[Update] Walter Investment Management Buys Security One for Up to $31 Million

Walter Investment Management Corp (NYSE: WAC) announced on Monday it has signed an agreement to acquire all of the stock of Security One Lending (S1L) in a deal valued at up to $31 million in cash.

The purchase price consists of $20 million in cash paid at the time of signing and up to $11 million to be paid upon the achievement by S1L of designated performance parameters over the course of the next 12 months. The acquisition represents a 2X multiple of S1L’s EBITDA and approximately 1.2X projected pro forma 2013 EBITDA, according to Walter Investment.

Through the deal, WAC acquires a strong retail brand and a sales force of more than 400 originators and branches across the U.S. During fiscal year 2013, Security One Lending is the largest originator of reverse mortgages in the country, according to data from the Department of Housing and Urban Development. The company in 2012 hired more than 100 former MetLife loan originators after MetLife announced it was getting out of the reverse mortgage business.

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The deal is the second reverse mortgage acquisition for WAC, which acquired Reverse Mortgage Solutions, a servicer and issuer of reverse mortgages for $122 million in November 2012.

“We are extremely pleased to add the S1L business to the Walter Investment portfolio,” said Mark J. O’Brien, Chairman and CEO of Walter Investment. “The addition is a key step in achieving our previously stated goal of increasing the retail mix of RMS originations business. This acquisition will create a combined platform with a diverse set of established originations channels without significant overlap.”

The deal is expected to close in the first quarter of 2013.

More updates as we get them.

Note: Updates have been made in paragraph one to reflect that the acquisition will be a stock transaction with WAC acquiring all of the stock of S1L. 

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  • This is great news for HUD qualified mortgagees. The ripple impact to TPOs seems good as well. This may result in HUD qualified mortgagees acquiring their best TPOs to improve their likelihood of acquisition.

    So will this mean that with the S1L transaction, all boats rise when the tide comes in? If so, was S1L sale valued too low and sold too early?

  • John,

    Was this a stock or an asset/turnkey business operation sale? If the former, that means Walter Investment has not only acquired the assets and operations of S1L but its contingent liabilities for T & I defaults as well.

    One also wonders if the very poor origination results of the RMS group necessitated this acquisition with some negative impact on the the sales price of the RMS transaction.

    As usual all we see and the industry reports is the tip of the iceberg and in many cases much less. This is not a stab against RMD but a rather pointed statement that we in the industry really have no idea about what really motivates such transactions at almost any level.

      • John,

        Thanks for the change.

        It has been confirmed through S1L senior management that it is indeed an all stock deal which is somewhat surprising.

        This portion is nothing more than conjecture and hearsay but it seems as if the Walter Investment Group and RMS senior management realized the difficulty for RMS to create a strong origination core so they went out shopping for a strong origination team which they believed compatible with their existing group. S1L seemed to meet that objective.

        Why I say that is surprising is the unknown contingent liabilities S1L might have for T & I defaults and other GNMA on down the road on the HECMs it has previously “sold” to HMBS issuers. Just conservatively projecting that number is somewhat sobering.

        Pushing the contingent liabilility aside, this seems like a good fit for S1L and WIM for now and in the future.

  • $31 million in cash, in my opinion, it is not a good deal since there are several factors to rethink. With strong retail brand and a sales force of more than 400 originators and branches across the U.S, they can ask for more, not just the mentioned amount. But is it confirmed and tested before announcing the price?

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