Walter Takes Retail Focus in New Reverse Mortgage Landscape

Despite the near-term uncertainties arising from recent changes to the Home Equity Conversion Mortgage (HECM) program, Walter Investment Management Corp. (NYSE: WAC) is holding true to its reverse mortgage business and seeing sizable growth opportunity over the long-term, according to company executives during a conference last week.

“The reverse mortgage business continues to suffer a bit from the changes in the regulatory environment,” said Walter’ Chief Financial Officer Gary Tillett during the company’s presentation at Barclays’ 2014 Global Financial Services Conference. “Servicing protocols are up, so we’re strengthening the servicing protocols and putting up costs against that. And primarily, with the change in the product, we’re seeing pricing moving up and less upfront profitability.”

Given the changing landscape fueled by the new program rules that took effect early August, Walter says it’s going to invest more heavily in the retail side of its reverse segment, including both “boots on the ground” and its consumer direct channel, Tillett added.

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During the second quarter of 2014, Walter originated approximately $299 million in unpaid principal balance for its reverse mortgage segment. The non-bank servicer, which is the parent company of Security One Lending and Reverse Mortgage Solutions, is also the largest securitzer of HECMs, having issued $359 million of HECM securitizations during the quarter.

When compared to the same period a year ago, Walter’s reverse mortgage origination business reported net losses totalling approximately $4 million. In efforts to shore up the losses suffered to this segment of the its business, the company has noted several times that it has revised its strategy and operating models that it believes better fits the new regulatory environment.

“We’re focusing on retail and refinement of the servicing platforms and managing servicing costs as we continue to make those changes,” said Tillett. “Our mid- to long-term outlook for the reverse business is positive, focusing on the strong demographics that fit that product.”

Written by Jason Oliva

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  • In my opinion, the company “suffered 4 million dollars in losses” because, number one, our industry (and its trade association) failed to inform and then guide the actions of HUD and the burgeoning regulatory bureaucracy on matters of social policy, the economic realities of the present, the true causes of the program’s insurance losses and the dangers of allowing investor overlays that exceed the programs legislated parameters which exacerbate the confusion and uncertainty that renders the consumer unable to make a decision.
    Number two, Hud’s leadership has been granted the authority to act without the counterbalance of Congressional oversight which, if nothing less, slows down the implementation of regulatory changes long enough to allow intelligent comment and input.
    We are, as we speak, squandering a once in a lifetime opportunity to capitalize on artificially low rates to advance our productivity because we have left the decision making to HUD and the CFPB both of which have occupied our time and distracted us from addressing the true needs of America’s senior homeowners.
    In my humble opinion.

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