Walter Takes Retail Focus in New Reverse Mortgage Landscape

Despite the near-term uncertainties arising from recent changes to the Home Equity Conversion Mortgage (HECM) program, Walter Investment Management Corp. (NYSE: WAC) is holding true to its reverse mortgage business and seeing sizable growth opportunity over the long-term, according to company executives during a conference last week.

“The reverse mortgage business continues to suffer a bit from the changes in the regulatory environment,” said Walter’ Chief Financial Officer Gary Tillett during the company’s presentation at Barclays’ 2014 Global Financial Services Conference. “Servicing protocols are up, so we’re strengthening the servicing protocols and putting up costs against that. And primarily, with the change in the product, we’re seeing pricing moving up and less upfront profitability.”

Given the changing landscape fueled by the new program rules that took effect early August, Walter says it’s going to invest more heavily in the retail side of its reverse segment, including both “boots on the ground” and its consumer direct channel, Tillett added.

During the second quarter of 2014, Walter originated approximately $299 million in unpaid principal balance for its reverse mortgage segment. The non-bank servicer, which is the parent company of Security One Lending and Reverse Mortgage Solutions, is also the largest securitzer of HECMs, having issued $359 million of HECM securitizations during the quarter.

When compared to the same period a year ago, Walter’s reverse mortgage origination business reported net losses totalling approximately $4 million. In efforts to shore up the losses suffered to this segment of the its business, the company has noted several times that it has revised its strategy and operating models that it believes better fits the new regulatory environment.

“We’re focusing on retail and refinement of the servicing platforms and managing servicing costs as we continue to make those changes,” said Tillett. “Our mid- to long-term outlook for the reverse business is positive, focusing on the strong demographics that fit that product.”

Written by Jason Oliva

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