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.
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