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Reverse Mortgage Solutions Records $29.6M Loss as Ginnie Mae Buyouts Rise

Reverse Mortgage Solutions recorded $29.6 million in pre-tax losses during the second quarter of 2018, with management at its parent company in part blaming high costs associated with Ginnie Mae buyouts.

In addition to elevated fair value losses, Ditech Holding Corporation (NYSE: DHCP) pointed to an extra $9.7 million in borrowing costs related to mandatory buyouts of Ginnie Mae securities as a key reason for the reverse segment’s lackluster second quarter.

“We are proactively managing buyouts in the reverse segment to continue to stabilize the business,” chief financial officer Jerry Lombardo said on the company’s earnings call last week.

The Fort Washington, Pa.-based company’s second quarter reverse performance marks a decline from this time last year, when RMS had $13.6 million in pre-tax losses.

Quarterly reverse mortgage revenues of $5.8 million were also down from the second quarter of last year, when RMS generated $15.4 million in revenues.

“We plan to continue to evaluate strategic options around more favorable financing terms of reverse Ginnie Mae buyouts,” Lombardo said.  “We expect this buyout activity to peak in 2019.”

Formerly a subsidiary of Walter Investment Management Corporation, RMS came under the Ditech banner in February, when Walter emerged from Chapter 11 bankruptcy protection. Once a key player in the Home Equity Conversion Mortgage origination space, RMS has existed as a servicing entity since January 2017, when Walter shuttered its lending operations — along with fellow subsidiary Security One Lending, which was eliminated completely.

Walter had purchased RMS for $122 million in the fall of 2012, and acquired Security One for up to $31 million the following spring.

Under its current ownership, RMS had a portfolio of 98,895 servicing accounts as of June 30, with overall unpaid principal balance of $18.8 billion.

Written by Alex Spanko