Walter Sees Record Q1 Earnings, Strong Reverse Mortgage Potential

Walter Investment Management Corp. (NYSE: WAC) today reported a net income for the first quarter of $27.7 million, or $0.73 per diluted share, an increase compared to net a income of $5.1 million, or $0.17 per diluted share, recorded in the same quarter a year ago.

Having entered the reverse mortgage space in November 2012 with the purchase of Reverse Mortgage Solutions, Inc. for $122 million, Walter said in discussing its performance that it remains committed to building its reverse business with a strong outlook on the horizon.

“The reverse mortgage segment is expected to continue to add meaningful profitability and growth for the company,” said Charles Cauthen, Walter’s chief financial officer and chief operating officer during a call with analysts.

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Since its entry into the market, the company has seen “solid contributions” stemming from its reverse mortgage segment, which generated a revenue of $14.1 million in the first quarter of 2013.

This included $6.7 million in servicing fees, $4.4 million in gain on sale revenue and $2.9 million of net other revenue, according to the company.

“The reverse mortgage business is making a strong contribution to earnings, reporting solid cash gains in sales margins for the quarter,” said CEO Mark J. O’Brien during the call.

The reverse segment also included a $36.8 million gain from the net impact of Home Equity Conversion Mortgage (HECM) loans and HECM-backed mortgage securities (HBMS).

Walter’s acquisition of Security One Lending earlier this year helped deliver a “record quarter” for the company’s reverse mortgage business, according to O’Brien.

Servicing acquisitions also led to solid growth during the quarter, executives said.

In October 2012, Walter was awarded a $3 billion joint-bid with Ocwen Loan Servicing, LLC, to acquire the mortgage servicing and origination platform of Residential Capital, which it said generated $74.1 million of net gains on the sales of loans in the first quarter.

Other highlights included an April announcement that Walter’s subsidiary, Reverse Mortgage Solutions, Inc., acquired a $12.2 billion UPB reverse mortgage servicing portfolio from Wells Fargo.

The portfolio of more than 76,000 loans is expected to transfer to RMS during the third quarter of 2013, the company said.

Core earnings for the quarter was $56.5 million after taxes, or $1.50 per diluted share, a 174% increase compared to the same quarter of last year, and 151% greater than the fourth quarter of 2012.

Walter reaffirmed its previously provided AEBITDA range for 2013 of $650 to $725 million. The company also estimates after tax core earnings per share of $5.06 for the year.

Written by Jason Oliva

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