Bullish on Reverse Business, Walter Outlines More Growth Potential

On the heels of announcing a partnership with an investor group that acquired reverse mortgage company Urban Financial Group in August, Walter Investment Management Corp. (NYSE: WAC) told shareholders it will continue to drive growth in its reverse division in light of upcoming product changes. 

“We will work to continue to increase the retail portion of our product mix, following up on the progress we have made so far,” said Walter Executive Vice President Denmar Dixon on a conference call to discuss second quarter company earnings. “We anticipate solid volumes for the year with an expected ramp-up throughout the year as the market transitions to new products and absorb some likely product modification coming from FHA.”

The company has been bullish on reverse mortgages since acquiring Reverse Mortgage Solutions for $122 million last year, and the subsequent purchase of Security One Lending for up to $31 million. 

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With retail originations, servicing rights, closed loan and HMBS channels, the company says its reverse mortgage participation will continue to grow following whatever market changes take place, though margins may decline short term pending changes expected from FHA. 

The changes, for which FHA received authority under a reverse mortgage reform bill this month, are expected to be defined by HUD some time in August and implemented by October 1. 

“Margins are expected to be slightly lower due to product mix changes,” Dixon said, noting a rising opportunity within the market for reverse mortgage securities. 

The company sees servicing as a growing opportunity as well, with the potential for additional consolidation opportunities. 

“We expect to continue to grow the servicing book through a combination of organic production, flow programs such as that executed with Urban and acquisitions,” Dixon said. “RMS’ position in the sector provides us with a very attractive platform for consolidation opportunities. We expect growth in our ARM business as it benefits from acquired portfolios and product expansion.”

Written by Elizabeth Ecker 

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  • The footprint of Walter is beginning to be seen more and more within our tiny industry. With over 1,000 employees within just the HECM industry, they seem hungry for even a larger slice of the pie.

  • I don’t know how anyone could be “bullish” on reverse mortgages in light of the changes promised by FHA. The financial-assessment requirement alone will drive prospective customers away, since many who could qualify can also qualify for lower interest rates and higher payouts with forward mortgages.

    • Richard,

      With your attitude, I advise you to start looking for a new job in a less volatile industry right now. With that bias, why wait?

      However, two things you forget. The first is that when demand is expected to go down in an industry, opportunities open for buyers of the businesses in that industry. The second point is that after implementation of the changes, reputation risk to lenders goes down. WIMC should feel bullish.

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