Walter Investment Posts $10.4 Million Loss in Reverse Mortgage Business

Walter Investment Management Corp. (NYSE: WAC) reported a rough start to 2016, for both its overall business as well as its reverse mortgage segment.

For the first quarter ended March 31, 2016, Walter Investment posted a net loss of $172.7 million, or $4.85 per share, compared to a net loss of approximately $31 million, or $0.82 per share, for the first quarter of 2015.

As for the company’s reverse mortgage business, Walter reported an adjusted net loss of $10.4 million for the first quarter of 2016, reflecting the impact of lower gain on sale revenues, which the company attributed to lower volumes and a reduction in net servicing revenues and fees.

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“Our reverse segment continues to be impacted by lower gain on sales revenues, as well as the continued elevation of expenses related to regulatory changes, including the issuance of a Mortgagee Letter beginning in April of 2015, which changed the timing and scope of those properties being moved into a due and payable status,”said Walter Investment CEO Denmar Dixon during an earnings call Tuesday morning.

These changes, along with the maturing of the portfolio, Dixon added, resulted in the “largest number of loans” entering this process in the company’s history during the first quarter of 2016.

“The reverse segment experienced another challenging quarter with results reflecting the impact of significantly reduced originations volumes and continued elevated expenses driven by increased defaulted mortgage activity resulting from 2015 regulatory changes,” said Walter’s Chief Financial Officer Gary Tillett.

Despite these “disappointing results,” Walter’s executive management said it continues to believe in the value of its reverse business, which comprises top-10 industry lender Reverse Mortgage Solutions, Inc., and that the company is taking steps to drive “meaningful improvement to the business.”

Such steps include continuing to strengthen Walter’s management team, enhancing sales operations to drive increased consumer channel volumes, and maintaining a disciplined approach to its investments in the company’s correspondent and wholesale channels.

When asked during the Question & Answer portion of Tuesday’s earnings call whether Walter would consider a sale of its reverse mortgage business, the company reiterated its previously stated position that while it is open to creating value through strategic opportunities, Walter remains committed to building-out and improving upon its reverse operations.

“We are open, as we are with all our business, to being opportunistic around our ability to take advantage of more strategic opportunities,” Dixon said. “I think there is a lot happening in the reverse sector as we speak. Like we said, we think we’ve got one of the leading franchises, so we will have an eye toward what we can do there to accelerate the pace of change.”

“It is clear to us that a reduction of some of the assets on the balance sheet from that business would be a positive,” Dixon added. “We are looking at alternatives, but our primary focus is on running the business and building the operations out.”

Written by Jason Oliva

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  • Makes you wonder how long some of these companies will stick it out with reverse. Would like to hear the numbers of the companies who heavily advertise on television. It cannot be pretty.

  • Walter has yet to report net income from its reverse operations. As one of the nation’s leading HECM lenders, RMS keeps doing poorly. There has yet to be any substance supporting the optimism of management. To believe that Walter can turn things around in the continuing erosion in endorsement volume is faith misplaced. It is hard to believe that there are no cracks in the support of the Board of Directors.

    Walter’s financial data is the tip of the iceberg.

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