Walter Says Reverse Business Returning to Profitability

Reverse mortgage servicer and origination company Walter Investment Management Corp. (NYSE: WAC) reported quarterly losses Thursday that sent its share price reeling, losing as much as 20% in value over the course of the trading day.

The company cited a 10% year-over-year decline in its reverse mortgage segment overall, as well as a 20% drop in funded origination volumes as compared to the second quarter of 2014.

It continues to take a positive outlook on the reverse business, however, noting progress toward profitability during the quarter.

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Walter executives also pointed to “irrational correspondent pricing,” and a shift in business from its higher volume correspondent channel to the lower volume, higher margin retail channel. Securities volumes were down 19% year-over-year, the company reported, resulting from a decline in correspondent originations. The company also noted a goodwill impairment charge it encountered previously resulting from its 2013 acquisition of Reverse Mortgage Solutions.

Despite the negative quarterly performance, however, Walter’s executives maintained a positive outlook for the reverse business in the coming quarters.

“Our reverse business has made progress toward returning to profitability,” said Mark J. O’Brien, Walter Investment’s chairman and CEO, in remarks prepared for the company’s quarterly earnings conference call with industry analysts.

Specifically, Walter executives point to the retail side of its reverse segment, having stated previously that the company will invest more heavily in this channel.

“Our reverse business has advanced its initiatives to aggressively grow the retail channel and is making progress in returning to profitability,” said Chief Financial Officer Gary Tillett, in the company’s earnings call.

However, executives said there is a possibility that Walter could offload certain non-core assets, including the reverse mortgage business.

When asked whether the company could sell the reverse mortgage business to a third party and retain the servicing, Chief Investment Officer Denmar Dixon responded, “Absolutely.”

“We’re looking to optimize the platform,” he said. “I think everything is on the table. [The reverse mortgage business] is a business that’s not, for lack of a better term, very balance sheet efficient for us.”

Emily Study contributed to this report.

Written by Elizabeth Ecker

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  • By the headline this sounds positive for the Reverse Mortgage business. Then you read the article. I will bet they are out of Reverse either totally or just servicing within the next 6 months if not sooner. If I was a start looking for a job now.

  • Someone the other day wrote about another shoe falling. Is this it? Is someone saying: “Absolutely?”

    Why do so many industries which are or have been in decline refuse to admit it? It does not matter if endorsement levels are going up if average revenues per unit produced have dropped as drastically as has happened in our little industry since September 30, 2012.

    Am I negative about the industry? Absolutely not but my eyes and ears are open. Verified facts speak for themselves. Besides, many originating lenders and TPOs can run profitably at very low average revenues per reverse mortgage but that does not mean that they have not seen their profits drop dramatically. While most other companies can hide their reverse mortgage business net income and losses, publicly traded companies like Walter and Ocwen cannot.

    I doubt if the concern over falling revenues will even be mentioned in any general session of the NRMLA Convention. But what I cannot get over is that there is no scheduled general session covering the results of the Extreme Summit and where we as an industry are going with it.

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