Walter Taking Steps Toward Chapter 11, But RMS Spared

Walter Investment Management Corporation (NYSE: WAC) on Friday announced a plan to pursue a corporate restructuring through a prepackaged Chapter 11 plan, but subsidiary Reverse Mortgage Solutions, Inc. won’t be involved.

In a late-night press release, the Fort Washington, Pa.-based firm said it entered into a restructuring support agreement (RSA) with its noteholders to pursue the Chapter 11 option, with a formal solicitation of votes expected next month. The goal, Walter said, is to reduce its outstanding debt by about $700 million and focus on its core businesses — which include reverse mortgage servicing through RMS.

“We are making significant progress transforming our business, and the financial restructuring contemplated by the agreements we have reached with our lenders and noteholders are a key part of our plans,” Walter president and CEO Anthony Renzi said in a statement. “Through these agreements, we expect to quickly restructure our debt while ensuring that businesses will continue as normal.”

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RMS and another Walter subsidiary, Ditech Financial, LLC, will not be part of the Chapter 11 process and will continue operations as normal, the company said.

Walter laid out a quick timeline for the plan, with the initial filing slated for November and a completion deadline of January 31, 2018.

A shaky year

The troubled servicer had hinted that a prepackaged chapter 11 bankruptcy plan was possible amid ongoing financial woes: Earlier this year, Walter had to admit that some of its financial filings were inaccurate and could not be relied upon, and received delisting warnings from the New York Stock Exchange due to its consistently low stock prices.

Walter kicked off 2017 by exiting the Home Equity Conversion Mortgage origination business in January, leaving RMS as a servicing entity only. That was a quick turnaround from 2012, when Walter bought RMS for $120 million and hinted at big plans for its new HECM arm.

“The sector has very attractive long-term growth prospects and is currently undergoing significant structural change, providing us with an opportunity to capitalize on those dynamics,” then-CEO Mark O’Brien said at the time. 

The company also bought Security One Lending for up to $31 million the following year; Security One was shuttered as part of the overall reverse mortgage exit in January.

Together, RMS and Security One turned in 1,996 loans in 2016, good for seventh place in the industry according to Reverse Market Insight.

Written by Alex Spanko

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  • Even their auditors knew that the investment in S1L and RMS was money thrown on a fire. Between 2014 and 2015, the auditors required Walter to write off all $138.8 million in Goodwill related to the acquisitions of both RMS in 2012 and S1L in 2013; however, this was just one small part of the losses it has incurred since February 2013. Their reverse mortgage operating losses, again a small part of their overall losses, were horrendous by reverse mortgage lender standards.

    Despite all of the overoptimistic statements made by the Walter executive management in the last 5 years, their predictions of growth through reverse mortgages proved their inexperience with the product and their lack of due diligence in acquiring both entities. Watching their stock drop from $48.81 on February 15, 2013 to $0.55 as of Friday has been torturous. Let us say I am glad I never bought shares in the company.

    No doubt WIMC (Walter Investment Management Corporation) executive management thought reverse mortgage endorsements would improve after the losses incurred in fiscal years 2010 through 2012. They were right as to one year as endorsements improved slightly during fiscal 2013 one year but unfortunately that was the first year of our current secular stagnation cycle.

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