RMS Parent Receives Second Warning from NYSE

Embattled mortgage servicer Walter Investment Management Corporation (NYSE: WAC) received a second de-listing notification from the New York Stock Exchange, this time over a dwindling market capitalization.

The Fort Washington, Pa.-based Walter — which services reverse mortgages through its Reverse Mortgage Solutions arm — has seen its market capitalization sit below $50 million for 30 consecutive trading days, according to a company press release issued late Wednesday, while its total stockholders’ equity also fell below that amount. This violates rules laid out in NYSE’s listing manual, thus triggering a de-listing notice.

In response, Walter will provide the stock exchange with a business plan that maps out its path back into compliance with NYSE’s listing standards by February 2019. Once Walter produces the plan, which it intends to deliver by mid-September, NYSE has 45 days to determine whether the blueprint is feasible.

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“The Company intends to take steps to remedy the listing deficiencies in a timely manner,” Walter said in the release. “However, no assurance can be given that the Company will be able to regain compliance with the applicable listing standards or otherwise maintain compliance with the other continued listing standards.

This marks the second time in exactly a month that Walter has found its status on the exchange in jeopardy. In July, the servicer disclosed that it received a de-listing notice after its stock price fell below $1 for 30 consecutive trading days. Under that notice, the company was given six months to put together a 30-day average share price of at least $1 or more or face banishment from NYSE.

Walter’s stock closed Wednesday’s trading flat at $0.35 per share, with a reported market capitalization of about $14 million.

The company has faced significant headwinds in recent months, from the disclosure of an accounting error in May to an announcement earlier this month that it was pursuing an out-of-court restructuring plan to avoid potential bankruptcy. The latter bombshell led to a 30% drop in the price of WAC stock, according to investment website Seeking Alpha.

It’s a precipitous shift from November 2012, when Walter purchased RMS for $122 million — many times its current market capitalization — and reverse mortgage firm Security One Lending for up to $31 million the following year. Walter shuttered its origination business in January, though it continues to service existing loans through RMS.

Written by Alex Spanko

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  • Why Walter was tempted to come into this industry is hard to understand. If an outside company performed due diligence in their behalf, Walter has a potential source from which to recover some of the losses.

    If the management at Walter thought they were talented enough to absorb the activities of both RMS and S1L, they have proved they have not. I know several who bought shares in Walter at the time of the acquisitions and paid over 100 times its current price.

    The experience of Walter should be a warning to others looking to do as Walter. You cannot come into an industry that you have no experience managing and expect to do well. Walter to this industry is a tale of warning and woe.

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