Walter Investment Management Corporation (NYSE:WAC) cited the strong performance of its reverse mortgage holdings as a contributing factor in the company’s “record” first quarter earnings in a Wednesday presentation at the Morgan Stanley Financial Conference.
The company’s reverse portfolio had strong first quarter origination volume and margins, said Walter’s presentation for the New York City event, after reporting “record financial results” including a total net income of $27.7 million in Q1 following the November 2012 purchase of Reverse Mortgage Solutions, Inc. for $122 million.
The reverse mortgage segment generated revenue of $14.1 million in the first quarter, according to the company’s earnings report.
Walter counted reverse mortgages, along with originations and servicing, as one of its core businesses that had “continued strong performance” in the first quarter.
“[Walter is] positioned well to continue capitalization on the robust opportunities across the speciality mortgage sector,” it said in the presentation.
In the second quarter, the reverse mortgage industry will be transitioning from a fixed rate to an adjustable rate product, Walter noted, adding that regulatory scrutiny and changes “are beneficial to [the] long-term prospects of [the] sector” and that demographics continue to favor the long-term growth of the product.
The U.S. House of Representatives on Wednesday passed the Reverse Mortgage Stabilization Act of 2013 authorizing the Department of Housing and Urban Development (HUD) to make changes to the Home Equity Conversion Mortgage program by mortgagee letter, thereby allowing HUD to bypass the standard rule making process for substantial program changes beneficial to borrowers and the Federal Housing Administration’s Mutual Mortgage Insurance Fund.
Walter’s focus on sustainable, profitable growth is boosted by a differentiated operating model that features reverse mortgage and originations business, the presentation noted, and the addition of this business has further diversified the company’s revenue streams.
“[Walter’s] reverse and ancillary business are performing well [as] diversified fee-based revenue streams,” the company said.
Written by Alyssa Gerace