Reverse Mortgage Solutions (RMS) will continue its operations during its bankruptcy proceedings due to financing secured by its parent company, Ditech Holding Corporation, according to a new 8-K filing by Ditech with the Securities and Exchange Commission (SEC).
According to the filing, the bankruptcy court approved an order for Ditech’s debtor-in-possession (DIP) facilities, allowing Ditech and some of its subsidiaries to gain access to up to $1.9 billion in available financing. Among those subsidiaries is RMS.
Up to $1 billion will be available to fund RMS’ buyouts of, “certain Home Equity Conversion Mortgages (“HECMs”) and real estate owned from Ginnie Mae securitization pools” under an arrangement they call the “reverse repo agreement.” The proceeds of the initial draw on this were used to, among other things, “pay off RMS’s previously existing master repurchase agreements and purchase the HECMs and related real estate owned previously financed by RMS thereunder,” the filing reads.
The lenders have also agreed, “to work towards documenting, within thirty (30) days following the closing date of the DIP Facilities, a separate master repurchase agreement with RMS” which will be used to fund RMS’ Ginnie Mae HMBS tail securities. Such an additional repurchase agreement is contemplated, “to provide for an advance rate of 92 percent and a maximum committed sublimit of $80 million. Any amounts drawn under such repurchase agreement would reduce the amount otherwise available to be drawn by RMS.”
On the heels of this month’s bankruptcy filing, RMS assured its customers that it will continue operations while bankruptcy proceedings are taking place. “The restructuring process has not changed your reverse mortgage, and should not change the scheduled or unscheduled draw process,” RMS said in a letter to customers.
All these events follow a long odyssey of financial woes for RMS and its parent company, which was delisted from the New York Stock Exchange (NYSE) following warnings that stemmed from its failure to meet the NYSE listing standard in 2018 following its first bankruptcy filing earlier that year. Last month, Ditech stated that it elected not to make an approximately $9 million cash interest payment to its creditors in December 2018, putting the company at risk of default.