICIFC harmless in connection therewith.
OTHER MATTERS
The Manager
On July 31, 1997, Thomas O. Markel resigned as President and a director of
Imperial Credit Advisors, Inc. ("ICAI"), a wholly owned subsidiary of Imperial
Credit Industries, Inc. ("ICII") and the Company's manager. The Company does
not believe that Mr. Markel's resignation will affect its operations or the
obligations of either ICAI or ICII to the Company under the management agreement
between the Company and ICAI (the "Management Agreement") or ICAI's
Submanagement Agreement with ICII.
IMH and ICII intend to negotiate the termination of the Management
Agreement. IMH is required to pay ICII a fee upon such termination. The fee may
be paid in shares of registered IMH Common Stock, other securities, in cash, or
a combination of the foregoing. If such termination occurs, the Company may
enter into a new
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management agreement with RAI. RAI is owned one-third by each of Messrs.
Tomkinson, Ashmore and Johnson. The consummation of the transaction is
conditioned on several factors including negotiation of major terms of the
transaction, execution of formal documentation and approval of the disinterested
and unaffiliated members of the Board of Directors of each of IMH and ICII.
There can be no assurance that this transaction will be consummated and even if
consummated, the Company cannot currently determine the amount of the
termination fee or the form of consideration with which it will be paid. All
shares and per share information in this Prospectus Supplement excludes any
shares issuable pursuant to these transactions.
Name Changes of Company and Related Entities
The Company intends to change the names of each of Imperial Credit Mortgage
Holdings, Inc., ICI Funding Corporation and Imperial Warehouse Lending Group,
Inc. to names which do not contain the word "Imperial," the phrase "Imperial
Credit" or the initials "ICI." The changes are intended to distinguish the
Company from "Imperial Credit Industries, Inc." and its affiliates. Such change
is subject to approval by the stockholders of each of IMH, ICIFC and IWLG.
Facilities
On August 27, 1997, IMH/ICH Dove Street, LLC, a California limited
liability company, of which each of IMH and ICH own a 50% interest, purchased an
office building in Newport Beach, California, with approximately 73,791 rentable
square footage. IMH and ICH intend to relocate their headquarters to the
building over the next two year period.
Residual Interests in Securitizations
ICIFC currently holds certain residual interests in securitizations of
primarily REMICs which it originally purchased from ICII. ICII has agreed to
reimburse ICIFC for certain losses related to such residual interests.
Legal Matters
A financial institution has contended that it has a claim against the
Company in connection with certain communications between the Company and the
financial institution regarding a certain mortgage broker and transactions
involving that mortgage broker. No lawsuit has been filed and no damages have
been alleged. The Company believes that these contentions are without merit,
and if a lawsuit is ever filed, it will be vigorously defended.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMPERIAL CREDIT MORTGAGE HOLDINGS, INC.
By /s/ Richard J. Johnson
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Richard J. Johnson
Chief Financial Officer
Date: October 15, 1997
