Walter’s Q3 Earnings Strong as Reverse Mortgage Market Share Grows

Reverse Mortgage Solutions’ parent company Walter Investment Management Corp. (NYSE:WAC) reported net income of $72.7 million for the third quarter ended Sept. 30, 2013 compared to $6.4 million the previous year, attributed to strong earnings growth in the company’s fast-growing servicing segment. 

The quarter’s reduced reverse mortgage earnings were attributed to recently-implemented changes to the federal Home Equity Conversion Mortgage program, with Walter seeing the reverse mortgage program as a long-term investment in light of those changes. The company cited higher volume of units serviced compared to the same quarter in 2012 as the company’s primary income growth driver.

Total revenues more than tripled from $149 million to nearly $489.2 million. Walter’s reverse mortgage segment generated revenue of $41.7 million in the third quarter, a 15% increase from the previous quarter.

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Revenues for the quarter included a $30.5 million gain from the net impact of HECM and related HMBS (HECM mortgage-backed securities) obligation fair value adjustments, $7 million in servicing fees, and $4.2 million of other revenue. The investor incurred $39.5 million of reverse mortgage-related expenses, down from $45.8 million of expenses the previous quarter. 

However, reverse mortgage core earnings before income taxes totaled $3.1 million, down from $15.9 million in the second quarter, while AEBITDA dropped from $16.9 million to $4.5 million. 

“The decline in core earnings before income taxes and AEBITDA (adjusted earnings before interest, taxes, depreciation, and amortization) as compared to the second quarter resulted from lower origination volumes associated with recently announced regulatory changes to the reverse product offerings and competitive factors in the reverse space,” said Walter in the earnings report. 

Walter reported gaining an additional 1% of market share in the third quarter, with ongoing plans to grow its share of the higher margin, retail originations market. 

View the third quarter earnings report. 

Written by Alyssa Gerace

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