Walter Investment Management Corp. (NYSEAMEX: WAC) last week commended the Federal Housing Administration on its plans to implement a moratorium on fixed-rate full-draw reverse mortgage loans and said the changes are unlikely to have an adverse impact on loan volume.
“We had anticipated this week’s announced moratorium on the Full-draw HECM Reverse Mortgage product and have already begun moving customers towards other FHA HECM products,” said Mark O’Brien, Walter chairman and CEO. “We applaud Commissioner Galante and the FHA for taking actions to reduce risk to both the FHA and borrowers and believe these actions will, in fact, help improve and sustain what is a very important mortgage product. We believe the reverse mortgage sector remains a very attractive growth opportunity for Walter Investment.”
Walter, which recently purchased Reverse Mortgage Solutions (RMS) for $122 million indicates roughly 90% of RMS’s loans in 2012 were of the full-draw fixed-rate type. The company expects loan volume will not be impacted as borrowers shift from the fixed rate standard to the other reverse mortgage types that are still available.
“While the Company expects the transition of borrowers to the HECM Variable Rate Standard and HECM Fixed Rate and Variable Saver products will likely result in a reduction to the average size of the initial draws for these borrowers, it anticipates that the impact to Reverse Mortgage Solutions’ overall origination volume will not be significant, as demand for the reverse mortgage product is largely needs-based and less driven by the product’s interest features,” the company stated.
Walter executives made similar statements of support during a call with investors and analysts on Friday.
“We believe the transition of the product from the full draw HECM to the fixed and variable rate saver and adjustable rate will be an easy one,” O’Brien said. “History will demonstrate the consumer has made this transition in the past and will do so again in the future. The economic future of the product will be as good as past of the product.”
The executives also stated their support for additional program changes currently under discussion by FHA including a financial assessment of borrowers and the creation of set-asides for tax and insurance payments.
Written by Elizabeth Ecker