Walter Confident in Reverse Mortgage Business Despite Q1 Losses

Reverse mortgage servicer and origination company Walter Investment Management Corp. (NYSE: WAC) reported quarterly reverse mortgage segment losses Thursday, but maintained a positive outlook on the business, which generated revenue of $43.9 million for the first quarter 2015 — a 58% increase from the same period last year.

While it expects a near term impact of the recently implemented financial assessment, the company says the extended time frame for rolling out the new requirements has led to a smooth transition.

“Our reverse business has demonstrated solid execution against its strategic initiatives, delivering growth in both retail and correspondent originations channels,” said Mark J. O’Brien, chairman and CEO, during Thursday’s earnings call with analysts.

The company also announced Wednesday that it has launched a rebranding initiative spanning its multimedia channels including a new national TV commercial under the Security 1 Lending brand that begins running nationwide this week.

On the servicing side, the company remains the top reverse mortgage securities issuer in the industry.

“Our reverse segment maintained its ranking as the No. 1 HMBS issuer in the country,” said Gary Tillett, executive vice president and chief financial officer. “The service portfolio increased 3% compared to the prior year end, aided by organic growth in our originations, and through sub-servicing from flow arrangements.”

Total expenses in the reverse segment for the first quarter were $57.4 million, a 55% increase as compared to the prior year period, which Walter said was primarily driven by higher salaries and benefits due to hiring to support the growth in the retail lending channel, additional curtailable charges associated with regulatory events during the quarter and accrual adjustments associated with legal and regulatory matters.

The segment reported adjusted loss of $1.3 million and AEBITDA is break-even for the first quarter 2015 as compared to adjusted loss of $2.1 million and AEBITDA of $800,000 in the first quarter of 2014.

Walter executives also addressed the impact of the financial assessment, which took effect in late April. The new requirement is expected to impact reverse business in the near term, said Denmar Dixon, vice chairman, executive vice president and chief investment officer.

“In the reverse mortgage business, we expect the origination volumes to be impacted in the near term as the industry implements the new Financial Assessment guidelines,” he said. “Given the lead time to implementation, we would expect a smooth operational transition over the next several quarters.”

Written by Emily Study

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