WSFS Closing Reverse Mortgage Subsidiary After Earnings Announcement

WSFS Financial Corporation, the parent company of WSFS Bank, reported a quarterly loss per common share of $0.50 and net loss of $2.3 million compared to diluted earnings per common share of $1.07 and net income of $6.7 million for the second quarter of 2008.

Included in its earnings announcement is that it’s conducting an early wind down of 1st Reverse Financial Services, the company’s reverse mortgage subsidiary.

In late April 2008, WSFS acquired a majority stake in 1st Reverse Financial Services, LLC.  During the second quarter of 2009, 1st Reverse reported a pre-tax loss of $152,000, compared to a pre-tax loss of $586,000 for the first quarter of 2009.  1st Reverse recorded $654,000 in fee income during the second quarter, an increase of $98,000, over the first quarter of 2009. Expenses were $806,000 during the second quarter, $336,000 below the first quarter of 2009.

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"Despite the improved results, the subsidiary has still not reached breakeven levels, and in the current economic climate, prospects for achieving required returns are weak,” said Mark A. Turner, President and CEO of WSFS. “As a result, WSFS has made the decision to conduct an orderly wind-down of this start-up initiative."

As a result of this decision, during the quarter WSFS recorded an additional $1.6 million pre-tax charge related to the wind-down of 1st Reverse including the write-off of all related goodwill and intangibles, outstanding intercompany receivables and its remaining investment in this subsidiary.

Mr. Turner continued, "WSFS remains committed to the reverse mortgage product and will continue to originate reverse mortgages through its Delaware-based retail franchise. This group has been the top reverse mortgage originator in Delaware for the past year and a half."

Another interesting note from the announcement, WSFS had $953,000 in expenses related to due diligence on an acquisition prospect.  Sources close to WSFS told RMD that the company was in discussions to acquire the Senior Lending Network but the deal fell through towards the end.

WSFS Reports 2nd Quarter ’09 Results

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  • This is sad news. Ralph is a true professional, one of our industry's finest, and doesn't deserve to be dumped like this.
    That said, we as an industry have to be concerned about two significant lenders (Senior Lending Network and now 1st Reverse) being shut down by their bank parent company in less than a month. My biggest fear now is this could add more fuel to the fire for McCaskill's “witch hunt”, the GAO, HUD auditors (re: Financial Freedom's recent review in Teaxas), and others that feel compelled to over react to everything.

  • For many the handwriting was on the wall when first qtr 2009 losses were announced. This shut down does not appear to be anything other than an economic decision. It is hard for management to hang on to lossing operations without some kind of financial benefit offsetting it.

    It is, however, sad to see an active industry participant having to shut down operations especially in a business and political atmosphere like there is right now. First SLN, now 1st Reverse.

    We wish all of the employees the best and hope they all land on their feet.

  • I have heard that they were changing some info on the application prior to the six month period so they can get a new case # and a new appraisal right away.

  • If you are a Reverse Mortgage Consultant working for 1st. Reverse in California one of largest reverse mortgage organization could be your new home.
    Call LC at 800-224-6015

  • As a correspondent lender for 1st Reverse, I’m deeply indebted to Ralph and his highly trained team of professionals. They really trained me well and gave me the confidence to continue in the RM business.

    Thank you Ralph, Andy, Dennis, and all of you at 1st Reverse and good luck !! You too Kevin.

  • As a correspondent lender for 1st Reverse, I’m deeply indebted to Ralph and his highly trained team of professionals. They really trained me well and gave me the confidence to continue in the RM business. Thank you Ralph, Andy, Dennis, and all of you at 1st Reverse and good luck !! You too Kevin.

  • What is the outlook for 1st Reverse? Will Ralph be permitted to restructure 1st Reverse outside of the WSFS enterprise? One reverse mortgage mid-sized lender was able to do that and in less than 9 months like the mythical phoenix became a much larger player in the reverse mortgage space. I hope 1st Reverse management is looking at this as an opportunity rather than as a setback.

  • My thanks to Ralph, Dave, Terry, Andy, Larry and all the others at 1st Reverse who trained me, a former housing counselor, to originate loans. It's a shame when good, credible companies can't turn a profit.

  • It seems there is a common element here with SLN and 1st Reverse which is wholesale. It just doesn’t make money and distracts an organization from their core business model which is retail. I get it, retail may not be as glamorous as wholesale because its more of a challenge to produce real volume ,but it makes much more money and should not be ignored. Another example is JB Nutter, wholesale just doesn’t make sense.

  • Mark Turner pulled the plug to quickly. Volume was growing and 1st Reverse's reputation for working with the “little guys” was the last bastion of hope for the smaller wholesale lenders that the “big guys” won't touch now. If given a bit more time, I believe WSFS would have seen a good profit and become a major player in the industry.

    Mr. Rizzo: If there are no wholesale channels, the big lenders are able to corner the market, and the “little guys” wouldn't even have the option to offer this excellent senior resource. Then you get stuck with companies that are so cocky, that customer service goes by the wayside. Yes, wholesale lenders are harder to work with due to their different levels of experience and submitting not-so-clean files, but hard work never hurt anyone. btw, Mr. Rizzo, check your numbers. There is a lot of money to be had working with wholesale. And let keep our eye on the ball; it's about seniors, not just money.

    • iluvrms,
      I appreciate your commetns regarding the little guy having an outlet for the HECM. It truly is about helping seniors, however, let's also be real with each other…if a wholesale company, such as 1st Reverse or SLN, is losing money on their whoelsale business because the margins are so tight, it is nearly impossible to sustain the business unless you have a tremendous ability to service your portfolio and keep the loans on your books until the secondary markets improve. Truth is, companies like Metlife are going to be one of the last wholesalers standing until the investor pool opens up again and someone starts buying this product and stops lumping it in with other “mortgage related products” My statement was not meant to disparage anyone, only to speak the truth…wholesale is NOT a great market today and unfortunately, most companies do not have the financial ability to ride the wave right now. Companies need to know who they are and what made them successful and do everything they can to survive…that is the bottom line.

  • WSFS. People call them “wisfis”. I call them “Wusses” for pulling the plug like that. 1st reverse was on the way to profitability unless there is something that the general public does not know. Glad they lost $953,000 on the SLN deal. Serves them right. They know how to waste peoples time. Good luck in the tank Wusses….Dont mean to sound bitter but this nonsense needs to stop. How many boats do you need??? How much money is enough???

  • Sorry to see 1st Reverse go. More wholesalers will be going down also because wholesale has been undercutting the big retail guys with lower than reality orig and servicing fees. There was no way they could sustain themselves with the undercutting they were doing.

  • The wholesalers have been undercutting the big boys with unreasonable orig and servicing fees. It is no surprise that they could not sustain themselves.

  • It's sad for more folks to lose their jobs in this tough market…because if they want to stay in the mortgage field they really have very few places to go. Good luck to all!

    On the other hand, I'm really not surprised that the parent company cut them off. If you take the time to look into the backgrounds of the top 3 executives…none, I repeat, NONE have a track record of profitability in ANY venture they have been involved in while holding a management position. Now that is the sad part!

  • It’s sad for more folks to lose their jobs in this tough market…because if they want to stay in the mortgage field they really have very few places to go. Good luck to all! rnrnOn the other hand, I’m really not surprised that the parent company cut them off. If you take the time to look into the backgrounds of the top 3 executives…none, I repeat, NONE have a track record of profitability in ANY venture they have been involved in while holding a management position. Now that is the sad part!

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