The FHFA's attempt to prevent servicers and banks from receiving commissions and fees on force-placed insurance could marginally impact mortgage firm Walter Investment Management, Compass Point Research & Trading said Tuesday.
About 5% of Walter Investment Management’s 2012 revenue came from lender-placed insurance, making news of the FHFA’s focus on the product a bit uncomfortable for the mortgage firm, analysts noted.
Compass Point, the first firm to publicly point out Walter’s exposure, said 'the impact' is negligible on WAC’s forward-earning estimates since a decline in insurance revenue was already forecasted.
Walter’s (WAC) business from lender-placed insurance "tended to have higher margins and could have been contributing up to 10% of the company’s earnings," Compass Point said.
"However, a decline in insurance revenues was widely expected and we forecast insurance revenue would remain flat into 2014 even though the servicing portfolio would triple in size. Overall, we view the impact as negligible to our forward-earnings estimates," the research firm wrote.
FHFA Acting Director Ed DeMarco made waves filing a notice Tuesday, saying the agency wants to curtail the practice of force-placed insurance.
The practice has received constant streams of criticism from parties who believe banks are incentivized to arrange for more expensive insurance policies.