Walter Investment Management (WAC) posted a second-quarter net loss of $12.9 million, or $0.34 per diluted share, which includes charges related to goodwill impairment in the reverse mortgage segment and reductions in the fair value of the company's servicing rights related to changes in valuation inputs.
Net income adjusted to reflect these items came in at $45 million, or $1.19 per diluted share, compared to net income of $88.6 million, or $2.36 per diluted share, in the second quarter of 2013.
The main performance differences from a year ago were driven by strong operating results in the originations segment in the second quarter of 2013 due to HARP related retention volumes and margins.
But it is not all bad news, second-quarter numbers reflect improved results from the first quarter of 2014 in the originations segment and receipt of performance related fees in the investment management business.
“Our Originations segment increased AEBITDA by 138% as compared to the first quarter, originating more than 16,000 HARP loans in the second quarter. In addition, our investment management business recorded significant performance fees in the quarter and in July we completed the initial funding of WCO representing the foundation for future growth in assets under management in this business," said Mark O'Brien, Walter Investment's chairman and CEO.
The servicing segment generated revenue of $127.8 million in the second quarter of 2014, which included $174.9 million of gross servicing fees, $25.6 million of incentive and performance-based fees and $19.2 million of ancillary and other fees.
Meanwhile, the originations segment generated revenue of $150.3 million in the second quarter, driven primarily by the consumer lending channel, while the reverse mortgage segment generated revenue of $38.7 million for the quarter.
"We believe the combination of strong execution against our strategic plan coupled with ensuring each of our businesses embraces and drives a culture of compliance and positive consumer experience will provide benefits to each of our core constituencies: consumers; clients; our stakeholders; and regulators," continued O'Brien.