Ditech Finds ‘Stalking Horse Bidder’ for Reverse Mortgage Solutions

Ditech Holding Corporation announced Tuesday that it has engaged in a court-supervised sale process for the stock and assets of Reverse Mortgage Solutions, Inc. (RMS) with Washington, D.C.-based Mortgage Assets Management, LLC, a company that oversees portfolios of mortgage servicing rights.

The forward mortgage servicing and origination business, Ditech Financial LLC, will be acquired by real estate investment firm New Residential.

In the sale arrangement, Mortgage Assets Management will serve as a “stalking horse bidder” in the court-supervised sale process, which means that the agreements in this instance are subject to better or higher offers.

“We believe the agreements with New Residential and Mortgage Assets position us to maximize value and create the best path forward for our stakeholders, including homeowners and customers,” said Thomas F. Marano, Chairman of the Board and Chief Executive Officer of Ditech Holding, in a press release announcing the sales. “I would like to thank all of our employees for their continued hard work and dedication. As a result of their efforts, we have continued serving our customers throughout our court-supervised process.”

In a letter written by RMS President Jeff Baker and posted to the company’s website, customers are assured that in spite of the impending auction and agreement with Mortgage Assets Management, they do not need to take any action and the status of their reverse mortgages has not changed.

“During the sale process, our operations are expected to continue as normal, as they have been throughout the Chapter 11 process,” Baker writes. “This sale process has not changed your reverse mortgage, and should not change the scheduled or unscheduled draw process.”

If other qualified bids for the assets up for auction are submitted, Ditech will conduct either one or multiple auctions with the New Residential and Mortgage Assets Management agreements setting the “floor” for new auction processes. The agreements are also subject to Bankruptcy Court approval, and other conditions. The bidding deadline is currently set for July 8, 2019.

“A hearing on confirmation of the Company’s plan of reorganization and to approve the sales is currently scheduled to begin on August 7, 2019,” the press release says.

This follows a continually unfolding odyssey of financial problems that have afflicted Ditech, and by extension, RMS. RMD first learned that Ditech’s assets, including RMS, were up for auction on June 5. Last month, Ditech was officially deregistered from the New York Stock Exchange, which suspended the requirement for it to make additional filings with the Securities and Exchange Commission (SEC), further clouding its financial status.

In April, it was revealed that a loophole in Ditech’s bankruptcy proceedings invited scrutiny from both consumer advocacy groups and the Department of Justice. In the midst of the financial difficulties that Ditech is embroiled in, RMS seems to be relatively insulated from the larger problems of its parent company, at least from an operational perspective.

According to a February filing with the Securities and Exchange Commission, Ditech also secured financing from its debtor-in-possession (DIP) facilities, allowing some of its subsidiaries – including RMS – to gain access to portions of up to $1.9 billion in available financing.

Earlier in 2018, Ditech emerged from its first bankruptcy filing after having previously done business under the name Walter Investment Management Corporation. Walter acquired Reverse Mortgage Solutions in 2012 and Security One Lending in 2013, and in 2017, Walter decided to stop originating Home Equity Conversion Mortgages (HECMs). RMS then turned to servicing only, and closed its retail channel.

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