Walter Goes Capital “Light” with Launch of New Funding Platform

Walter Investment Management Corp. (NYSE:WAC) last week completed its initial funding of a new entity that it expects will provide a more “capital-light” strategy to managing its mortgage servicing rights (MSRs) assets.

Through Walter Capital Opportunity Corp. (WCO), Walter completed an excess servicing spread sale transaction with its Green Tree Servicing subsidiary for a sales price of approximately $75 million.

The transaction represents the first investment made by WCO and involved the entity’s acquisition of 70% of the excess servicing spread from a pool of Green Tree’s MSRs with an unpaid principal balance of approximately $25 billion.

Walter, also the parent company of Reverse Mortgage Solutions and Security One Lending, anticipates the launch of WCO will provide an alternative source of capital to build the company’s asset management revenue stream. 

“We are pleased to announce the completion of his excess spread sale to WCO, an initial step in Walter Investment’s transition toward a more capital-light business model,” said Walter Chairman and CEO Mark O’Brien in a statement.

The initial excess spread sale of $75 million was on par with the approximately $80 million that Walter had expected when it first executed the securities purchase agreement for WCO with York Capital Management during the first quarter. 

“As we have noted previously, we are quite excited about the launch of WCO, implementing our capital-light strategy and the prospects for our asset management business,” said O’Brien during an earnings call last quarter. 

Looking ahead, Walter expects that it and WCO will find “mutually beneficial” opportunities to collaborate through the sale of MSRs to WCO, as well as opportunities to subservice assets that the newly launched entity may acquire, said Walter CFO and Executive Vice President Gary Tillett during the earnings call.

Written by Jason Oliva

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