CONSULTING AGREEMENT

Exhibit 10.1

CONSULTING AGREEMENT

This Consulting Agreement (“Consulting Agreement”) is made and entered into with an effective date of December 3, 2007, (“Effective Date”), by and between Impac Funding Corporation, a California corporation (“Company” or “Impac”), and Impac’s guarantor, Impac Mortgage Holdings, Inc., a Maryland corporation (“Guarantor”) and Gretchen Verdugo (“Consultant” or “Verdugo”) (collectively “the parties”) with reference to the following facts and intentions.

RECITALS

A.            Consultant and Company are parties to an Employment Agreement entered into and made effective May 1, 2006 (“Employment Agreement”), whereby Verdugo was employed as the Executive Vice President, Chief Financial Officer (“CFO”) for Impac.

B.            The above-referenced Employment Agreement has now been terminated and the parties agree that there are no further, other or outstanding obligations remaining with respect to the Employment Agreement, other than certain Consultant’s obligations pursuant to the Proprietary Rights and Inventions Agreement that was entered into as part of the Employment Agreement, as relate to post-termination obligations as set forth in the Separation Agreement among Impac and Verdugo (“the Separation Agreement”).  Additionally, Impac remains bound by all rights to Indemnification to Verdugo as set forth in the Separation Agreement, as well as the Guaranty contained in the Employment Agreement, which shall apply to Impac’s obligation to make payments as provided for in this Consulting Agreement.  Consultant and Company now desire a consulting relationship to be established pursuant to the terms specified herein.

            NOW THEREFORE, in consideration of the foregoing and mutual covenants and conditions hereinafter set forth, Consultant and Company agree as follows:

AGREEMENT

1.             Retention of Services .  The parties agree to enter into a consulting relationship whereby the Company has engaged the Consultant to assist the Company with respect to any litigation against the Company of which Consultant has any knowledge or in which she may be a witness.  This consulting relationship will commence on December 3, 2007 and will continue until such time as any such litigation is complete.

2.             Compensation .  During the term of the consulting relationship, Consultant will be paid a total of $200,000.00, made payable in equal, bi-monthly payments over the course of the initial six months of the consulting relationship.  The first payment shall be delivered upon execution of this agreement. Payment will be made jointly to Gretchen Verdugo and the law firm of Allred Maroko & Goldberg without withholding or offset.  These payments are compensation to which Consultant would not otherwise be entitled and constitute good and valuable consideration for the provision of her consulting services and other obligations identified herein.  These payments are also subject to the Guaranty that was entered with Verdugo in conjunction with her Employment Agreement with Impac, dated May 1, 2006, a true and correct copy of which is attached hereto and incorporated herein as Exhibit A.  All of the Guarantor’s obligations

set forth in the Employment Agreement and its attachment shall apply equally to the obligations to make the payments called for herein.

3.             Reimbursement of Business Expenses.   During the period that Consultant performs consulting services hereunder, the Company shall reimburse Consultant for reasonable and necessary business expenses, including reasonable travel expenses, incurred by Consultant on behalf of the Company in connection with the performance of Consultant’s duties hereunder.

4.             Provision of Health Care and other Benefits .  Consultant will receive continuing health care benefits from the Company through and until May 31, 2008. Consultant will receive continuing life insurance, short term disability and long term disability benefits through and until May 31, 2008 as provided under the Employment Agreement that was terminated.  After May 31, 2008, Consultant will be eligible for COBRA benefits with respect to health care benefits.

5.             Consultant Free to Obtain Other Employment .  Consultant is free to seek and accept other consulting assignments and/or part-time or full time employment during the term of this Consulting Agreement.  Consultant’s relationship with the Company, including payment of the above-referenced compensation, as well as reimbursement of business expenses and provision of health care benefits, will continue regardless of whether Consultant obtains other consulting positions or part-time or full-time employment elsewhere. When Impac desires the consulting services of Verdugo, it will refrain from interfering in Verdugo’s other employment or income producing activity, or her pursuit of same.

6.             Independent Consultant Relationship .  Consultant’s relationship with the Company after the termination of her employment will be that of an independent Consultant, and nothing in this Consulting Agreement is intended to, nor should be construed to, create a partnership, agency, joint venture or employment relationship following the termination of the Employment Agreement.  Consultant will not be entitled to the benefits that the Company may make